Daily Update: August 27, 2020

As the coronavirus has forced the world to become more insular, the global tourism industry has not been able to conquer consumers’ fears of the pandemic to revive travel during the peak summer season.

“No country has escaped the impact of COVID on tourism,” Sandra Carvao, the U.N. World Tourism Organization’s chief of market intelligence and competitiveness, said in a policy briefing on Aug. 25.

The crisis has been a “major shock” to the industry in advanced economies and exists as an “emergency” in developing nations’ tourism sectors, having prompted $320 billion in lost exports linked to tourism worldwide in the first five months of the year. According to U.N. Secretary-General Antonio Guterres, global GDP could plummet 1.5%- 2.8% this year as export revenues linked to tourism sink by $910 billion, to $1.2 trillion.

As the third-largest export sector of the global economy, tourism “employs one in every 10 people on earth and provides livelihoods to hundreds of millions more,” Mr. Guterres said, adding that the pandemic has put more than 120 million jobs worldwide at risk.

“The precipitous drop in tourism will have an outsized impact on countries that rely on foreign travelers—with potentially large-scale effects on their economies’ national accounts,” the International Monetary Fund said in its recently released 2020 External Sector Report. “Costa Rica, Greece, Morocco, Portugal, and Thailand could be among the hardest hit, with losses in tourism proceeds exceeding 3% of GDP.”

In the U.K., tourists are "staying away in droves," according to the World Travel and Tourism Council, which projected this week that the country’s economy is likely to lose £22 billion ($29 billion) from the collapse of international travel. Spending by foreign visitors could tumble 78% year-over-year—equivalent to daily losses of £60 million ($79 million).

Travel and tourism made up 9%, or £200 billion ($264 billion), of the U.K.’s GDP last year, generating nearly 11%, or 4 million jobs, of the entire workforce, according to the WTTC’s 2020 Economic Impact Report.

The implications of the “stop-start” quarantine the in U.K. could “threaten London’s position as one of the world’s premier hubs for business and leisure travel, which could see other destinations take over,” WTCC President and Chief Executive Gloria Guevara said on Aug. 26, as the capital city “is at a massive competitive disadvantage and won’t recover at the same speed as other cities in Europe” due to the country’s requirement for travelers to self-isolate for two-weeks upon returning from countries with high infection rates.

In Indonesia, tourism-dependent Bali said it wouldn’t reopen to international travelers until the end of this year as the total number of coronavirus cases climbs. The country planned to reignite its tourism industry on Sept. 11. Government officials anticipated in April that the volume of foreign travelers would fall to 5 million this year, from more than 16 million last year.
"The Indonesian government couldn't reopen its doors to foreign travelers until the end of 2020 as we remain a red zone," Bali Governor Wayan Koster in an Aug. 24 statement. "The situation is not conducive to allowing foreign tourists to come to Indonesia, including to Bali.”

Short-term rentals have seen a faster recovery than hotels in the months since the pandemic struck, S&P Global Market Intelligence reported. Although short-term rental bookings suffered a "massive" decline in March, to about 700,000 worldwide, the subsequent recovery soared to a peak of roughly 2.5 million bookings per week, Scott Shatford, the CEO of short-term rental data and analytics firm AirDNA CEO, said during a webinar last month.

"This uncertainty about interaction, touching things, people just want to be isolated in a way, want to have a controlled environment, and short-term rentals can offer that, guaranteed, more often," Mr. Shatford said. "When we look at the data, the biggest correlation that we see between markets that are doing really well and markets that aren't doing very well is how far the average person is traveling."

Today is Thursday, August 27, 2020, and here is today’s essential intelligence.

Uncertainty in the Global Economy

No End In Sight: What The Ongoing COVID-19 Crisis Means For Boardroom Strategies

"Very remote." That is how John Hitchins, a nonexecutive director at two U.K. companies, summed up what many corporate boards thought not so long ago of the likelihood of a pandemic suddenly disrupting countless businesses around the world. Then COVID-19 arrived in the early months of 2020. Boards swung into crisis mode, often in a matter of days, with many now continuing to take make-or-break decisions for their companies as the virus leaves a trail of bankruptcies, job losses and strategic upheaval across industries and geographies. As that's happening, boards are shifting their focus on the post-pandemic future, despite an array of unknowns, said Hitchins, who is a director at specialist lender and savings bank Aldermore Group PLC and at Societe Generale International Ltd. an investment banking unit of France's Société Générale SA.

—Read the full article from S&P Global Market Intelligence

US restaurants in sales 'purgatory' after Q2 slump as pandemic effects persist

U.S. restaurant chains accelerated their takeaway and delivery service offerings in the second quarter as coronavirus lockdowns continue to batter their sales and experts say much of the industry's recovery will continue to be held back as long as dining restrictions continue. After suffering losses following lockdowns and closures of dine-in operations in April, restaurant chains had started to see signs of recovery by May and June as states reopened their economies and eased restrictions on restaurants. But a resurgence of COVID-19 cases forced states to reverse course in July sending more shocks throughout the restaurant industry and tempering its recovery.

—Read the full article from S&P Global Market Intelligence

Consumer Discretionary Deal-Making Reaches Historic Low In Q2'20

The number of mergers and acquisitions in the consumer discretionary sector announced in the second quarter of 2020 fell to a low last seen in the early 2000s, data compiled by S&P Global Market Intelligence shows. A total of 587 deals were struck during the quarter, down 44.4% from 1,055 in the year-ago period. It was the fewest number of transactions in any three month period since the first quarter of 2004. Total M&A activity in value terms fell 58.3% to $25.58 billion from $61.35 billion in the second quarter of 2019, the lowest sum since the first quarter of 2013.

—Read the full article from S&P Global Market Intelligence

Low Interest Rates, Steady Home Prices To Help Boost Indian Residential Market

Improving home affordability amid 15-year-low interest rates and stagnant prices in India could help kick-start a recovery of the nation's residential property market, although a sustainable rebound will require the economy to grow more strongly again. India's housing market experienced its worst slump in at least a decade, with sales of new homes in the top eight cities down to 59,538 in the January-to-June period, almost half the 116,576 units sold in the previous six-month period, according to data from the Indian unit of Knight Frank LLP. The number of new homes launched in the period also dropped sharply to 60,489, from 112,150 in the July-to-December period of last year, the data show.

—Read the full article from S&P Global Market Intelligence

The Future of Credit

Credit FAQ: How S&P Global Ratings Factored Counterparty Risk Into Recent Midstream Energy Rating Actions