A few months ago, I published an article in which I commented on the great strength of those countries that have such a large relative weight of their gross domestic product (GDP), dependent on a sector such as tourism. Nobody in their right mind can be against having a GDP subject to a sector which, as the indicators show, not only does not stop growing, but is also one of the sectors with the greatest growth, as well as the greatest contribution, to the world economy.
What is more, it is a sector which, as we have said on numerous occasions, is one of the greatest drivers of job creation. We are talking about the fact that 20% of the total employment generated in the world since 2013 is the responsibility of the tourism sector. A responsibility that is attributed more responsibilities as being the cause of generating more than 5,000 million dollars a day. An amount that, if we analyze it in detail, allows us to know why this sector generates so much employment, because we are talking about a sector with great demand.
But not everything is there. We have talked about a profitable business, a business with potential, a business that generates employment, a business that moves large flows of liquidity, but, nevertheless, we have not said everything about this sector. The fact is that the tourism sector, in contrast to other sectors, is the sector that best adapts to situations like the one that is happening in our economy. In other words, it is a sector with such a capacity to adapt that it tends to emerge strengthened, as well as practically intact, from every crisis that our economy goes through.
Its high rate of seasonality, while causing greater job destruction at certain times of the year, also allows the companies that make up the sector to have business structures in which much of the structure is made up of variable costs. In other words, without the need to have a fixed cost structure which, in times of recession, can disrupt profit margins. In short, a privileged sector that has meant for many countries, as some say, being the “goose that lays the golden eggs”.
Furthermore, and very much to be considered, a sector to which more and more economies have begun to join.
However, reference is often made to a very common saying – at least in Spain – that everything good, in excess, ends up being bad’. Well, in this sense, and extrapolating to the topic discussed in the article, we are talking about the fact that it can be very profitable to subordinate a large part of your production model to a certain sector. Now, when we do not diversify, if there is a shock in the economy that especially affects that sector on which we depend, the situation could cause real difficulties for the economy.
A situation which, as I say, and although it seems to be a general one, is what is happening to many countries on our planet. France, Spain and Italy are countries that have a large percentage of their GDP dependent on the tourist industry. Furthermore, when we analyse these countries in detail, we can see how they have regions in the territory which, despite being large cities, have around 50% of the citizens resident in the territory who are employed in the tourism sector.
In turn, the weight of the sector in its GDP, in this regard, we are talking about, sometimes, representing around 40%, even representing, in certain circumstances, up to 50% of the GDP of certain regions. A large percentage for any gross domestic product, which, while providing it with the strength we mentioned at the beginning, also represents a clear weakness in the face of possible negative scenarios that could have an effect on the economy and, especially, on the sector that controls our productive system.
A situation that we are seeing right now, where the tourism sector is continually being crushed by the Coronavirus pandemic. Since the beginning of the great economic and health crisis, tourism has fallen to levels never seen before, while countries continue to restrict the passage of all those citizens who do not have the resident. A scenario that, in the face of a general paralysis and confinement, shows us the inability of the sector to experience growth in the short term.
Furthermore, we are not only talking about the sector not working and you must take measures, we are talking about the fact that if in a certain territory, such as that which Spain possesses, the tourism sector shows serious weaknesses such as those it shows today, having a weight in our GDP is a great risk that we must contemplate. To get an idea, with that 40% of employment that is directly linked to the tourism sector, in a scenario of general confinement and where there is no displacement, a large part of those jobs, which are closely linked to the sector, will end up being destroyed.
In conclusion, we must be very careful with the situation. Especially when we are talking about a sector which, for many economies, is considered strategic in a large part of the world. We are talking about a sector that has not only allowed us to grow so quickly, in unison with the very growth that the sector was showing, but a sector that shapes the lives of millions of citizens in the world, who, every day that passes, have to make goodbye to more than 1 million colleagues who are made redundant because of the inability to contain the situation.
”Francisco Coll MoralesEconomist