Research from Temple University professor uses models to show how vouchers could be essential with regard to assisting tourism industry following COVID-19 pandemic
PHILADELPHIA, April 16, 2020 — COVID-19 has affected just about every industry but few more so than the tourism sector.
For instance, in China, hotel occupancy showed a 71% year-over-year decline from January 23-26. In the U.S., there is predicted to be a drop in travel spending of 355 billion U.S. dollars in 2020, a decrease of 31%.
Recovery is going to take considerable time, but new research from Yang Yang, an associate professor in the School of Sport, Tourism and Hospitality Management (STHM) at Temple University, suggests that a voucher system could assist the tourism industry moving forward.
“Our model indicates the pandemic would induce a dramatic decline in the tourism market in terms of both consumption and employment. To restore the tourism sector, we suggest the voucher could be an effective measure,” Yang says.
Co-authored by Hongru Zhang from Jiangxi University of Finance and Economics and Xiang Chen from the University of Connecticut, Yang’s article “Coronavirus pandemic and tourism: Dynamic stochastic general equilibrium modeling of infectious disease outbreak” was recently accepted for publication in the Annals of Tourism Research, a prestigious journal of tourism management.
The research uses a dynamic stochastic general equilibrium (DSGE) model to indicate how the tourism industry will be affected. The model-based forecasting method is used to explain economic phenomena, such as economic growth, business cycles and the effects of economic policy.
As part of their research, Yang and his colleagues used the DSGE model to look at three different groups of decision-makers: households, producers and the government. The model’s simulations were designed to predict what would have the lowest potential economic impact for all three of those groups.
“According to the simulated results from this model, the voucher system really helps. It works like a subsidy that effectively reduces the price of tourism. The thought then is that this makes tourism more appealing for potential customers,” Yang says.
A voucher system would not be an entirely new concept. In 2009, China utilized tourism coupon programs to stimulate economic activity in response to the world financial crisis.
According to Yang, an additional option that could be explored in place of vouchers would be direct cash transfers. However, that would not be as beneficial to the tourism industry as vouchers. The DSGE model predicts that the industry would lose far less money with a voucher or coupon system than it would with direct cash transfers or no action at all.
Already, some local Chinese governments and companies have resorted to using coupons to increase consumer spending following COVID-19. Could that same strategy work in the U.S.?
“That is definitely something that the federal and local governments can consider and this is a win-win strategy for both customers and suppliers,” Yang says. “The financial assistance helps the industry to recover and the residents get the chance to experience something they long for after the stay-at-home order.”
About the School of Sport, Tourism and Hospitality Management
Established in 1998, the School of Sport, Tourism and Hospitality Management (STHM) at Temple University has a distinguished tradition preparing leaders in the sport, recreation, tourism and hospitality industries.
Thoroughly committed to providing student-centered education and professional development relevant to today’s thriving sport, tourism and hospitality industry — STHM integrates applicable, real-world experience into the curriculum and classroom through its global network of industry partners and well-connected alumni network. Our award-winning faculty and cutting-edge research institutes engage in pioneering research, informing business practices and providing students with the knowledge and skills to succeed in these fast-growing industries.
The School offers undergraduate degree programs in sport and recreation management and tourism and hospitality management; traditional graduate degree programs in sport business and hospitality management; and two online graduate degree programs in executive sport business and travel and tourism. STHM also offers a PhD program in business administration with a concentration in tourism and sport.