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Tourism staring down coronavirus double-barrel shock

Published: (Updated: ) in Australian News by .

Australia’s tourism and hospitality sector is heading into unchartered bleak times, with the coronavirus set to deliver knockout punches to many businesses and jobs.

Australia's tourism and hospitality sector is heading into unchartered times, with the coronavirus set to deliver knockout punches to many businesses and jobs.

The tough 14-day self-isolation measures rolled out from midnight will have dire consequences for a tourism industry already reeling from the bushfire crisis and drought.

With passengers around the world scrambling over the past 24 hours to cancel flights, international visitor numbers are primed to drop off a cliff.

Tourists snorkel over Flynn Reef off the coast of Cairns.

READ MORE: How do I self-isolate?

Even before Prime Minister Scott Morrison declared the self-isolation restrictions, Qantas last week chopped back routes as its share price tumbled.

Flight Centre too acted swiftly, announcing on Thursday it would close up to 100 stores amid heightened uncertainty from the COVID-19 virus.

Dermot Ryan, an AMP equities portfolio manager, told the Australian tourism sector was staring down a double-barrel supply and demand shock.

"This is one of the most challenging times I've ever seen for the travel and tourism industry," Mr Ryan, who traded through the 2008 Global Financial Crisis, said.

"A lot of hotels will struggle … it will be tricky for some businesses to get through this."

A major problem for the sector is no-one knows how long the coronavirus pandemic and its impact may last, Mr Ryan said. A leaked UK government document emerged today indicating officials expected the pandemic may not end until the middle of 2021.

"I imagine there will be job losses and that is inevitable … but we will rebound and those jobs will come back," he said.

"Everything is about the balance sheet now," Mr Ryan added, predicting any travel and hospitality businesses not in prime fighting shape faced collapse.


"Can your business continue to operate in the tough reduced demand, reduced supply world we suddenly now find ourselves in?" he said.

A segway tour at the base of Uluru the morning after the closure of climbing at Uluru, on Saturday 26 October 2019

Latest government figures from 2016-17 showed 924,000 Australians were employed in the tourism sector, accounting for 8 per cent of the country's workforce at the time.

Government support is critical, Mr Ryan said.

Federal Tourism Minister Simon Birmingham told Today his government was injecting a $1 billion stimulus into tourism businesses.

He admitted the coronavirus was already having a "grave effect" on the sector, with international bookings down up to 90 per cent.

"There will be business closures. There will be job losses. These are tragically unavoidable," Mr Birmingham said.

The government plans to give $25,000 to small and medium size businesses, in an attempt to halt decimation of the industry.

Australian Tourism Export Council (ATEC), the peak body representing Australia's $44 billion tourism export sector, today declared businesses were braced for a "significant blow" that will have a dramatic flow on to employment.

"No international visitors means all travel distributors, and many tourism suppliers, have no business and are unlikely to have any business in the near future," ATEC Managing Director Peter Shelley said.

Coronavirus: Major companies cancel all cruises for at least 30 days over virus

Over the weekend global cruise ships cancelled world-wide operations, including visits to Australia where the sector generates $5.2b to the economy, for at least 30 days.

Mr Ryan called last week's action on the ASX and global exchanges "some of the wildest markets" he had ever experienced.

However, huge slumps in sharemarkets opened up opportunities, he added.

"Diamonds are made out of pressure," he said, and tipped hospital and aged care stocks to benefit from "very large demand for beds".

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Supermarket shelves increasingly stripped bare by panicked consumers were likely to boost balance sheets.

And as more companies ordered employees to work from home, Mr Ryan said increased broadband and mobile usage could be a boon for telecommunications stocks.

Mr Ryan said he was "very cautious" about the general retail sector, with mass gatherings banned and a growing number people afraid to leave home.

"You have to take a deep breath and hold on," he said.

"There will be tough months ahead but there are very good opportunities to buy wonderful assets on a massive scale."

By lunch today, travel-related companies on the ASX had fallen sharply following the forced self-isolation for all people entering Australia from overseas.

Webjet (-13.9 per cent), Corporate Travel Management (-12.2pc), Flight Centre (-12.7pc), Sydney Airport (-13.9pc) and Virgin Australia (-8.9pc) were all significantly down.

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Source: 9News

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