Abstract
The COVID-19 crisis is dramatically affecting the world economy and, particularly, the tourism sector. In the context of extreme uncertainty, the use of probabilistic forecasting models is especially suitable. We use Monte Carlo simulations to evaluate the outcomes of four possible tourism demand recovery scenarios in the Balearic Islands, which are further used to measure the risks and vulnerability of Balearic economy to the COVID-19 crisis. Our results show that fear of contagion and loss of income in tourism emitting countries will result in a maximum 89% drop in arrivals in the Balearic Islands in 2020.Given that most tourism-related occupations are not highly skilled and are characterized by lower salaries, there are greater risks of loss of welfare, especially for women, who are a major share of the tourism labour force.The model shows important differences among minimum, average and maximum estimates for tourism sector production in 2021, reflecting considerable uncertainty regarding the speed of the sector's recovery. The results serve as a basis to prepare a range of policies to reduce destination vulnerability under different crisis outcomes.
Highlights
Over the 21 Century, tourism has been exposed to several health crises resulting from disease outbreaks, including the SARS, Ebola and MERS epidemics
To perform our Monte Carlo (MC) simula tions of future tourist arrivals, we propose to use a random number generator based on available estimates of expected GDP decline pro vided by different national and international institutions, and empirical estimates from the existing literature related to income elasticity, the expected fall in tourist demand related to fears due to external shocks and duration of such impacts over time
Tourism sector has been drastically affected by the COVID-19 crisis
Summary
Over the 21 Century, tourism has been exposed to several health crises resulting from disease outbreaks, including the SARS, Ebola and MERS epidemics. Middle East and Africa both recorded a 75% drop in arrivals, while in Europe arrivals declined by 70% This severe reduction of displacement towards tourist destinations, necessitate estimations of the potential impacts that this pandemic could have on the tourism economies. For a non-deterministic model, which is sometimes called probabilistic or stochastic, the conditions of a future situation are simulated to some probabilistic behaviour of the future outcome (Fong, Li, Dey, Gonzalez Crespo, & Herrera-Viedma, 2020). Such models allow making use of different estimates of risk variables. All that make probabilistic models especially suitable to analyse uncertainty
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