Repatriates Assembly

How the pandemic hit the tourism industry in Kazakhstan?

Impact of COVID-19 for the tourism sphere in our country

The first industry to be hit by the coronavirus outbreak was the tourism industry. The global fight against this dangerous disease has led to the closure of internal and external borders. For example, the transport services have been suspended, the mega-projects and high-level events have been postponed as well. These restrictions immediately affected the work of the tourism industry. However, it is not possible to assess the impact of the pandemic on the Kazakhstani tourism industry fully

One of the most costly areas during emergencies and quarantine is tourism. According to the World Council for the Travel and Tourism, COVID-19 could close the 50 million jobs in the global travel industry. Compared to last year, booking of air tickets for travelling in Italy decreased by 94%, in the UK – by 63%, Spain – by 84%, Germany – by 65%, France – by 74%. According to the experts, this is the lowest figure for the last hundred years. In short, the global tourism industry has an “Impossible soul”.

Following the announcement of the pandemic, the International Business Tourism Association (GBTA) conducted a study on the impact of the coronavirus on the business tourism industry. It was attended by 1,095 representatives of corporations and associations around the world. The survey found out that about 41% of the respondents had canceled all international trips due to the risk of coronavirus, while 73% of them found some business activities unnecessary.

In general, it is estimated that COVID-19 could cost the global tourism industry about $80 billion. This was reported by the South China Morning Post, citing data from the British Economist Intelligence Unit (EIU). In 2002–2003, the experts who analyzed the data on the outbreak and spread of pneumonia came to this conclusion.

In this regard, in accordance with the Chinese expert, Deng Wang, the countries of the Association of Southeast Asian Nations, in particular, are likely to suffer significant losses. The share of Chinese tourists in the tourism market of Europe and the United States is 4% of the total number of tourists. This means that the tourism industry in these countries can be significantly improved by the share of domestic tourism.

And, in Kazakhstan, the difficulties began when the coronavirus spread and flights have stopped to the most popular destinations. Those who managed to travel before the state of emergency and quarantine were later forced to flee by special planes. At that time, 5,914 Kazakhstanis were on vacation abroad. Up to 1 billion tenge was needed in order to return them back. An operator in charge of this area, the Fund “Tourist Care” returned to the country about 6 thousand tourists in 4-5 days and carried out this work quickly. When the travel agencies solved this problem themselves, it became clear that the situation in the industry would be even worse. However, the travel agencies are faced with these difficult tasks today, as the return of 4.6 billion tenge paid to travelers for the hotel and air tickets.

The tourist market of Kazakhstan is made up from thousands of companies. Firstly, these are tour operators who form the tourism products and charter flights, but they are not allowed to sell their products to end consumers. Secondly, these are travel agents who sell products of tour operators and provide additional services to both individuals and businesses. Both of them work for the inbound (they accept foreigners in Kazakhstan), outbound (send foreigners abroad) or domestic (organize travel within the country) tourism.

If the coronavirus epidemic limited only travelling, business trips and events in early 2020, then the decision of Kazakhstan to introduce an emergency situation and close the borders was a shock for the tourists` business and actually stopped the work of most travel companies.

Not only travel agencies were affected, but also airlines, hotels, restaurants, shops and other businesses serving the tourists. Small agencies, having assessed the situation, stopped their activities – the whole team took a vacation for a month and closed the doors of the company. But even a big business cannot afford such a controversial “Knight's move”. Numerous obligations to customers and staff do not allow the work to be stopped, and the closure of borders does not allow it to continue. Due to its scale and effective management, a large business, that survived the crises and devaluations of previous years, has turned out to be very vulnerable in the current realities.


Turnover of travel companies in the country

But of all the huge amount that people spend on a trip, the travel agency earns only a small part in the form of reward. For example, in the case of buying air tickets, this figure can be calculated as a fraction of the percentage. The rest of the money goes to suppliers – airlines, hotels and so on. But it is related to the travel agency that clients come with a demand to return their money immediately. If there are few such clients, the travel agency copes with the obligations. But if this is an avalanche of calls, as it is happened a year ago, then the current turnover of the travel agency will not be enough to meet the financial requirements of customers promptly. In order to return the money to the client, the travel agency must receive a refund for the paid services from the suppliers first.

Many airlines, such as Air Astana and SCAT, and chain hotels are accommodating, agreeing to return or exchange. But these are not all suppliers. The terms of return do not imply an immediate receipt of funds by the company. For example, the largest travel agencies do not have direct settlements with airlines.

