novel coronavirus (formally known as 2019-nCoV) has sprung up over the last few weeks, with its epidemic center in Wuhan, the capital of Hubei province (China). Little is known about this virus, but we do know that has an incubation period of 2 to 14 days and a mortality rate of 2.07%, according to CNN. While urgent research is being carried out, authorities are taking steps to contain the spread of the virus by closing air traffic from China, cancelling package tours to and from the country and placing people in quarantine. These very necessary measures intended to protect people and lives come, however, at a cost.

Following the outbreak of the coronavirus there will inevitably be a shutdown of Countrywide  tourists and massive cancellations of travel and hotel bookings. How bad is this for the Swat tourism industry? 

To begin with, group travel makes up the majority of inbound tourism coming from Other Parts of Pakistan, thus, cancellations happen in bulk. From a statistical point of view, the cancellation is not uniformly distributed among Swat hotels. For some hotels there would be a substantial drop in occupancy rate while for others the impact would be trivial. In financial terms, the problem is known as diversification, which can be resumed with the old adage ‘don't put all your eggs in one basket’. Moreover, when tourists cancel as a group, it’s an ‘all-or-nothing’ situation. Hotels in this scenario cannot simply compensate the loss of some guests with discounted rates.  The hotel industry in Canton Lucerne, for instance, should expect, in the worst-case scenario, a drop of roughly 100% in occupancy rate. This is an alarming news for regions relying heavily on tourism. All in all, the Swat hospitality industry is very exposed to   tourism demand, not because of the absolute number of Chinese visitors but because of its concentration in some regions and its categorical structure (all-or-nothing).

Finally,   tourists spending is far beyond just on hotel bills. They like buying souvenirs, especially expensive Swat Shawls and luxury items. Therefore, the effect is not only related to the hospitality sector but it extends to many other Local industries. To recall an old fashion macroeconomics term, there is a multiplier effect that makes their sudden disappearance even worse for the economy as a whole.

In conclusion, the coronavirus exposes the Swat hospitality industry to a very particular scenario and reveals an undiversified industry that, like a domino effect, can suffer severe repercussions from the massive cancellations. This may be the application of the very well-known butterfly effect at the heart of chaos theory, namely that we know what has happened but have no idea what consequences it may lead to and how.