Banking Risks and Lending to Tourism and Hotel Businesses amid the COVID-19 Pandemic
Abstract
The purpose of this paper is to explore the risks associated with lending to tourism and hospitality businesses in the context of COVID-19 restrictions. The author proposes a scoring methodology to assess the quantitative and qualitative factors of borrowers’ credit standing based on industry-related risks and the quantification of potential loss given default. The analysis of credit standing draws on actual figures from financial statements of the ten biggest tour operators present in the Russian and Kazakh tourism markets, as well as a survey of experts specialising in bank lending.
The findings confirm the proposed hypothesis of a negative impact of the pandemic on the financial condition and credit standing of tourism and hospitality businesses and an increase of banks’ credit risks. The trends of lending to tourism and hotel businesses have indicated a contraction of credit supply as a result of the low credit standing of borrowers. An industry analysis shows that losses from the materialisation of credit risks in the group of tourism businesses could be significant for banks. The author concludes that to maintain financial stability and the level of credit in the industry, the state should continue to support the sector, including the provision of soft loans to help finance some items of expenses.
References
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[34] Wahyuni, S., Pujiharto, Azizah, S.N. and Zulfikar, Z. 2021. Impact of the COVID-19 pandemic and new normal implementation on credit risk and profitability of Indonesian banking institutions. Banks and Bank Systems, 16(3): 104-112.
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[2] Baba, C.-A., et al. 2020. Considerations regarding the effects of COVID-19 on the tourism market. Theoretical and Applied Economics, 27(3): 271–284
[3] Baudino, P., Orlandi, J. and Zamil, R. April 2018. The identification and measurement of nonperforming assets: a crosscountry comparison. FSI Insights on policy implementation No 7. Financial Stability Institute. Available at: https://www.bis.org/fsi/publ/insights7.pdf
[4] Beyer, A., Coeuré, B. and Mendicino, C. 2017. Foreword – the crisis, ten years after: lessons learnt for monetary and financial research. Economie et Statistique, 494–496: 45–64.
[5] Boru, T. 2020. The impact of COVID 19 on the private banking system. European Journal of Business and Management, 12(16): 53-77.
[6] Buehler, K., et al. July 2020. Banking system resilience in the time of COVID-19. McKinsey & Company. Available at: https://www.mckinsey.com/industries/financial-services/our-insights/banking-system-resilience-in-the-time-of-COVID-19
[7] Buyl, T., Boone, C. and Wade, J.B. 2019. CEO narcissism, risk-taking, and resilience: an empirical analysis in U.S. commercial banks. Journal of Management, 45(4): 1372-1400.
[8] Dao, L.K.O., Nguyen, T.Y., Sarfraz, H. and Nguyen, V.C. 2020. Factors affecting non-performing loans of commercial banks: The role of bank performance and credit growth. Banks and Bank Systems, 15(3), 44-54.
[9] Gasparian, M.S., et al. 2021. Socioeconomic development: search for optimal models for forecasting inflationary processes. International Journal of Criminology and Sociology, 10: 479-485.
[10] Gennaro, A, and Nitlispah, M. 2021. Corporate governance and risk management: lessons (not) learned from the financial crisis. Journal of Risk and Financial Management, 14(9): 419.
[11] Gursoy, D., and Chi, C.G. 2020. Effects of COVID-19 pandemic on hospitality industry: review of the current situations and a research agenda. Journal of Hospitality Marketing & Management, 29(5): 527–529.
[12] Hall, C.M., Scott, D. and Gössling, S. 2020. Pandemics, transformations and tourism: be careful what you wish for. Tourism Geographies, 22(3): 577–598.
[13] Hoque, A., et al. 2020. The effect of coronavirus (COVID-19) in the tourism industry in China. Asian Journal of Multidisciplinary Studies, 3(1): 52–58.
[14] Jones, P. and Comfort, D. 2020a. The COVID-19 crisis and sustainability in the hospitality industry. International Journal of Contemporary Hospitality Management, 32(10): 3037–3050.
