From Paradise to Hell; How the COVID-19 Crisis Has Affected Bali, Indonesia’s Biggest Tourist Destination
As we have discussed in earlier reports and articles, the tourism industry is among the heaviest affected industries amid the COVID-19 crisis. Travel restrictions (such as mandatory COVID-19 tests and vaccines) and in some cases full travel bans set by governments across the world are discouraging people from traveling.
Moreover, a considerable part of the global population is probably simply too scared to opt for traveling under present circumstances; either because they fear to be infected with COVID-19, or, because – in case a spike in new COVID-19 cases occurs – travel bans may suddenly be imposed which could make it difficult for people to return home.
And so, basically anything that is (closely) related to tourism (such as airlines and other transportation services, travel agencies, hotels, restaurants, museums, theme parks, and souvenir shops) has been feeling heavy pressures since early 2020 due to the unprecedented collapse in demand. Moreover it’s increasingly becoming clear that there are no quick solutions to the ongoing COVID-19 crisis, despite political leaders promising (somewhere between mid-2020 and Q1-2021) their populations that a return to normal would be possible after herd immunity is achieved through the ‘two-jab’ vaccination programs.
However, while national COVID-19 vaccination rates in many countries in the West are approaching the ‘herd immunity level’ (65-70 percent of the population), there are no signs that social and business restrictions are to be lifted, for good, anytime soon as COVID-19 mutations undermine the efficacy of existing vaccines. This would mean that authorities keep certain restrictions in place.
So, if authorities continue to restrict economic activity and people’s movement while waiting for the development of an effective and safe vaccine (which perhaps is an impossible endeavor), then these tough conditions may last for many years to come. This would mean that entrepreneurs in the tourism and travel industry of Indonesia will have to wait a long time before conditions turn normal.
We would not be surprised at all if it will take up to four years before the number of foreign visitor arrivals into Indonesia return to levels that were normal in the pre-COVID-19-crisis era. So, for now, we think that around 2025-2026 conditions are to turn normal for Indonesia’s tourism industry. And considering tourism contributes significantly to the national economy of Indonesia (for example via foreign exchange earnings as foreign visitors bring along billions worth of foreign currency into their holiday destinations each year) it is a drag on the whole economy.
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This is the introduction to the article 'From Paradise to Hell; How the COVID-19 Crisis Has Affected Bali, Indonesia’s Biggest Tourist Destination' which is available in the July 2021 report of Indonesia Investments.
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