BANKRUPTCY OF TOUR OPERATORS: WILL THE TRAVEL INDUSTRY SURVIVE UNDER THE PRESSURE OF CORONAVIRUS?

Russians are literally torn between the news of coronavirus infection and the collapse of the ruble in recent days. Add here a little controversy on the Constitution, the gradual lowering of the "iron curtains" between the countries, reports of a new global economic crisis and it turns out to be a real bacchanalia. But for whom is this whole bunch of negative news going to hit the hardest? We suppose it would be the travel industry. Let us talk about it.

Coronavirus

The virus, which began to spread in late December, very quickly discouraged tourists from traveling to China and neighboring Asian countries. First, all trips to the Middle Kingdom were canceled,  and then the trips to South Korea as well.  We cannot say that Iran was a popular tourist destination, but soon the Russians lost the opportunity to go there as well.

In February, the coronavirus reached Europe, and Italy has been quarantined (the maximum mortality rate from the coronavirus was recorded there, even ahead of China). Soon it became clear that the epidemic, or rather the pandemic (according to the latest reports from WHO) will affect not only local tourism destinations, but generally the tourism industry as a whole.

The main question that arises - do the tour operators face massive bankruptcy because of the spread of coronavirus? The top manager of the network of travel companies “VITA Travel”, Alexei Tsipordey, helped Rusbankrot to understand this problem. He noted that the bankruptcy of tour operators depends not only on external causes - the main blow falls on companies with low diversification of destinations, as well as those who cannot agree to reduce losses or fines with the host, hotels and airlines.

“The first calls were back in February,” explained Alexey Tsipordey. – “That is why many operators were careful about their plans for the season. Large tour operators are diversified in directions and effective in business models, but if you stop everything at once, you need to understand that the initially unprofitable tourism business on the exit stream may not last long.”

Our interlocutor identified the impossibility of forecasts for foreign tourism as the main existing problem - it is difficult to imagine, what will happen even in a week. The situation is changing too rapidly.

Fear of travel

Another trend is the growing fear of Russians about travel. Residents of the country, to put it mildly, are horrified by the news about the coronavirus and are massively refusing from the trips, not only abroad, but also around Russia. If we consider the resorts of the Crimea and the Krasnodar Territory, then even on them sales fell by 20-25%, although there is no coronavirus there.

Now all the tourists, figuratively speaking, are divided into three categories. The first cancels any trip, regardless of the situation with the coronavirus in the chosen resting place. The second ones behave absolutely opposite and leave no matter what - they can only be stopped by the ban on flights and quarantine. The third does not cancel their trips, but they are not quite sure that they will go on trips - they just wait for changes and monitor the situation.

“We did not notice a strong fear, but people often ask about the situation,” said the general director of “VITA Travel”. - The main fear of tourists is not even to get infected, but the fact that flights will be closed and their vacation will break right before departure. To put it in simple words, tourists are most afraid of unpredictability. "

Bankruptcy of tour operators

Recently, the vice-president of the Association of Tour Operators, Dmitry Gorin, has denied information about the impending mass bankruptcy in the industry. He said that measures are now being taken to stabilize the situation - sales, of course, might drop, but bankruptcy is ruled out.

However, lately there have been many rumors with opposite information about the allegedly impending bankruptcies - the travel industry may not be able to withstand downtime and small companies will start to close pretty soon. Alexey Tsipordey noticed that everything here depends on how quickly the tour operator can reorient, for example, to Russia. If reorientation does not take place and support from the state does not come, then bankruptcy is inevitable – some of them might take 3-4 weeks, some regional cases might take around three months.

“Massive bankruptcy is disadvantageous to anyone,” said Tsipordey. “In addition to direct monetary losses of the population, this can provoke a whole chain of problems among insurance companies, banks, lending tour operators, airlines, hotels, small travel agencies, local transport companies”

Thus, a “snowball”, leading to a crisis may appear. Tsipordey also added that the main thing in this situation is not to limit tourism within the country. If this happens, the tourism industry will be observing small and large bankruptcies almost every day.