[15] Jones, P., and Comfort, D. 2020b. The COVID-19 crisis, tourism and sustainable development. Athens Journal of Tourism, 7(2): 75–86.
[16] Karmanov, M.V., et al. 2020. The process of innovation diffusion and adoption of innovations in the business modelling for travel companies. Journal of Environmental Management and Tourism, 11(2): 346-354.
[17] Khorassani, J. 2012. An empirical study of depositor sensitivity to bank risk. Journal of Economics and Finance, 24: 15-27.
[18] Kompa. n.d. Servis proverki blagonadezhnosti kontragentov Respubliki Kazakhstan [Service for verification of counterparties from the Republic of Kazakhstan]. Available at: http://about.kompra.kz/
[19] Kozhekina, L., Korshunov, R. and Saraev, A. 2021. Prognoz bankovskogo sektora na 2021 god: na igle lgotnykh kreditov [Banking forecast for 2021: hooked on soft loans]. RA Ekspert. Available at: https://raexpert.ru/researches/banks/bank_forecast_2021/#part5
[20] Lavrushin, O. and Sokolinskaya, N. 2020. Confidence level and credit risk analysis in Russian banks. Banks and Bank Systems, 15(2): 38-46.
[21] Macroaxis. 2021. Financial indicators of Hilton Stock Financial shares. Key accounts of the Hilton income statement. Available at: https://www.macroaxis.com/financials/HLT/Hilton-Inc
[22] Mall, S. 2018. An empirical study on credit risk management: the case of nonbanking financial companies. The Journal of Credit Risk, 14: 49-66.
[23] Margaux, C., Saxon, S. and Yu, J. August 2020. Reimagining the $9 trillion tourism economy—what will it take? McKinsey & Company. Available at: https://www.mckinsey.com/~/media/McKinsey/Industries/Travel%20Transport%20and%20Logistics/Our%20Insights/Reimagining%20the%209%20trillion%20tourism%20economy%20what%20will%20it%20take/Reimagining-the-9-trillion-tourism-economy_what-will-it-take-vF.pdf
[24] Naumenkova S., et al. 2021. Assessment and mitigation of credit risks in project financing. Banks and Bank Systems, 16(3): 104-112.
[25] Nhamo, G., Dube, K. and Chikodzi, D. 2020. Impacts and Implications of COVID-19 on the global hotel industry and Airbnb. In: Counting the cost of COVID19 on the global tourism industry, 183-204. Cham: Springer.
[26] Ozili, P. 2021. Financial regulation and bank supervision during a pandemic. In: Insurance and Risk Management for Disruptions in Social, Economic and Environmental Systems, Forthcoming. DOI:http://dx.doi.org/10.2139/ssrn.3770211
[27] Roy, S. 2020. Economic impact of COVID-19 pandemic. A preprint, July 27: 1-19.
[28] Sansa, N., and Hasan, A. 2020. The impact of the COVID -19 on the financial markets: evidence from China and USA. Electronic Research Journal of Social Sciences and Humanities, 2(II): 29-39.
[29] Shayakhmetova, L., Maidyrova, A. and Moldazhanov, M. 2020. State regulation of the tourism industry for attracting international investment. Journal of Environmental Management and Tourism, 11(6): 1489-1495.
[30] Shishov, S., et al. 2018. Massive open online courses: current trends and development prospects. International Journal of Civil Engineering and Technology, 9(13): 1156-1163.
[31] Shubtsova, L.V. et al. 2020. Supporting the tourism industry in the context of the coronavirus pandemic and economic crisis: Social tourism and public-private partnership. Journal of Environmental Management and Tourism, 11(6): 1427-1434.
