Is Tourism open or closed? Your fault or their failure?

Is Recovery Doable?

The elected and appointed men and women working in
Washington, DC, spend most of their time pointing fingers at each other,
creating mayhem, dissention, confusion and ultimately disasters, wrecking
(perhaps destroying) the world economy. One of the biggest losers in this “He
said. She said” fiasco is the tourism industry and its partners, including (but
not limited to) destinations, hotels and travel/transportation, restaurants,
travel agents, tour operators, stadiums, and conference centers.

As of October 2, 2020, there were 34,567,664 reported cases of Coronavirus with 1,028,990 people dead from the disease ( www.worldometers.info/coronavirus/ ). After over nine months of acknowledging and dealing with this pandemic, leaders are no closer to corralling this virus then they were when it was first identified. It is about time to stop name calling and blaming and the perfect time to round-up the scientists, address the disease for what it is, take an inventory of the harm it has caused, and develop/implement solutions that will enable the world to reboot, creating new routes to economic recovery.

Teeter Totter

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COVID-19 has disrupted both the demand and supply side of the tourism global value chain (GVC). Unlike previous natural disasters, global capacity (i.e., hotels, restaurants, stadiums, airlines, airports) are in place, but out of use, providing opportunities for a rapid recovery once the virus becomes neutralized.

A review of earlier natural disasters, from earthquakes in
Japan to SARS in China, Hong Kong, Singapore and Taiwan, finds that quick
recovery is possible when strong containment policies are in place and there is
flexibility in the global value chain (GVC). The World Bank (2020) highlights
the importance of early mitigation policies during the initial stages of
pandemics as the costs associated with the crises will increase significantly
as the virus spreads through several locales – all experiencing the pandemic
shock concurrently. The expenses and risks associated with pandemics require
coordination locally, with nearby cities/states, and internationally with
countries, to mitigate pending economic disruptions in terms of unemployment,
corporate bankruptcy, financial market fragility, collapsing infrastructures
and fractured healthcare systems.

The World Bank study (2020) projected that global GDP would
fall by more than 2 percent in 2020. The International Labor Organization
(2020, ILO) projected that COVID-19 would lead to a 6.7 percent decline in
working hours, which is equivalent to 195 million full-time workers in the
world, including approximately 125 million full-time workers in Asia and the
Pacific. Overall, the social distancing measures are affecting approximately
2.7 billion workers, which represents approximately 81 percent of the world’s workforce.

Health Linked to Economics

We are experiencing COVID-19 from two points – one is
related to human health and well-being and the other is shock to the economy
(along with the risk of a financial crises). All of this is taking place
because of a poor (or non-existent) health policy response that has paved the
road to a heavy disruption in the GVC on the supply and demand sides of
production and consumption.

Place Thumb in Dike      

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The World Travel and Tourism Council (WTTC)
(wttc.org/COVID-19/Government-Hub) urges governments to support the travel and
tourism sectors by:

1.            Protecting
the livelihoods of workers, providing financial assistance and income
protection,

2.            Fiscal
support in the form of interest–free loans to global, small and medium-sized
businesses as a stimulus to prevent their collapse and the postponement of
government dues and financial demands on these sectors for least the next 12
months,

3.            Injecting
liquidity and cash to support all industry participants.

4.            Gloria
Guevara, the WTTC President and CEO, in a letter to heads of governments,
requested world leaders to get the industries, “out of the crises.” Summarizing
the current situation, she stated, “We have reached a stage where critical
action is urgently needed…. We need to transcend politics and put millions of
livelihoods…front and center. This is not a binary solution or a choice between
health on the one hand, and job, the economy and travel on the other. We can
make strong progress on all these fronts if we follow the expert advice from
science and learn from the past and positive experiences of others.” Guevara
found that, “leaders…must come together and prioritize rescuing the world from
this unprecedented crisis by acting…in a coordinated way to bring back more
than 120 million jobs…” In the letter, signed by industry leaders, she
identified four measures requiring a concerted international framework and
leadership:

a.            Masks
should be mandatory on all modes of transport throughout the journey of the
traveler, plus interior venues and in locations where there is restricted
movement resulting in close personal contact and physical distancing cannot be
maintained. This could reduce the spread by up to 92 percent.

