Brazil’s Tourism Industry Is Dying
It was already bad enough that Rio de Janeiro has become a nearly bankrupted shooting gallery, but when the coronavirus came to town, it just made matters worse. Brazil’s tourism industry is dying.
Over 50,000 companies in the sector have gone out of business in the last several months due to lockdowns and consumer concerns about flying and staying in hotels.
A study by the National Confederation of Goods & Services (CNC), some 50,000 companies that are dependent on tourist traffic, including restaurants and cultural attractions, have closed for good since March. Agencia Estado newswire reported on the study this weekend.
The number accounts for some 16.7% of Brazil’s tourist-related businesses, with tourist town restaurants and bars being the hardest hit and making up more than half of the bloodletting as of August.
Some 5,400 hotels have closed. Around 1,700 tourist bus routes have been closed, though it is unclear if they are permanently out of business.
“Airlines are also worrisome,” Fabio Bentes, the author of the CNC report was quoted as saying in the subscriber only newswire article. “The crisis could lead to deeper market concentration by a few players, which will impact airfares.”
It’s not just Rio’s problem. Rio is arguably Brazil’s leading choice for international tourists. The city is postponing next year’s Carnaval parade, though it is unclear if the locals will heed any warnings and forget the annual tradition when it comes around next February.
Sao Paulo was so the most business closings, with 15,200. Minas Gerais state was second at 5,400, followed by Rio at 4,500.
All of those closures led to the loss of roughly 481,300 jobs.
“The impact of the travel and tourism’s job losses on the labor market is enormous,” says Bentes. “The sector witnessed a 14% loss in its labor force.”
Bars and restaurants in Rio have been surviving on take out orders. Others have been selling items inside the establishment to make money.
Thanks to the pandemic, the entire tourism sector raked in just 26% of what it usually does between March and September, which are the fall and winter months in Brazil.
The worst months were March and April, with Brazil’s southern economic hubs went on lockdown. In those months, income for the sector fell by 68.1%, CNC says, using data from Brazil’s IBGE.
In July, as Brazil started to claw its way out of lockdown mode, the sector was down to around 56.6% of its pre-pandemic income, CNC says.
“A lot of businesses that depend on tourism suffered,” says Rodrigo Logo, research director for IBGE. He told Agencia Estado that rental car agencies, tourism agencies, and bookings for entertainers all got crushed this year.
According to Manoel Linhares, presidente of the Brazilian Hotel Industry Association, measures taken by the government to sustain employment — similar to the Small Business Administration program here in the U.S., and our Payroll Protection Plan — all helped to some degree. Without them, job losses would have been more severe. More companies would have closed, including permanently.
He says that even as Brazilians are learning to live with the coronavirus, they are not staying in hotels and not flying.
“Hotel occupancy rates are 20% on average,” he says. “A hotel needs a 50% occupation rate to cover its costs, otherwise they have to cut costs, reduce payroll,” Linhares was quoted as saying by Correio Brasiliense, a capital city daily.
CVC Corp, one of Brazil’s largest international travel agencies, says the foreigners aren’t coming. Domestic flyers are grounded. Brazil domestic bookings are 70% below where they were a year ago.
As a result, CVC lost R$1.15 billion in the first quarter of 2020, with more losses sure to come.