A comparative study of the impacts of the COVID-19 pandemic on the hospitality industry in Switzerland & Madagascar

The aim of this investigation is to compare how the Covid-19 pandemic has affected the hospitality industry in Switzerland and Madagascar. More precisely, in the Riviera region located in Switzerland around the lake Leman investigating multiple towns including Montreux and Vevey and their surroundings. Montreux is my hometown. In Madagascar, I will be focusing my research on the island of Nosy Boraha, an island on the east coast of the mainland. Having family with Malagasy backgrounds has offered me the chance to visit Madagascar every year including during the pandemic. Furthermore, the study will examine exact data from a range of hotels with a variety of different rankings that are spatially located in both these areas. After numerous issues with lockdown periods, the lack of international clients due to cancelled flights and the need of government aid I have decided to compare data from a low-income country and a higher income country. This will allow the study to explore two extremes and determine whether the development of a country increases the fortitude of the impact created by the pandemic.

Has the Covid-19 pandemic had a more serious impact on the Swiss or Malagasy hospitality industry?

Nosy Boraha better known as “St. Marie” its French name, is located on Madagascar’s east coast in the Indian Ocean in the region of Toamasina. The island is 49 kilometres long and 5 kilometres wide (“Sainte Marie”). The Ravoraha international airport was constructed in the south of the island in 2015 and the island equally has a commercial port. Its population is

estimated to be 30'000 people (“City Population”). The island was a popular pirate base between the 17th and 18th centuries while then being colonised by the French in 1750. Since then, the island has been receiving a range of international tourists seeking for an adventure with beautiful coral reefs, transparent waters and incredible Fauna and Flora.

The riviera region is located on the north shore of Lake Leman in the canton of Vaud. It consists of many small towns, the most popular ones being Montreux and Vevey which we will be focusing on. Vevey and Montreux both have a small population size , these towns may seem uninteresting however in normal times, their breath-taking views and the multitude of

events organised every year attract tourists from every corner of the world. Montreux has a population of 26’000 people (Romanvie) and Vevey has a population of 19’683 people (City population).

To have a clear focus for this study, I have based the data collection on the following hypothesis -

The pandemic had a stronger impact on the hospitality industry in Madagascar compared to Switzerland.

Indeed, Madagascar has high poverty rates as well as being a less economically developed country. Madagascar had a HDI of 0.528 points in 2019 ranking 164th place in the world’s ranking (“Madagascar 2022”). Equally, the government’s corruption and lack of investment in the country’s health and public sector may be a potential reason for the pandemic’s stronger impact on the hospitality industry. Hypothetically, this will lead to a faster spread of the virus and a disordered management of the pandemic, which is unappealing to tourists. Therefore, the pandemic will have a milder impact on hospitality in Switzerland due to its strong health sector and high HDI ranking of 0.955 points in 2019 leaving it in 2nd place worldwide (“Switzerland HDI”). International clients will continue to visit Switzerland during the pandemic as entry regulations will not be as strict as Madagascar. The government is politically stable which will allow them to create regulations to diminish the spread of the virus and put testing centres and support in place for patients.

In Switzerland, it was on the 16th of March 2020 that the country went into confinement where schools, inessential shops, restaurants, and bars closed. People were advised to stay home however everyone had the freedom to go out without permission. In Madagascar, they started handling the situation on the 20th of March 2020 when they took measures to avoid the spread of the virus. They announced confinement in the Analamanga region where the capital is situated and implemented a curfew (“Coronavirus à Madagascar”).

It was also on the 20th of March 2020 that there was a suspension of all flights to and from the capital. Later, on June 4th, 2020, there was a suspension of all international “Air Madagascar” flights (Madagascar Tourisme). These flights coming from Paris and the Reunion Island were often the main influx of international clients for tourism in the country. The borders then closed for tourists until the 6th of November 2021 when its borders reopened for flights from Europe to the capital via Air Madagascar and Air France. However, entry in the country was not easy as a PCR test was required 72 hours before the flight and an antigen test was done upon arrival in the airport. This discouraged tourists to visit Madagascar since if their test was positive at arrival their whole holiday was ruined. Recently, the government announced that no PCR tests were required from international tourists to enter the country. On the other hand, Switzerland closed around 130 border crossing points on the 17th of March 2020 (“Switzerland Covid-19”).

Any businesses promoting leisure stayed closed in Switzerland until the 1st of June 2020. The Swiss Government then implemented the use of Covid Certificates in September 2021. This regulation allowed members of the vaccinated population to enter bars, restaurants, museums etc. As a percentage of the population was not vaccinated, this decreased the number of local clients in the hospitality sector. In November 2022, 69% of the population was vaccinated (“Coronavirus: The Situation”). With many regulations coming through after that, in April 2022 they lifted all restrictions related to the pandemic.

During the two months and a half of closure, business owners still had to pay their employees but without their monthly revenue which was a struggle. This is when the

government put RHT into place which stands for “Réduction de l’horaire de travail” translating to “short time working compensation” or “furlough”. The government would pay part of employees’ salaries who worked in companies that couldn’t operate due to extraordinary reasons (“Short-time working”). For hotels and restaurants, the government paid 80% of an employee’s salary.