b.            Test and
contact tracing. Governments must invest in and agree on extensive, rapid, and
reliable testing in under 90 minutes, at a low cost, before departure and/or
after arrival, supported by effective and agreed upon contact tracing tools and
protocols. The test(s) should be repeated within 5 days and be used to replace
blanket quarantine, reducing the negative impact on jobs and the economy.

c.             Reinforce
global protocols and standardize measures to rebuild traveler confidence,
ensuring consistency aligned to the travel experience and reduce the risk of
infection.

The WTTC has determined that even a small resumption of
travel can have a massive economic benefit, bringing thousands of jobs back and
provide assistance to the struggling business sector, generating GDP for
economies struck by the pandemic.

Financial Help. Never Enough

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To stem the economic hemorrhaging caused by COVID-19, some
governments have implemented massive relief packages. The Chinese Ministry of
Finance injected $16 million into the economic funnel and $261 billion for new
government bonds to support provincial–level governments. The US Senate passed
a $2.2 trillion relief package. The EU countries, Australia and East Asians
countries also introduced financial assistance. The International Monetary Fund
provided funding for low-income IMF countries including Morocco, Tunisia,
Madagascar, Rwanda, Guinea, Gabon and Senegal, with Ghana receiving the largest
sum of $1 billion (April 2020; iclg.com).

Money! Where?

In August 2020 McKinsey (mckinsey.com) analyzed stimulus
packages across 24 economies (totaling $100 billion dedicated directly to the
tourism sector; nearly $300 billion with a heavy tourism focus). The stimulus
sources included multiple entities and government departments with a few
countries offering a single integrated view on beneficiaries and losers. In the
survey of the effectiveness of public sectors responses, McKinsey found that
two-thirds of tourism participants were either unaware of the measures taken by
government or felt they did not have sufficient impact. 

McKinsey found that most of the $100 billion was made
available in the form of grants, debt relief and aid to small and medium-sized
enterprises (SME) and airlines. New Zealand offered a $10,000 grant per SME to
cover wages; Singapore presented an 8 percent cash grant on the gross monthly
wages of local employees; Japan waived the debt of small companies where income
dropped more than 20 percent; Germany allowed companies to use state-sponsored
work-sharing programs for up to 6- months and the government offered an income
replacement rate of 60 percent.

New! Normal?

According to research conducted by McKinsey, it will take
4-7 years for tourism demand to return to 2019 levels; therefore, over-capacity
will be the new normal in the medium-term. Prolonged periods of low-demand will
require new financing schemes. Options include: development of revenue-pooling
structures. Hotels competing in the same market(s) in the same locale(s)
pooling revenues and losses while operating at reduced capacity. This would
allow hotels to optimize variable costs and reduce the need for additional
government intervention. Non-operating hotels could take stimulus funds and use
the money to refurbish their properties or for other investments that would
enhance the attractiveness of the destination. Governments would provide
oversight through audits and escrow accounts.

Alternatively, government–backed equity funds could be made
available to deploy private capital to ensure that tourism–related SMEs
survive. This would reduce the overall risk for the investor and develop a
standardized valuation methodology avoiding lengthy due diligence processes on
each asset.

The American Hotel and Lodging Association (AHLA) has urged
elected officials to pass relief measures before they leave on recess, ahead of
the November election. Without a stimulus package the economy could move into a
double-digit recession. In addition to the staggering human and financial
losses in the hotel industry, thousands of pilots, flight attendant, gate
agents and other airline personnel have been furloughed or fired.  Chip Rogers, President and CEO of the AHLA
stated, “millions of jobs and the livelihoods of people who have built their
small business for decades, just withering away because Congress has done
nothing.”

Industry Morphs

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What will life after COVID-19 look like for the
multi-sectors of the tourism industry? Most researchers and industry leaders
agree that it will not look like 2019 (or earlier). Successes in the future
will rely on embracing digitalization, leveraging new technologies and
carefully monitoring shifts in consumer behavior.

