Airlines, hotels, retailers to be badly hit by coronavirus

As the death toll rises and countries contemplate blocking their borders, key sectors and industries are already feeling the impact from the flu-like epidemic


THE coronavirus outbreak is about one-month-old, but the spread from the epicentre in Wuhan, China, to across the world has left many communities terror-stricken.

As the death toll rises and countries contemplate blocking their borders, key sectors and industries are already feeling the impact from the flu-like epidemic.

Similar to the Severe Acute Respiratory Syndrome (SARS) outbreak in 2003, certain sectors will be severely impacted and the fallout will largely depend on how long the spread of strain which has killed more than 300 people.

The World Health Organisation’s (WHO) announcement, that the spread of the virus had reached a global health emergency, would further devastate certain sectors which depend on human movements.

Dark Days for Airlines

National carrier Malaysia Airlines Bhd (MAB), AirAsia Group Bhd, AirAsia X Bhd and Malindo Airways Sdn Bhd are already impacted as air travellers cancel or postpone their travelling arrangement.

Malaysia has already banned flights from and to Wuhan since last week. Sabah has totally banned flights from China.

Local carriers are expected to lose thousands of paying customers as the ban prolongs. The global health emergency announcement would further push travellers to remain in their home country.

MAB, which is already reeling with an estimated cash injection of around RM1 billion annually, would be the worst hit with a further decline in travellers.

The carrier flies to seven cities in China including Hong Kong. AirAsia flies to about 14 cities in China including the recently suspended Wuhan. Global airlines have also cancelled or reduced flights to China and local carriers are expected to follow suit.

According to MIDF Research, the number of passengers carried to and from China are expected to face temporary headwinds due to the pandemic outbreak, particularly for AirAsia — the country’s main low-cost airline.

According to past figures during the 2003 SARS outbreak, Malaysia Airports Holdings Bhd’s passenger traffic growth in the country took a breather that year to fall by 1.5% year-on-year (YoY) to 33.5 million.

The total number of international passengers at Kuala Lumpur International Airport’s Main Terminal travelling to and from China declined by 10.7% YoY during the same period.

“Henceforth, we do not discount any downside risks for China routes. Based on our preliminary analysis, we found that the capacity catered to destinations in China by AirAsia X makes up between 25% and 45% of AirAsia X’s total capacity,” MIDF said in a research note.

During the SARS outbreak, almost all airlines in Asia Pacific registered a drop in travellers and many airlines registered losses.

In Malaysia, tourist receipts dropped 17.42% to RM21.29 billion in 2003 from RM25.78 billion the year before. The number of tourists fell by 20.5% to 10.57 million. Throughout 2003, tourist arrivals from China also fell by 37.3% to 422,624 compared to 674,056 in 2002.

More Empty Rooms at Hotels

Hotels in Malaysia has reported booking cancellations as travellers dread the reach of the coronavirus.

Despite no recorded death in Malaysia and the number of infected victims remaining small, foreigners have started to delay their travels.

Malaysian Association of Hotels (MAH) said cancellation of hotel room bookings have increased after the Chinese government issued a ban on its citizens from booking overseas tours.

MAH CEO Yap Li Seng said other than the hotels, various industry stakeholders, including airlines and tour operators, are considering immediate contingency plans to boost tourism from other markets.

It expects more cancellations, especially at destinations highly dependent on the China market.

During the SARS outbreak, hotels and airline companies witnessed a drop of between 30% and 40%.

According to official figures, 2.41 million tourists from China visited Malaysia between January and September 2019.

Travel Agency with No Tourists

It is estimated that more than 400,000 Chinese tourists are expected to be in the country between Jan 25 and Feb 15, 2020, during the Spring festival, according to Malaysia Inbound Tour Association (MITA).

However, 80% of them have cancelled their rooms, mainly for hotels three-star and above throughout the country. It is estimated that one Chinese tourist spends about RM3,655 in Malaysia.

“This directly impacts about 60 active travel agencies registered under MITA. We plan to ask hotels to still reimburse the travel agents as this situation is very much not anticipated.

“Alternatively, we are also hoping that Malaysians could take advantage of the vacuum, which may see some price drops in accommodation in the country,” he told The Malaysian Reserve.

Loss of Huge Income Source for Retailers

Tourists from China are among the big spenders, especially at luxury shops. According to the United Nations World Tourism Organisation, tourists from China spent about US$270 billion (RM1.1 trillion) globally in 2018.

In Malaysia, luxury brand outlets are among the favourite shopping havens for China’s wealthy Chinese.

According to the government’s figures, between January and September 2019, tourist receipts involving tourists from China stood at RM12.8 billion, the secondbiggest spender after Singapore.

But Malaysia Retail Chain Association (MRCA) said there is no significant impact that could be judged presently.

“We are still observing and it is hard to tell how far this issue could hamper the retail market,” an MRCA spokesperson said.

The Tourism and Culture Ministry aims to generate RM100 billion of receipts from 30 million tourist arrivals this year. Of the total, 3.48 million arrivals are expected from China.

Typically, tourists spend about 30% of their expenditure on shopping in Malaysia, which could translate to about RM30 billion this year.