Evolving Past a Global Crisis

Tourism and Hospitality During a Crisis.

Surviving a bad season may be part of doing business, but for tourism and hospitality, the COVID-19 pandemic represents a significant crisis that will lead to permanent changes in how we interact with the world ... and each other.

A Complicated Crisis

The COVID-19 pandemic hit the tourist industry and sent it tumbling like a row of dominoes, kicking off a chain reaction that sent shockwaves to every corner of the economy.

Hospitality and tourism are no strangers to unprecedented disruptions, like the recession of 2007-08, or the security threat of global terrorism following 9/11, but the pandemic stands out as a much larger, longer-lasting and multi-pronged crisis, which throws doubt on the very future of tourism and hospitality

COVID-19 did not merely disrupt normal operations—it brought devastating consequences to otherwise dynamic businesses and caused lingering instability with waves of lockdowns and new restrictions at local, national and international levels. Border closures and strict compliance to complex hygiene protocols kept doors shuttered. Social distancing demanded lower customer occupancy. This severely impacted an industry famous for its small profit margins, where the difference of a few cancelled bookings or a few extra restaurant tables marks the difference between staying in the black or falling in the red. This in turn became a blow to municipalities relying on tourism revenue.

For most hospitality businesses, especially small or medium enterprises, the hope for sustained cash relief carrying them into 2021 is simply not realistic. The fiscal shock of the COVID-19 pandemic can be seen as an abrupt halt to the continuous income generation that tourism and hospitality need to survive. This paired with a series of severe restrictions turned off a steady income stream, causing a crash that led to the dismissal of furloughed staff. No longer can the projected earnings of the present season fund a bigger brighter future season. The traditional growth model does not function in a pandemic economy.

Changing Demand

COVID-19 is also historic in the way it has affected both the demand and supply of the tourist industry. For decades, travel has been a major aspiration of the middle class but due to the pandemic, the steady masses of free-spending consumers with surplus income and leisure time have been overwhelmingly disempowered, their numbers reduced to such a degree that major tourist destinations have already experienced permanent changes to their commercial landscape 1.

Of special concern is that the atmosphere of apprehension and the heightened risk to travelers is affecting developing nations who have historically relied on tourism and hospitality to rise from poverty. Less-diversified economies will be more susceptible to the unfortunate ripple effect that hits their own infrastructure, since a significant portion of their GDP relies on the steady inflow of foreign currency attached to tourism. Such a major disruption to tax revenue and cash flow will affect working governments and civil society 2. One example is a developing nation like Palau, which earns a staggering 90% of its revenue from foreign tourists, mostly from Asian countries.

While tourism and hospitality feel the one-two punch of the pandemic, the industry must also reconcile the role it played in spreading COVID-19. While travel and tourism are different, they are often symbiotic 3. In the case of the pandemic, air travel, business travel and seemingly innocent visits to family and friends quickly spread the virus globally. Mega cruise liners experienced massive outbreaks that threatened port destinations and led to passenger fatalities. Vacationers returning home from crowded beaches and resort towns contributed to a second wave that hit Europe in the later part of 2020.

For that reason, the tourism and hospitality industry must embark on a broad approach to recovery, focused less on insular concerns of individual business while opening themselves to innovation and adaptation. Part of that process will be an internal review of traditional structures and processes that made the industry so vulnerable, while accepting the new realities of the post-COVID market.

Assessing the Damage

The United Nations (UN) predicts a revenue drop of one trillion USD for 2020 and the loss of more than 100 million jobs in tourism 4. The vast majority of these jobs represent the informal sector, from gig workers and temporary contractors to street vendors and handicraft makers. The effect will be worse in 2021 as furloughed restaurant and hotel employees become unemployed.

Women workers are disproportionately impacted by the pandemic, as they are among the highest number of employees at the lowest-paid end of the tourism and hospitality industry. They felt the brunt of the collapse while inhabiting the farthest edges of hope for recovery and a return to work. Even in better times, women are three times more likely than men to leave the workforce in order to look after children. However, since the pandemic, for every single unemployed male, nearly eight women have lost their jobs 5. The sustained rate of high unemployment caused by the pandemic will likely lead to a negative wave-like effect that could last for many years.

The UN points out that tourism represents a “complex value chain of interconnected industries”, from airlines and transportation to food, agriculture, entertainment, retail, conferences and conventions—even academia 6. The breakdown between so many industries may feel catastrophic, however, this moment can also represent a catharsis for a tourist infrastructure born out of old technology and traditions.