The sectors, traditionally characterized by human
interactions, will be replaced with touchless experiences involving robots and
other tech-focused experiences. Sustainability will play an important role in
building a resilient and flexible business model resulting in an enhanced
economy, plus social and environmental viability in the long-term.

Changes in Consumer Behavior

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From lock-downs, quarantines and children returning to the
“family” home, to concerns about the economy, personal employment, plus health
and wellness anxieties, consumer spending and behavior is in flux. Trends
indicate there is a strong desire for domestic travel with destinations
reachable by car that are paired with an increased interest in open spaces with
fresh air, and private accommodations. Potential travelers have a desire to
avoid high-density accommodations and activities, and do not want to mix too
closely with strangers (especially on cruises and long-haul flights).

While there is a preference for active holidays involving
fitness (i.e., hiking, cycling), there is a decline in consumption along with
an increase in frugality, potentially leading to a fall in discretionary
leisure spending. Consumers want to be seen (through social media images) as
being responsible and safe, with travel plans evaluated through the lens of
“what is safe,” rather than “what is popular.” There is a strong awareness of COVID-19
and its impact on small businesses and the livelihoods of local communities
leading to prioritized spending with SMEs in order to support local enterprises
(etc-corporate.org).

Industry Responds to COVID-19

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Sif Gustavsson, Former Director, Visit Iceland USA;
Currently CEO Iceland Cool stated that, “Tourism is Iceland’s largest
industry.” In 2019, over 2 million foreign visitors visited Iceland with
approximately 2 million arriving on flights through Keflavik International
Airport, representing 98.7 percent of the total number of visitors. Because of
the pandemic, the number of passengers arriving at Keflavik Airport, as of June
2020, declined by 96 percent. Overnight hotel visits decreased by 79 percent in
June, and 87 percent in May (grapevine.is).

In order to maintain the tourism industry Gustavsson
identified a few of the components of the Iceland Stimulus Package:

1.            Abolishes
hotel taxes

2.            Covers
part-time unemployment up to 75 percent

3.            Provides
funding for travel companies

4.            Offered
travel Vouchers ($35) to all citizens in March to motivate local summer travel

5.            Makes
contact tracing app available for residents and visitors

6.            Develops
plans for post-COVID-19 through an International symposium (September 30)
hosted by the Prime Minister of Iceland.

At this time, Iceland’s borders remain open to select EU and Schengen states and Canada; however, there are restrictions; tourists violating quarantine restrictions (2 COVID-19 screenings; 5-6-day quarantine), are fined $1800.  If you are considering travel to Iceland, review the official COVID-19 website for updates ( www.covid.is/english ).

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Kim Gauthier, Senior Vice President, Asset Management,
hotelAVE and President of the Hospitality Asset Manager Association finds that
the American Hotel Lodging Association, “is on the front lines advocating for
the industry.” The organization, “recently launched Safe Stay, an industry-wide
initiative to help educate the public on the protocols being taken within the
hotel industry.” Gauthier stated that the association was, “instrumental in
extending the PPP covered period from 8-24 weeks….and, “serving as an exemplary
model for the industry.”

Gauthier recommends the industry explore new areas for
growth including, “flexcations or schoolcations” are “specifically for luxury
resorts where guest engagement is high and the property’s expansive grounds
allow them to be creative.” Identifying other trends, Gauthier notes,
“longer-term leisure bookings and requests for multi-bedroom suites as guests
are looking to turn their vacations into temporary homes.” Noting an increase
in the use of technology, Gauthier cites “touchless experiences like digital
keys and chat functions,” to make the guest feel safer. She also finds that
guests are inquiring about the “change in cleaning processes and frequency of
associate testing,” making “higher standards and protocols” mandatory, “telling
guests is not enough; they want validation.”