In the contrary in Madagascar, restaurants and hotels were never asked to close however the fear that many people had of the pandemic left these establishments empty. The government chose a different option to help business owners during the pandemic. François-Xavier Mayer, president of the tourism office in Nosy Boraha states that “The World Bank gave money to the state and the state instead of giving it directly to the hoteliers to cover salaries or, as they did in Switzerland to maintain salaries and maintain the economy, they did it differently. They said, well so we're going to create training courses for which we'll pay people to be trained to find a job.” (Mayer, François-Xavier “Personal Interview”) In fact, the state created training courses such as agriculture, computer training and French and English-speaking courses. This was implemented to avoid unemployment during the pandemic and the participants were paid for a day’s work. Moreover, for hoteliers who needed to adjust parts of their hotel or reconstruct areas, the government would grant an amount of up to 12’000$ to help. However, François-Xavier expressed that “only about a hundred files were accepted”. (Mayer, François-Xavier “Personal Interview”) Without this help, it would’ve been difficult for hoteliers to fire some employees who live solely off their salary to feed their families and allow their children to go to school. Cutting them off during these hard months would leave them in poverty. Madagascar’s high rates of poverty have deepened due to the pandemic, the rate has deepened from 75% to 78% (Eichstadt).

To collect data for this study, I contacted many hoteliers who have agreed to give me data
from their hotels.

• My primary data was collected in detail from the “Tralala Hotel” in the city of Montreux with 34 rooms and a resort hotel in Nosy Boraha, Madagascar named “Princesse Bora Resort” with 20 rooms.
• I created a survey on Microsoft forms with multiple questions and sent it out to hoteliers in the Riviera region, Switzerland and Nosy Boraha, Madagascar. Concerning data, I asked for the following -
   
  • Number of nights sold to clients in the years before the pandemic (2018/2019).
  • Number of stays in sold to clients in the years during the peak of the pandemic (2020/2021).
  • Origin of clients.
  • Overall occupancy rate. The data collected allowed a comparison to be made.
• To have an overview on the wider spectrum of tourism in both locations, I carried out two interviews. Estelle Mayer who is the president of the society of hoteliers for the Riviera region and the owner of the “Tralala Hotel” gave me insight on her business and her colleague’s businesses as well. This association promotes the overall image and reputation of hospitality while also supporting touristic development of the region (“Société des hôteliers”). In the society of hoteliers, there are 54 hotels involved. As weekly meetings take place within this association, I had access to their yearly data collection of the whole Riviera region’s hotels.
• My second interview was with the president of the tourist office in Nosy Boraha, Francois-Xavier Mayer and the owner of the “Princesse Bora Resort”. This office is an association member of the “National Tourist Office of Madagascar” bringing together all the actors from the private sector of the island ranging from restaurants and hotels but also artisans and shops (Sainte Marie). He equally gave me access to data for the hotels on the island.

The pandemic in Madagascar triggered one of the deepest recessions in the country’s history. A recession significantly declines the economic output of a country which created high rates of unemployment, a collapse in export revenues and private investment which ultimately led to a decrease in living standards. It was estimated that 1.8 million people had fallen below the poverty line in 2020 (Madagascar Economic). Madagascar is one of the main exporters of vanilla, gold, raw nickel, cotton textiles and titanium ore. While international trade was paused during the pandemic, the country lost a significant amount of export revenue as a percentage of its gross domestic product (GDP). GDP is the value of total output produced in an economy over a period of time. In fact, in 2016, international exporting accounted for 33% of their GDP (Beck). The Chinese and U.S markets take in 25% of Malagasy imports and as they were closed this limited their opportunities even further (Eichstadt). The business cycle shows an economy’s growth in the long run. A peak in the country’s economy is situated at point B and a trough is displayed at points A and C.

During the pandemic, the country’s economy was therefore plunging as seen by the labelled recession. Equally, this was due to the large contraction of GDP by 7.1% caused by the pandemic (Madagascar Economic). In addition, as unemployment rates continued to increase, this put a strain on hoteliers and members of the tourism industry as a large proportion of the labor force works in tourism. The tourism industry in Madagascar is internationally renowned for its ecotourism. The economic gains received from tourism allow the country to ensure the protection of habitats and natural resources (Vernart). In 2019, travel and tourism contributed 12.7% to Madagascar’s GDP compared to 4.4% in 2020 (“Contribution of Travel”).

Equally in Switzerland, in consequence of the pandemic the GDP dropped by 2.4% in 2020. In addition, private consumer spending fell by 3.7% in 2020, the sharpest decline since the second world war (“Swiss GDP Takes”). Private consumer spending fell as many sectors were closed. People could not spend money in restaurants, bars, culture, hotels, and transportation. This caused a fall in aggregate demand, the total amount of spending on goods and service in a period of time at a given price level. Private consumption is a component of aggregate demand.

The graph above demonstrates a fall in aggregate demand by a shift to the right in the short run. As AD falls, the price level decreases and so does the quantity of output. This causes a contraction in the Swiss economy. The fall in private consumption was one of the main

reasons that hoteliers in the tourism industry suffered so much. They weren’t making any form of revenue. Unsurprisingly, in the hospitality industry, there was a decline of value added in accommodation and food services by 20.8% in 2020 (“Swiss Economy”). The government therefore had to increase their spending to bail-out the economy with subsidies and emergency loans to businesses.

This decline in aggregate demand can be concluded across both countries as its components such as consumption and net exports decreased. However, the relative support offered by the country’s governments slightly reduced this decline in aggregate demand which aided both economies.