Industry Study: Crisis Has Closed 50,000 Businesses in Brazil’s Tourism Sector

RIO DE JANEIRO, BRAZIL – The Albertina restaurant, in the West zone of São Paulo, portrays the tourist sector’s current scenario in Brazil. Hit by the impact of the pandemic, the establishment announced last July it was ceasing to do business after its doors had remained shut for over 100 days.

“Nobody wants to close, because it means firing people and giving up an economic, personal and professional investment. It’s a hard decision, but sometimes it’s necessary, it needs to be made,” said chef Bruno Alves, who now devotes himself to dinners for closed groups.

A study by the National Confederation of Commerce of Goods, Services and Tourism (CNC) shows that Alves’ predicament is far from being isolated. According to the organization, with the absence of usual customers, 50,000 tourist establishments were forced to close their doors between March and August. These include bars, restaurants, hotels, inns, travel agencies and transport services, as well as culture and leisure activities.

The number represents the loss of 16.7 percent of all tourist businesses in Brazil, particularly bars and restaurants (with the closure of 39,500), hotels, inns and similar (5,400) and road transport (1,700).

“There are people doing contruction works in hotels because it’s no use opening now, it’s best to wait for the pandemic to pass, opening entails related costs. The airline sector is also of great concern because the crisis may lead to even greater market concentration, with repercussions on airfare prices,” said economist Fabio Bentes, in charge of the CNC survey, who used data compiled from the Labor Ministry’s General Registrt of Employees and Unemployed (CAGED).

All of Brazil’s states have lost tourist companies, especially São Paulo (loss of 15,200 establishments), Minas Gerais (5,400), Rio de Janeiro (4,500) and Paraná (3,800).

According to the survey, in six months of pandemic 481,300 formal jobs were lost in the tourism sector. “The impact of this job loss on the labor market is tremendous. The sector employed 3.4 million formal workers before the pandemic. There was a loss of almost 14 percent of jobs in the sector,” said Bentes.

The Albertina restaurant had seven staff and three owners. The Caverna, a bar in Rio’s South Zone, had the same fate, with the dismissal of its ten employees with signed employment booklet and four more weekend temps. “Delivery alone doesn’t secure revenue. With the reopening of the first establishments, full rent was collected again, as well as the energy bill, costs increased a lot and delivery lost its attractiveness,” said Pedro Aliperti, partner of the Caverna, who auctioned off decorative items from the bar to pay off debts. “I’m not leaving empty handed, but at least I don’t owe anything to anyone.”

Idleness

The tourism sector used only 26 percent of its revenue-generating potential during the crisis months, failing to collect R$207.85 (US$39) billion between the second half of March and the end of September, the CNC estimated. The worst moment occurred in March and April, when the amount of tourism services provided in the country plummeted by 68.1 percent, as determined by the Brazilian Institute of Geography and Statistics (IBGE).

In July, the sector was still operating 56.6 percent below pre-pandemic level. “There are very significant losses within the tourism sector on the part of car rental, accommodation and catering, travel agencies, buffet services, artistic creation,” listed Rodrigo Logo, research manager at IBGE.

According to Manoel Linhares, national president of the Brazilian Hotel Industry Association (ABIH), the government measures aimed at sustaining employment and granting credit have contributed to avert higher losses in the sector, but hotel occupancy remains low. “Average occupancy stands at 20 percent of total capacity. Hoteliers needs 50 percent occupancy to pay costs, so they had to cut expenses, lay off staff,” Linhares justified.

“International sales are poor. In the domestic market, we are at 70 percent compared to a year ago,” said Leonel Andrade, president of CVC Corp, owner of CVC travel operator, when commenting on the net loss of R$1.151 billion in the first quarter of 2020.

The company believes it should gain market share, as its greater size than its competition provides better conditions to withstand this difficult moment: “We will probably conquer market share with the crisis, but this is not something to celebrate.”

ABIH expects a slow and gradual sector rebound and is investing in a campaign to convince Brazilians to travel inside the country again. “The rebound will come from regional tourism, of short length, more by road. Hospitality is prepared to accommodate safely, professionals are trained in all protocols to protect tourists’ health,” said Linhares.

Widespread loss

With the hospitality sector affected by the coronavirus pandemic, Alfredo Miguel saw his business affected too. Owner of the Bonjardim Group, which provides catering services for hotel chains, he reduced his staff from 300 to 80, but was not forced to close any of the group’s 15 facilities. “We are suffering greatly too. But we’ll carry on as long as we can.” He said it was not possible to claim the credit offered by the government because revenue was above the limit for the grant.

Bonjardim has an existing contract with a hotel in Salto (SP), but activities have been suspended and resumption is still uncertain. As a result, this facility’s 15 employees had to be dismissed in early April. Miguel expects an improvement in the sector with the introduction of a vaccine. “If the vaccine comes in December, things will be better. But if it comes only in March, then improvement will only occur in June next year,” he said.

The president of SinHoRes Osasco – Alphaville and Região, Edson Pinto, shares the same opinion. “The vaccine issue is crucial to regain confidence, but in São Paulo we have the best hygienic and sanitary protocols in Brazil and the best performance in its implementation.”

The shortage of clients is also a major issue for Martin Jensen, CEO of Queensburry, a luxury tourism agency. The company, which used to have 116 employees, released all but 24 and filed for bankruptcy protection. “After March, I did not have any complete sale of the international package. And there were over one thousand travel cancellations. March was a deluge, a tsunami, a nightmare.”

Source: O Estado de S. Paulo

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