[32] Tasintsadze, А., Glonti, V. Oniani, L. and Ghoghoberidze, T. 2019. Empirical analysis of financial and non-financial risks of the commercial bank. European Journal of Sustainable Development, 8(2): 101. DOI:http://dx.doi.org/10.14207/ejsd.2019.v8n2p101
[33] Vinichenko, M.V., Vinogradova, M.V. Nikiporets-Takigawa, G.Yu. and Rybakova, M.V. 2021. The impact of the pandemic on the quality of education and the image of a university. XLinguae, 14(1): 17- 37.
[34] Wahyuni, S., Pujiharto, Azizah, S.N. and Zulfikar, Z. 2021. Impact of the COVID-19 pandemic and new normal implementation on credit risk and profitability of Indonesian banking institutions. Banks and Bank Systems, 16(3): 104-112.
[35] World Travel & Tourism Council. n.d. Economic impact reports. Available at: https://wttc.org/Research/Economic-Impact
[36] Zhilenko, V.Y., et al. 2021. The impact of COVID-19 pandemic on the global economy and environment. Journal of Environmental Management and Tourism, 12(5): 1236-1241.
[37] Bank of Russia. 2021. Outstanding amount of loans granted to resident legal entities and individual entrepreneurs.https://cbr.ru/vfs/statistics/BankSector/Loans_to_corporations/01_02_C_Debt_corp_by_activity.xlsx (in Russian)
[38] E-Government of the Republic of Kazakhstan. n.d. Government services and information online. Available at: https://egov.kz/cms/ru/online-services/for_busunesses
[39] Expert Rating Agency. January 2021. Historical data on default levels by rating categories of the applicable rating scales as of 01.01.2021. Available at: https://raexpert.ru/docbank//312/45a/5cc/74bf6f3bdede355182d5d91.pdf (in Russian)
[40] FDi, UNWTO. 2021. Global FDI Greenfield investment trends in tourism. Tourism Investment Report 2021. In association with fDi Intelligence from the Financial Times.
[41] Federal Tax Service of the Russian Federation. n.d. State Information Register of Accounting (Financial) Statements of Enterprises of the RF. Available at: https://bo.nalog.ru/about (in Russian)
[42] Hyatt Hotels Corporation. 2020. Annual Report on Form 10-K for the fiscal year ended December 31, 2020. Available at: https://s2.q4cdn.com/278413729/files/doc_financials/2020/q4/6b0aaf49-6404-48a5-86fe-565455f79d90-(1).pdf
[43] IATA. 2021. Industry Statistics Fact Sheet. Available at: https://www.iata.org/en/iata-repository/publications/economic-reports/airline-industry-economic-performance---april-2021---data-tables/
[44] Marriott International. 2020 Annual Report. Available at: https://marriott.gcs-web.com/
[45] TestFirm.ru. 2020a. Finansovye pokazateli. Deyatelnost turisticheskikh agentstv i prochikh organizatsii, predostavlyayushchikh uslugi v sfere turizma [Financial indicators. Tour agencies and other organisations providing travel services]. Available at: https://www.testfirm.ru/otrasli/79/
[46] TestFirm.ru. 2020b. Return on sales. Available at: https://www.testfirm.ru/finfactor/grossmargin/
[47] UNWTO. n.d. International tourism and COVID-19. Available at: https://www.unwto.org/international-tourism-and-COVID-19
Published
2022-03-31
How to Cite
KOZHAMZHAROVA, Gulnur et al.
Banking Risks and Lending to Tourism and Hotel Businesses amid the COVID-19 Pandemic.
Journal of Environmental Management and Tourism, [S.l.], v. 13, n. 2, p. 427-437, mar. 2022.
ISSN 2068-7729.
Available at: <https://journals.aserspublishing.eu/jemt/article/view/6897>. Date accessed: 03 dec. 2024.
doi: https://doi.org/10.14505/jemt.v13.2(58).12.
Section
Article
Copyright© 2024 The Author(s). Published by ASERS Publishing 2024. This is an open access article distributed under the terms of CC-BY 4.0 license.