Tourism Industry Prospects Unclear Amid Coronavirus

EghtesadOnline: The new coronavirus has shut down Iran’s tourism industry for two months now and it seems that at present there is no end in sight.

News ID: ۷۴۹۸۹۴

21 April 2020

The government has announced it will bail out coronavirus-hit businesses by offering loans with a 12% interest rate; the Cultural Heritage, Handicrafts and Tourism Ministry has also put forward a rescue package for tourism businesses, which has yet to be finalized, according to Financial Tribune.

Economic operators, however, believe these bailouts are positive measures, but they cannot resolve the industry’s problems.

“The bailouts don’t offer that much of a cure as the pandemic has brought tourism to a standstill for two months now,” Amir-Pouya Rafiei-Shad, the head of Tehran Province Tour and Travel Agencies Association, said.

“Last year was a bumpy ride for tourism industry: spring flooding, November protests and Ukraine International Airlines plane crash. The outbreak of coronavirus may be the last straw for the industry not only in Iran but in the whole world,” he added.

Noting that the Cultural Heritage, Handicrafts and Tourism Ministry has proposed delaying the implementation of value added tax to support the industry, he said no work has been done over the past couple of months because all travel agencies were closed.

“The government needs to offer tax exemption to tourism industry for the fiscal 2019-20 and 2020-21, and lend some support for providing social welfare to employees of this sector. Reducing the unemployment rate has been the promise made by all governments; the financial support could help save jobs and prevent the bankruptcy of travel agencies,” he said.

Rafiei-Shad put the number of travel agencies in Tehran at 20,000 and said considering that each of them has an average of 10 people on their payrolls and each employer is the head of a four-member household on average, they provide livelihood for 80,000 people only in the capital city.

“No one accepts the responsibility for the unemployment of tour guides,” Mahdiyeh Jahangir, a tour guide, told the Persian-language daily Iran. There are 10,000 tour guides in Iran and as they don’t have an employer, they usually don’t have insurance coverage and consequently can’t receive unemployment benefits at this time.

“We only have a tour guide ID card and nothing more,” she added.

Jamshid Hamzehzadeh, the head of Iran Hoteliers’ Association, said the government bailout for tourism businesses is 120 million rials ($775) for each employee, which must be repaid over two years with a 12% interest rate.

“This sum is only enough to pay financial compensation for two months of an employee’s services. The government needs to offer loans at low interest rates like 5% instead of 12% to tourism industry and consider a five-year period for the repayment of loans with a one-year moratorium period,” he said.

The government has approved a 750-trillion-rial ($4.8 billion) package to help low-income households and struggling businesses impacted by the rapidly spreading coronavirus. The loans will be given to small- and medium-sized enterprises hit hard by the pandemic, according to the website of the Central Bank of Iran.

“The lending rate will be 12% to be repaid within two years,” Abdolnasser Hemmati, the CBI governor, said.

Commenting on the interest rate, Hemmati said it is reasonable, given the high inflation rate in the country.

“Even if banks set an 18% interest on loans, the real interest rate would still be negative when compared to the annual inflation rate … Any rate below 12% would apparently impose further financial pressure on banks,” he added.

Hemmati said only businesses that did not lay off workers during the corona crisis would be eligible for the loans. He instructed banks to process the loans soon and cut red tape.

In the wake of the coronavirus pandemic, few industries have fallen as far and as fast as tourism. The technological revolution that brought us closer together by making travel and tourism easy and affordable—a revolution that fueled one billion trips a year—is helpless in halting a virus that demands we shelter in place, the National Geographic wrote.

Taking a snapshot of tourism losses is difficult, as the data change as quickly as the virus spreads. If the pandemic continues for several more months, the World Travel and Tourism Council, the trade group representing major global travel companies, projects a global loss of 75 million jobs and $2.1 trillion in revenues.

Losses come daily; as of April 2, British Airways is reportedly poised to suspend 36,000 staffers.

Latest available data show eight million tourists visited Iran during the first 10 months of last Iranian year (March 21, 2019-Jan. 20), Cultural Heritage, Handcrafts and Tourism Minister Ali Asghar Mounesan was quoted as saying by the Persian-language daily Donya-e-Eqtesad.

About 2.11 million tourists travelled to Iran over Oct. 23, 2019, to Jan. 20, suggesting the monthly average of 650,000 visitors. The figure shows a 29% decline compared with the month ending Oct. 22 and a 25% decrease compared with the monthly average recorded for the first half of the current year (March 21-Sept. 22, 2019).