Travel bans to hit services in a world battered by supply strains

It’s one thing to see a port without many cargo ships. It’s a whole different level of jarring to see Milan’s Piazza del Duomo devoid of people.

On most evenings the revered landmark would be packed with tourists eating gelato or sipping Campari at storied establishments like the Camparino in Galleria.

But this week chefs, bartenders and millions of other employees of the Italian services sector — who account for nearly 70% of nation’s labor force — are all sitting at home waiting out the ravages of the coronavirus pandemic.

Globally, anecdotal reports at the most visible hubs of tourism aren’t much better. What started as a supply-chain headache for businesses threatens to morph into an all-out retreat in consumer spending.

The plunge in travel, tourism and hospitality could cause a bigger shock to the airline and hotel industry than the impact of the Sept. 11 attacks or the worldwide recession just over a decade ago.

Commercial air traffic is expected to drop by as much as 8.9% this year and U.S. hotels suffered a 12% year-over-year drop in revenue per available room during the first week of March.

New travel bans and the longer-term impact of a global downturn could exacerbate these declines and spread to other services industries like financial services and construction.

The growth of global trade in services was already on a precarious course before the virus hit. The World Trade Organization said this week that its latest services trade barometer declined in the fourth quarter of 2019 and will continue to fall in the months to come.

• The largest declines were in passenger air travel and container shipping, which may partly reflect early efforts in China to halt the spread of the disease. “A recovery is not yet in sight,” the WTO’s report said.
• The financial transactions index dipped below trend and construction gauge held steady.
• The WTO said its indicator has not yet fully captured the economic impact of the virus and is likely to decline further.
• The data support the fact that a public health crisis of this sort will have a significant impact on consumer habits in the short term.

Consumer businesses like Milan’s 105-year-old Camparino in Galleria — which persevered through the 1918 Spanish flu pandemic — will reopen its doors when the current emergency subsides. Until then, Italy’s famed restaurants — much like the rest of the global services industry — can do little more than wait and hope.