All financial transactions take place through the BSP system (a system of mutual settlements between agents and carriers), money is accumulated on the special account of the IATA Air Carriers Association and distributed among airlines. When it is making returns, this is reflected in the system. But the travel agency will see these refunds only in the system's report, and most importantly, it will not receive the money back. These refunds are usually taken into account for the next booking after about a couple of weeks.

The resources of travel companies are not aimed at providing services now, but they are encouraged at canceling them and collecting information about obligations to the buyers, suppliers, banks, and fiscal authorities. In the face of limited funds, the heads of travel agencies face a difficult choice: either return the money to the client and preserve their reputation, or pay an employee's salary for an honest job, or pay taxes to the state in order to avoid fines, penalties and seizure of bank accounts.


The support for the business

In neighboring countries, the authorities have already begun to take measures to support business: they pay minimum wages to people forced to take unpaid leave, announce tax holidays, including the representatives of the tourism industry. For example, on March 13, 2020, the Georgian government decided to exempt hotels, restaurants and companies operating in the tourism sector from income and property tax for four months.

Now, it is difficult to assess the losses that Kazakhstani business will incur. But the experts say that they will definitely be measured in billions of tenge or even more. On March 17, 2020, the President of Kazakhstan, Kassym-Jomart Tokayev, instructed the government to “Develop a package of incentive measures to support the subjects of tourism activities” through his Twitter page.

But there are no specifics yet…

The ways out of the crisis

At the beginning of the quarantine, the Head of State and NCE “Atameken” paid attention to this issue immediately. Along with other significant losses, the Presidential Decree exempted travel companies from income tax from April 1 to October 1. A general tax payment has been deferred for three months.

NCE “Atameken” and NC “Kazakh Tourism” signed a joint road map. The road map consists of 5 sections consisting of 27 events. It was planned to implement them in 2020-2021. A main direction here is the development of national tourism products and tourist infrastructure.

According to the Chairman of the Board of NC “Kazakh Tourism”, Yerzhan Erkinbayev, the document gives priority to the development of domestic tourism, in particular, the health tourism and promotion of crafts.

A tourism community has intensified online seminars, trainings and legal advice on how to cope with the crisis during and after quarantine, find sources of funding, and how to overcome the crisis. If you look at the website of the Association, an online meeting of representatives of NC “Kazakh Tourism”, akimats and travel companies are held every day. The reason is that travel companies around the world are focusing on the development of domestic tourism this year. This is actually the priority of the above “Road Map”.


Quarantine allows to develop the domestic tourism

The world experts predicted that the impact of the pandemic on the economy will continue until the end of the year. As a result, the cost of international tourism will rise. In results, travelling abroad becomes more expensive for people in developing countries whose currencies have depreciated now. And, some countries do not have the opportunity to receive foreign tourists. For example, the Spanish Tourism Minister, Reyes Moroto, told to the local media that the country would not be able to accommodate the 87 million tourists it did last year. And, the heart of a well-to-do traveler who wants to go to Italy, where there is a mass virus, is incurable. According to the experts, international tourism will change radically due to the pandemic. This includes the infrastructure. A number of measures should be taken to keep the tourists away from each other, in order to comply with sanitary requirements in the hotels, and on the shores of the sea and lakes. As a result, an international tourism may decline this year and the domestic tourism may recover.

Planning the trips abroad

According to the study by marketing company Sojern, the tourists have tried to travel in their home countries in 2020. The trips abroad can be revived only this year. This is due to the fact that more and more tourists around the world have returned their tickets in 2020 and started buying more tickets in 2021. For example, in the last 15 days, the booked tickets for 2021 in Spain increased by 160% compared to last year, and in the UK – by 242%. That is, in 2020 the figure fell, and in 2021 it increased significantly. Therefore, travel companies should try to serve the domestic market and save lives this year.


Online services are not developed in the tourism market of Kazakhstan

One of the directions taken by the world's travel companies during the current quarantine is online tourism. Last year, the Market Research Future predicted that the total online tourism market will reach $1,134.55 billion by 2023. Giving the sharp increase in the demand for the online services in the world during the coronavirus, we can assume that this figure will double. However, Kazakhstan is still lagging behind in this area. The resources, such as the “Booking Holding”, “Expedia Group”, “Airbnb”, “Ctrip”, where you can get the photo and video information about the destination from booking tickets, will not find domestic equivalent of that service, due to the lack of information about Kazakhstan. Tourists are forced to look for different services from the different resources. It is in current crisis that there is an opportunity to fill that gap. Therefore, it is definitely an obvious fact that our compatriots had been contributing to development of domestic tourism in recent years. These indicators should not stop after pandemic.

(The pictures were taken from the open sources)