However there are unique factors in the industry that sets it apart that will make its recovery will be extremely asymmetrical due to non-economic, non-quantitative factors.
The Traveler’s Perspective
Vacation plans for tourists, and to a lesser extent for business travelers, are heavily based on word-of-mouth references and recommendations from friends, acquaintances, and business associates. Despite the cutting-edge, marketing cyber-sophistication of the hospitality and related & supporting industries, the core fundamentals of tourism will continue to almost always be “grass roots” oriented through face-to-face conversations. Travelers use technology as a post-decision tool to secure the cheapest and most convenient way to travel, not to confirm their destination decision.
This process was brilliantly articulated in the movie The Matrix Reloaded in which Neo consulted the Oracle face to face. Imagine yourself as Neo talking to your friend the Oracle with respect to where you want to go. In the scene the Oracle explains to Neo, “You didn’t come here to make a choice. You’ve already made the choice. You’re here to understand why you made it.”
· Firstly because of the extended lockdowns and travel restrictions no one has traveled in almost a year making references and recommendations impossible to come by.
· Secondly, because of Covid’s fury, even older references are suspect because the status of many venues has changed dramatically, many of which have closed permanently. Everything has changed.
Once freedom of travel becomes a reality there will be limited travel choices, nothing that all the time and money can overcome which means that there’s no way to accurately predict the new tourism landscape.
Feast or Famine
The vaccine’s uneven distribution has begun with richer countries getting priority because of money, logistical distribution while developing and emerging markets, highly dependent are at the back of the line. The latter rely almost exclusively dependent on tourism for revenue.
Like the dynamics of a funnel vaccinated tourists from rich countries will have difficult traveling to developing and emerging countries may still be banned or have limited access because of on-going high public health risks in developing and emerging countries. For this reason domestic tourism will rebound, even flourish, well before international travel.
Furthermore an economy that is “opening up” is defined differently in each country and open to interpretation such as freedom of movement. Tourist may enter a country but will be restricted to specific resorts that are prison-like, gated-community. For this reason the global hospitality industry recovery will be asymmetrical and contingent on location.
Business road warriors are hospitality’s revenue and profit margin bread & butter. Nonetheless even domestically there will be far fewer business travelers all of whom will be on limited budgets with shorter stays and lower entertainment expenditures.
The business traveler demographic will probably consist of the business core essentials: C-suite executives and technical/sales personnel. During the lockdowns the effectiveness of teleconferencing has been proven to resolve most issues which eliminates future business travel for mid-level personnel.
Present-Day State of Global Tourism
Global tourism is a critical component of the world’s economy. According to the World Travel and Tourism Council there are 330 million hospitality jobs worldwide which represent one-tenth of the global work force and 10.3% of the global GDP in 2019.
The United Nations World Tourism Organization(UNWTO) chart entitled Covid-19’s Crushing Impact on International Tourism provided by Statista, an online statistical service, articulates how the pandemic has adversely impacted the global hospitality industry:
“Domestically, according to the US Travel Association US travel spending is down 45% from 2019. Already 3.5 million or 40% of the travel jobs have been lost with an additional one million by year’s end.” Their forecast is that pre-pandemic levels won’t return until 2024.
Even with limited international openings, domestic tourism will far outstrip international tourism because in an increasingly unstable geopolitical world notably Americans will be more comfortable traveling in their own country with the same language, culture, and rapid ease of return travel to their hometowns in case of sudden full lockdown mandates.
With respect to the hospitality industry financially, the pandemic has been a crushing blow. The following chart developed by UNWTO and presented by Statista entitled Tourism Back to 1990 Levels as Pandemic Halts Travel powerfully underscores this reality and the difficulty in recovery:
Zero Hour | The Re-Set
Of all the components in international tourism airlines are best suited to adapt to the uneven recovery. Historically airlines are far better prepared and adaptable in adjusting to demand with fewer flights, smaller aircraft, re-routing through hubs, etc. maintain competitive pricing while securing a reasonable profit. On the other hand geographically fixed services such as hotels have a fixed costs and fixed number of rooms and do not have the means to reduce the cost of those unfilled rooms.
With respect to the international and domestic hospitality industry, the logistical challenges and manufacturing to scale of the vaccine will continue to be problematic and delay global economic recovery through most of 2021. Furthermore the continued global economic recession will depress travel & leisure demand which means that the hospitality industry recovery will be arduously slow and painful.
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The Cerulean Council is a NYC-based think-tank that provides prescient, beyond-the-horizon, contrarian perspectives and risk assessments on geopolitical dynamics and global urban security.