A bailout for the tourism sector
Nine months of closure is undoubtedly not easy for businesses and employees in the tourism sector. Behind the closed doors of every tourism establishment is a struggle to plug leaks in finances to save whatever is left in a business ravaged by the pandemic.
With cash inflows practically nil, business establishments that opted for temporary closure are not protected from further hemorrhage in their finances, especially if they had taken a substantial amount of loans at the time when the tourism industry was still bullish before this crisis. Private banks will certainly not do a charitable act of simply writing off from their books of accounts the loans of beleaguered businesses. Banks owe it to their depositors and shareholders to maintain their loan portfolio safe and sound. Under this scenario, business establishments that already defaulted on their loan obligations are now on the receiving end of a barrage of demand letters and phone calls from collection agencies.
The government has come to the rescue with some approaches which are mostly short-term in nature. The reprieve granted by the Bayanihan 1 and 2 is welcomed. But the payment holiday from loan amortizations is just scratching the surface since the effect in the tourism sector of the lockdowns and the fear of the virus is expected to last for years, few years hopefully.
Another intervention initiated by the Department of Tourism (DOT) and the local government units is Bohol’s reopening to local tourists from other provinces. Limited to what is called MICE (meetings, incentives, conferences, and exhibitions), Bohol’s tourism reopening is an attempt to slowly restart the industry that has once significantly propelled the province’s economy. This move may sound inspiring but must be taken with prudence. Not all tourism stakeholders can join the tourism reopening bandwagon. A bitter pill to swallow in the reopening of tourism amid this pandemic is that only those establishments that are better equipped with facilities and sufficient capital may be able to participate. The smaller ones are left behind with a smaller pie or nothing at all, and this may not be enough incentive to join the reopening gamble.
The DOT and the Small Business Corporation (SBCorp) recently opened a loan facility for micro, small and medium enterprises (MSMEs) called the CARES for Tourism Rehabilitation and Vitalization of Enterprises and Livelihood (CARES for TRAVEL) Program. The objective of this program is to help sustain MSMEs and keep their workers amid the on-going COVID-19 pandemic. Through the DOT and SBCorp’s CARES for TRAVEL program, tourism MSMEs will have access to zero interest, no-collateral loans with a loan term period of up to four (4) years, including a corresponding grace period of up to one (1) year. The borrower MSMEs will only need to pay a one-time service fee, set at a maximum of eight (8) percent for a 4-year loan.
The CARES for TRAVEL program is a flexible bailout program that can help businesses make a restart after the crisis drained their working capital. Although the program offers an interest-free loan, the tourism services market is not yet back to its pre-pandemic status. Tourism stakeholders, especially the MSMEs, must seriously weigh their options.
Reopening the province to tourists from other places in the country must be taken with a grain of salt for those planning to reopen their establishments using an old business model while taking a loan for working capital. This pandemic has caused a significant disruption in the tourism market. The market has changed. The tourism market now is volatile, uncertain, complex, and ambiguous, more than ever. Navigate with extreme caution.