Covid-19: Bright Summer or Gloomy Future?
Sentences like “things will never be the way they used to be” are often heard after disasters and crisis, but mostly proved wrong when we go back to our normal routines. This is largely true, due to the “new normal” being more an intellectual and media driven view than a reality. We have recently seen that as soon as any travel restrictions were lifted in a country, bookings were booming, and travel demand blossoming, rapidly reaching pre-Covid 19 levels. Despite our lack of trust in previsions for drastic changes in the tourism market, we believe that the approach in dealing with the Corona virus by most governments worldwide will have three lasting consequences on the travel and tourism industry.
First, the Covid-19 crisis underlines that tourism has to be understood in a greater global economic and political context. Governments have demonstrated that they only follow their own logic in dealing with the virus, and the lack of global coordination has created both a strong reaction – even sometimes resistance – against some public decisions, but also a general lack of trust in the institutions. The multiplicity, the variability, the non-geographical homogeneity, and sometimes counter intuitive policies enforced to contain the virus, limited their visibility and hence acceptance. Not to mention that some of them were also contrary to the World Health Organization recommendations, adding confusion and misunderstanding. Missing the rational behind travel restriction regulations, and the erratic, weekly reversible decision making where “what is true today might be wrong tomorrow”, created a diffuse distrust from the general public.
The decision making for a candidate vacationer turned to two-words: risk averse. It is more obvious that not only a greater negative impact will be on long distance destinations, but also a market share shift between air and car transportation for the shorter distances at the benefit of the latest is more than probable. Everybody remembered the image of people being stranded abroad, with no likely gateway to return home, not to mention mandatory quarantines, sometimes in remote locations, and other additional constraints.
With several countries imposing a sanitary pass, the adverse effect on tourism will be significant. No one is going to enjoy “relaxing” in a destination where you must at any time and everywhere show pass and identification. As an example, after the announcement of a sanitary pass in France mid-July 2021, international bookings vanished and room cancellations were raining down, forcing major 5-star hotels in Paris to close during the summer with less than 10% occupancy, while this season traditionally represents their peak time.
A key factor influencing tourist destinations in the future will be the perception of their sanitary safety system, and besides it, the expected quality of the response to any outbreak, with the Covid-19 as a mental reference. Undoubtedly, while all destinations have been largely exposed to the virus, the perception of the qualitative response provided by the local authorities largely varied. In Europe for example, Italy scored high in the list of countries having mishandled the crisis. Not only was it hit earlier than other European countries by the Coronavirus, but also, rapidly, exposed numerous cracks within a health system, making everyone witness hospitals that were already obsolete, understaffed, and in crisis. Later on, the UK, France, and most of the Mediterranean countries also were plagued by very restrictive travel authorizations in an effort to avoid the fall-off of their health system. The contrast with Northern and Central Europe made obvious the un-readiness of medical response against any outbreak, but also that most of the time it was undersized even for the locals, let alone the extra population represented by the tourists. Besides Europe and the North-West of Africa, New York, China, Thailand, and most South American countries have lost a lot in the public eye, and it can be expected that a negative a-priori about these destinations will be long to forget.
Competition is strong on the international tourism market, and the mismanagement of the crisis has already a short-term effect. The absence of tourists during the crisis requires slashing the prices to speed up the demand recovery post-crisis. But low prices mean less money. A slow down in investments in touristic infrastructures and the hospitality business can be expected due to limited resources. But with less investment, come the risk of lowering its attractiveness against other destinations, making the price recovery being sluggish and misaligned with tourist arrivals volume… In addition, large touristic destinations might see their local residents being less welcoming of tourists, perceived as net importers of the Covid crisis. Lower investments and opposition from locals will accelerate the gap with other international destinations, looking to strengthen their economy rapidly with foreign money.
Finally, the third impact on tourism will be the research for alternative and more seclusive regions, against mass-tourism destinations. For the tourism industry, it will represent a new opportunity to recover, meeting the underlying trend for a more sustainable travel and tourism industry in the future. The continuous development of the low-cost business model for airlines (LCC) against traditional hubs and spoke networks has already demonstrated its benefits to multiple secondary destinations. These markets would have never benefited from public investment and tourism development without these air carriers driving hundreds of thousands of tourists in areas that were before not served by traditional carriers. In a post-Covid era, these alternative destinations will have even more appeal! Not only they will allow the airlines to generate a higher yield versus mass-markets with multiple competitors operating, but also, whoever flies first will keep that market for a while since the traffic volume will not support the sustainable operations of more than one airlines.
This change will be supported by the evolution of the hospitality market. Moving away from large hotels and all-inclusive residences, demand is looking for a more exclusive type of vacations. Rents of private properties, agri-tourism, and many of the new hospitality business models have appeared along with the development of dedicated web outlets, above and beyond the global distribution system (GDS) traditionally used by the airline and hospitality industries. In other words, the diversity of destinations is pairing with the diversity of accommodations, in a quest for a unique experience.