Bigger is Not Always Better

High-volume, low-cost mass tourism is incompatible with a highly-contagious airborne virus. While the democratization of travel opened the world to even the most budget-conscious consumer, the shrinking market and shifting demand of the post-pandemic world will change which consumers can afford to travel, how they travel and where they can go. Smart businesses will adapt to changing consumer habits, while also educating their clientele towards making better-informed decisions 7. Investors would do well to focus on a smaller industry with fewer customers and higher standards.

A multi-billion-dollar cruise ship industry represents the unsustainable pre-COVID past. Their flagrant disregard for environmental protocols and labor rights deserves special scrutiny and a renewed demand for drastic change 8 9. The largest corporations have been locked in a race to the bottom by focusing on maximum volume amidst competitive price wars.

But price could be less of a deciding factor in the future. Health, hygiene and wellness will be the new ‘luxury’. Governments are likely to increase regulation of cruise ships on port security, hygiene protocols, health and liability insurance, environmental standards, labor laws and crew changes. For example, the Norwegian government has declared that by 2025, all cruise ships entering their fjords must be emissions free. Looking ahead, to compete in prized destinations, cruise ships must decrease their footprint and adopt cleaner technology.

Despite a reputation of resisting change to their lucrative mass-tourism model, the amount of capital in the cruise ship industry makes it the best equipped to transition to improved operating standards and sustainability. This will be a bitter pill for many as they will have to exchange boom profits for a leaner, longer-term profit model. This is their opportunity to lead their industry towards progress, rather than chase a fickle consumer base. Reimagining the sustainable cruise experience could easily become a major growth industry

Transition Versus Recovery

An effective vaccine will reduce risk and bring back a degree of normality to some aspects of tourism, but we must accept that the entire experience of hospitality and tourism will be changed forever. Simply the consideration of more stringent hygiene protocols will affect things like transportation and built-in costs. We must accept that there will be other pandemics and global shocks to our system—the sooner the industry accepts that big changes are inevitable, the quicker they can move to a new and more resilient economy. In the short term, travelers will likely seek out experiences that are less consumption-based and deliver peace of mind and a stronger relationship with nature. Businesses may find an increased demand for a secure tourism experience within a controlled vertical that includes transportation, accommodation and diversions. An example might be a sustainable nature resort that vets its guests and contains them in a virus-free environment with access to wildlife, adventure and cultural experiences in one setting.

Government partnerships will be critical for tourism to succeed, while strategic partnerships between global corporations and local businesses will also be important for a sustainable foundation. Obviously, this means the price of travel will escalate rapidly. One of the biggest blows will be that travel will become unaffordable for most, causing a contraction of hotel rooms (and hotel sizes) and a rise in localized tourist products. Logically, this puts developed nations with higher-valued currencies in a better position to benefit from the new tourist economy, but it will be devastating for smaller economies like Mozambique or Nepal.

The COVID-19 pandemic represents a pivotal moment for the tourist and hospitality industries to reflect, adapt and transition towards a smarter, more sustainable product 10. While tourism is ‘on hold’, key industry players must look to forge new relationships that are more equitable. They must raise awareness and inform their clientele about how the spending of their tourist dollars affects workers and destinations, break away from path dependence and broaden their networks with like-minded businesses. They must invest in better and smarter technology to benefit from the new marketplace and achieve sustainability. They should support academic programs that better prepare next-generation tourism and hospitality professionals.

Above all, the tourism and hospitality industry needs to remember that their selling point is a calm escape from a chaotic and uncertain world. Access to nature and the outdoors will become increasingly popular. As more individuals work from home, the very concept of tourism will transition, alongside the changed concept of “the workplace” and “paid vacation time”. New and smarter tourist products will incorporate this hybrid of leisure and work, providing longer-term stays and technical infrastructure (like high-speed internet and video conferencing) to work remotely. For example, Barbados and Estonia now offer longer-term visas for remote workers 11.

The Future is Sustainable

The COVID-19 pandemic does not signal the end of tourism and hospitality altogether, but rather a contraction of mass-market tourism. Some sectors (like low-cost airlines) will be irretrievably damaged. Meanwhile, the pandemic is ushering in a new era of smarter, more sustainable movement of people and services while creating new opportunities for localized, nature-based tourism. Industry leaders will do well to look past the goal of short-term survival and focus their attention on long-term changes, finding their place in a more connected, transparent, streamlined, sustainable economy. Investors’ efforts will be best applied towards strategic decision-making that steers this fragile and complex industry away from the vulnerabilities exposed by the crisis.

Picture of Andrew Evans

Andrew Evans

Andrew Evans is an author and travel writer. A veteran of National Geographic, he has reported live from over 100 countries and all 7 continents. He lives in the Blue Ridge mountains of Virginia.

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