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On January 30, 2020, the World Health Organization (WHO) declared the outbreak of the novel coronavirus (COVID-19) case in Wuhan China a global health emergency. Since April 2020, the number of confirmed cases and death tolls have soared exponentially worldwide. For example, as of April 3, the cases multiplied 10-fold from 0.1 million to 1 million in 27 days (for details, see <Table 1>).

Southeast Asia was one of the first regions impacted by the contagious disease because of its close geographical proximity and business travel, tourism and supply chain links to China. As China accounts for 17% of global GDP, 11% of world trade, 9% of global tourism and over 40% of global demand of some goods, negative spillovers transmit to the rest of the world, especially to Southeast Asia. International tourism is further affected by lockdown and social containment measures implemented across the globe, leading to the slowdown of economic activities in many sectors of economy (OECD, 2020, p. 2).

Tourism is an incredibly important sector for Southeast Asia, Thailand in particular. Tourism makes up to 20% of GDP in Thailand. The tourism authority of Thailand estimated that number of tourists may reduce by six million because of the COVID-19 pandemic (https://www.reuters.com). In the early beginning stage of the COVID-19 pandemic, the Chinese government put a group travel ban on Chinese. This travel restriction had an immediate impact on Southeast economy since the Chinese account for 17% of all inbound visitors (ASEAN Secretariat, 2020). For example, 28% of all inbound visitors to Thailand were Chinese. Travel restrictions imposed by some Southeast Asian countries on travel to and from Europe and North America further reduced their tourism trade.

For empirical analysis, we select the large six countries out of 10 ASEAN members based on the value of GDP (gross domestic product). We call the selected six countries ASEAN-6, namely Indonesia, Thailand, Singapore, Malaysia, Philippines and Viet Nam. The ASEAN-6 hold 95.53% of ASEAN’s total GDP (ASEAN Statistics Division).

In this paper, we aim to explore the impact of COVID-19 pandemic on tourism industry across ASEAN-6 countries. Following Bhattacharya and Naryan(2005), and Lean and Smyth(2009), we employ unit root tests to examine whether the reduction of inbound visitors to ASEAN-6 countries caused by the shocks from COVID-19 pandemic is permanent or transitory.

The rest of this paper is organized as follows. Chapter II presents literature review on previous epidemics and COVID-19 pandemic across the globe. Chapter Ⅲ provides the economic importance of tourism industry to ASEAN-6 countries. Chapter Ⅳ explains empirical analysis. Chapter Ⅴ concludes this paper with policy implications.

There are growing number of studies on tourism demand regarding the SARS (severe acute respiratory syndrome), the H1N1 influenza and COVID-19. The SARS (severe acute respiratory syndrome) in 2003 created incredible negative economic impact on global economy, especially the tourism industry. Not only the occupancy rate of six Korean five-star hotels decreased around 14% during February to July in 2003(Kim et al. 2005), but the number of visitors in Hong Kong also decreased from 1,347,386 (March) to 493,666 (April) in 2003(Lee and Warner, 2005). In Singapore, hotel occupancy rate dropped from 72% to 42% and the total numbers of unemployed people were 102,000. For Hong Kong, the SARS epidemic may generate permanent effect on the number of tourist arrivals from the US, Japan, the UK, and Taiwan(Au et al. 2005). Nonetheless, they gave only short term effect in the case of India (Bhattacharya and Narayan, 2005). In terms of economic growth, the SARS crisis created about 50,000-89,000 unemployed workers in Taiwan, lowering the GDP growth rate by 0.43-0.77%. In addition, it could lower East Asian economic growth by 0.40-0.50% of total GDP(Brahmbhatt and Dutta, 2008).

The H1N1 influenza in 2009 also created incredible economic impacts, especially on tourism industry. While the H1N1 outbreak lowered European tourists in Mexico and led to losses of about USD 2.80 billion(Rassy and Smith, 2013), it caused the decline in number of tourists temporarily in Sarawak(Solarin, 2015) and Malaysia in general (Lean and Smyth, 2009). It reduced employment by 0.70-4.10 % and GDP by 0.90-6.20% in Australia, respectively(Verikios et al. 2012). For Korea, the socioeconomic costs (medical and non-medical cost combined) from H1N1 influenza in 2009 were USD 1.09 billion, approximately 0.14% of Korea’s GDP (Kim et al. 2013).

Currently, the COVID-19 pandemic has caused unprecedented negative economic impact on many sectors, tourism in particular mainly due to the international travel restrictions around the world. The outbreak can cause the decline in number of foreign tourists in either short-run or long-run. It is predicted that the number of international arrivals will be reduced by approximately 20-30%, creating losses of receipts around USD 300-450 billion in the global tourism industry. The decrease in the number of international passengers might lead to the revenue losses for airlines approximately USD 252 billion and for the airports by USD 77 billion in 2020(Gössling et al. 2020). The pandemic may reduce arrivals of Chinese tourists to the USA and Australia and it will take 6 to 12 months to recover to the pre-crisis levels(Polyzos et al. 2020), leading to unfavorable downturn on the tourism and related industries in both countries. For the air travel, Gallego and Font(2020) employed big data analysis during May-September 2020. They argued that the COVID-19 might reduce the desire to travel by 30% in Europe and the Americas and by 50% in Asia. For travelling by sea, the number of arrival of mega-cruise ships is expected to drop due to the differences in health-related restrictions across countries. Consequently, promotion of niche cruise with small ships could be the solution for tourism industry(Renaud, 2020). Moreover, the post-pandemic tourists may prefer to travel to nearby destination where are considered as lower risky places(Romagosa, 2020).

Only one study is found in the case of ASEAN-6 countries: Malaysia. Foo et al.(2020) asserted that the reduction in number of tourists leads to cancellation of 170,084 hotel room bookings during January 2020 to March 2020, which generated loss of revenue about 68,190,364 Malaysian ringgit. In addition, foreign airlines are permitted to have only one flight per week to China, forcing three major airlines of Malaysia (Malaysia Airlines, AirAsia and Malindo Air) to face with the risk of bankruptcy.

In this paper, we examine the impact of COVID-19 pandemic across ASEAN-6 countries focusing on tourism industry. For empirical analysis, we employ various unit root tests to check if the time series for international inbound visitors to ASEAN-6 countries satisfy the random walk hypothesis. If the time series for inbound visitors follows a random walk (or revealing a unit root), it implies that the series is non-stationary process, meaning that the shocks to visitor arrivals are permanent. On the other hand, if the visitor arrivals do not reveal a unit root (or stationary process), it indicates that the shocks to visitor arrivals are temporary.

We find that the effects of COVID-19 on reduction of inbound tourists are transitory for Indonesia and Thailand. On the other hand, the negative effects of COVID-19 in most of tourist groups of Singapore are permanent. Singapore is relatively a small city state and its Changyi International Airport is one of the busiest airport in the world. These facts combined make Singapore more vulnerable from the impact of COVID-19. For Malaysia, the temporary effects are revealed on the international visitors from Indonesia, whereas the permanent effects are reported for the inbound tourists from Singapore and China. Indonesia and Thailand might recover easily from the effects of COVID-19 on the numbers of visitors once the pandemic ends. However, Singapore may suffer in the long-term period regarding the decrease in foreign tourists. For the Philippines, Malaysia and Vietnam, both the short- and long-term effects are present in certain tourist groups.

The findings suggest that the government authorities in Singapore, the Philippines, Malaysia and Vietnam should take source-country-specific policy to cope with the long-term effect of COVID-19 over the number of international tourists.