Global: Economist Roger Bootle of Capital Economics says the medium-term prospects for the hospitality industry are “extremely good”.
Speaking to a global audience on Bench Events’ Hospitality Tomorrow virtual conference, Bootle gave his take on the coronavirus and its impact on the global economy.
Describing the current situation as completely unprecedented, Bootle said he expects to see “a sharp recovery when we have passed the worst”.
“Although we are going to see a 20 per cent fall in GDP in some countries, possibly even worse, and this is the biggest shock since the Great Depression, I think we will see a sharp recovery – a V-shaped graph,” said Bootle. “Although we won’t regain the previous level on the far side of the V, growth will continue at the levels it would have done.”
Looking specifically at the hospitality sector, Bootle said it will be affected by a “massive increase in public debt and a weakening of consumers’ personal balance sheets – there will be a lingering effect on the financial position of consumers”.
When travel restrictions are lifted he expects to see “a great surge of demand for hospitality offerings in the short-term, but it won’t be sustained, there will be a disappointing phase to follow. Memories of this will fade and the medium-term prospects for hospitality are extremely good. People want more experiences not things. I don’t think business travel will recover to its former levels, I have more optimism for leisure travel.”
In general economy terms, Bootle said: “There is pressure for governments to take a larger role – a school of thought that think public = good, private = bad. I don’t agree with that stance. It will become more difficult for corporations to pay large dividends, for example.”
“The crisis could well facilitate a move away from globalisation, a cutting of links with and less reliance on China,” he added, before moving on to Europe. “The primary reaction of countries in the EU to coronavirus was a nationalistic one – we have seen closed borders and economic protectionism. The pandemic will increase the strain on the EU and the Eurozone and we could well see Italy leave the EU.”
Bootle concluded by describing the current situation as unique in history: “The damage to the global economy has not come from the virus itself but from the reaction to it – the lockdown measures. While many have compared the situation to a war, in a war you would see a massive destruction of physical assets and a massive loss of human assets – people. Although coronavirus will claim a significant number of lives, the majority of them will be elderly so not particularly economically active – the vast majority of assets that were in place before the pandemic are still there.”
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