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Bruce Rosenberg, President of the Americas and Chief
Operating Officer of HotelPlanner, acknowledging the COVID-19 shake-up of the
travel industry, has determined that the nature of travel is changing. “A new
normal is emerging which includes lower demand,” combined with increased costs
linked with the need to lower rates in order to drive demand. With COVID-19
there is, “a perception that travel creates anxiety and stress that outweighs
the need to get away to rest, recover and have new experiences.” Rosenberg
addresses other management challenges, “dealing with all the different COVID
restrictions at the federal, state and local levels for hotel operators. For
consumers/travelers keeping track of COVID infection rates in a specific city,
quarantine requirements and other regulations is increasing the overall hassle
of travel.”

Rosenberg is optimistic about the future, finding that
people want to travel and there is demand for vacations along with visits to
friends and family, plus a desire for group travel to specific events like
youth tournaments. Rosenberg finds that, “People feel travel is a right and
want to exercise this freedom.”

Initially travel demand will be local with “International
travel slow to bounce back.” For domestic travel Rosenberg recommends creating
a website that acts as a clearing house for accurate information including
government regulations (city, state and federal levels), steps initiated by
specific providers to reduce and manage risk, infection rate updates,
destination profiles that includes safety based on measurable data points and
other incident outbreaks (i.e., flu, colds) and data from providers on the
actions each is taking to insure safety and security. According to Rosenberg,
every vendor website should include facts, “prescribed by the government
so…information is front and center.”

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 Greg Tipsord, CEO of
ViaClean Technologies, suggests the industry focus on the “demand for enhanced
cleaning and sanitization procedures. Pre-COVID-19, cleaning was a
behind–the–scenes tactic. Now, cleaning procedures are at the forefront…when
travelers are considering booking a trip.” Tipsord recommends that hotels,
“adopt enhanced technologies,” and be “transparent about the products being
used that ensure…health and wellbeing…” He notes that hotels and travel
organizations will, “see more bookings and revenues…as travelers…feel safe…”

Tipsord cites the airline industry, referencing the
challenges they face as they try to fill seats, addresses the fact that among
consumers, “many still fear being in crowded spaces.” Pointing to the private
jet industry he notes that there is a surge in demand due to, “enhanced
procedures and safety precautions…” He stated, “Jet Linx adopted the
Bioprotectus System to sanitize its jets and terminals for up to 90 days,” and
makes proprietary hand sanitizer available for all staff and clients. Because
of the sanitizing protocols, the company reported increased reservations.”
Tipsord finds that, “People want to get back out there and travel, they just
need to feel safe to do so.”

No Going Back

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In the “Before Time” (pre-COVID) the industry was on a
successful trajectory and there were no signs or signals to suggest that growth
would not continue. Unfortunately, COVID-19 has moved the industry into a new
dimension. What will the future present? Reality is likely to be unpleasant as
country borders may not be fully open for many months thus restricting or
halting the movement of people. Business travel will be reduced as online
meetings have become “normal.” Most multinational corporations are not
approving travel for their employees even to the point where they are cutting
the number of staffers commuting to their workplace. The MICE market is
comatose and will remain this way for the foreseeable future. Global events
(conferences, launches, festivals, seminars, conventions, sport events) might
slowly begin to emerge (in smaller – lite versions), in mid-2021 if/when a
viable vaccine is introduced.

Future considerations will focus on:

1.            Sanitation
and Hygiene.  New standards for cleaning,
regulated by governments.

2.            Health.
Checks may be mandatory at airports, prior to entering a hotel or restaurant,
with on-going monitoring through electronic surveillance. Access to medical
facilities, and telemedicine technology should be featured in destination and
hotel promotions.

3.            Brands.
Enterprises associated with high standards for health and hygiene will win as
the most desirable properties shift from location and design to safety and
security.

4.            Visible
Value. Guests must be able to clearly identify the link between quality and
price, established on a personal level and able to be validated. 

Perhaps, Maya Angelou, the American poet, memoirist and
civil rights activist is our best guide.

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Maya Angelou, I Know Why the Caged Bird Sings

© Dr. Elinor Garely. This copyright article, including
photos, may not be reproduced without written permission from the author.

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