Today, nobody can predict what the overall effects will be to the travel and hospitality sectors that will emerge from the darker shadows of the Covid story but there is at least now a case to be made that the road ahead is clearer, albeit with many bumps likely along the way. What is clear is that we are heading for a ‘re-set’ of sorts in all walks of life. The third session of the Panel for Travel & Hospitality (PATH TO Reset) took place earlier this week and identified issues that are beginning to shape the colour of that recovery (recognising that this is an ever evolving story). The panel includes travel & hospitality professionals from Taylor Wessing, the European Tour Operators Association, Dexter Moren, Liz Hall Consulting, Gerard Nolan & Partners and EY (with guest speakers having included Hilton) We summarise in our own words the output below and welcome comment and input to future sessions.
words the output below and welcome comment and input to future sessions.
Good news at last
Travel is commencing with European air corridors being negotiated and the planned opening of hospitality outlets (from July 4th in the UK). To further encourage the ‘UK is open for business’ message there is a need to:
- Build confidence and counteract some more negative journalistic themes.
- Encouraging ‘consumer first steps’ through promoting images reflecting a degree of activity and normality (e.g. eating out in restaurants) to give confidence to consumers to create commercial activity.
Markets and recovery
No ‘one size fits all’ solution exists.
- Destinations will evolve differently out of the crisis depending on a range of factors from the profile of their markets (with leisure markets likely to recover first over business travel), the extent of travel restrictions in place (e.g their quarantine and/or air corridor status) together with their perceived effectiveness at dealing with the health risk.
- ‘Managed’ and selective tourism is emerging that will govern how some destinations recover and may change the colour and desirability of some tourism flows for some time.
- The original travel quarantine message ‘shut people out’ but after industry pressure is now becoming more nuanced and more pragmatic as the traffic light system and air corridors emerge.
- Group leisure travel is a significant segment and needs long term planning and product development and promotion. 2020 is almost a write off with long term planning already commenced for 2021. The next few months are key to set the message right for the future.
- Trade bodies responses have varied but in our home market UK Hospitality has performed an excellent role and influenced guidelines which in the main have been adapted by government. In the UK a staycation boom is likely.
- For the trade, the annual World Travel Market messaging is important to set the scene for international tourism.
Consumer first steps and confidence is the key to recovery.
- Consumer behaviour and willingness to travel or eat out will also vary dependent upon age, underlying health and appetite to risk with the young willing to act well before the old.
- Again no one size fits all in the possible holiday rush that ensues as some will seek to identify lodges, camping or self-catering options (as these are seen as ‘controllable environments’) whilst others will chose major hotel chains as their brands will offer safety and ‘hygiene reassurance’
Practical realities
have now begun to shape and alter what were initially idealistic and aspirational government pronouncements. Examples include adapting the quarantine policy to the traffic light system and the pragmatic realisation that some ideas cannot be implemented easily (e.g. providing names at pubs which has GDPR implications) but at least there are signs of flexibility with unenforceable points being adapted.
Business recovery – pivoting every which way
- Unexpected pressure can drive creativity-some business owners have shown entrepreneurial skills and initiatives in ‘pivoting’ their business models during the crisis (takeaway offerings over intimate restaurant environments being only one example).
- Processes and guidelines are now evolving which will ease future planning. Next year’s products will reflect the reality of this ‘new world’ and give both operators and consumers standards to work to and confidence. Examples include determining how many people can be taken on a coach or in a restaurant and the extent and enforcement of social distancing rules and regulations.
- Businesses will evolve and recover partly dependent upon (i) scale (small v large particularly in restaurants and bars) (ii) funding profile, and their rent and other fixed cost obligations (iii) their ability to flex product and alter concepts to suit the new reality.
- Planning is key. Some hospitality operators are delaying opening until later in July as operating procedures need to be adapted across the board and will take time to put in place.
- New initiatives being implemented include employing wellness directors, safety branding, identifying hygiene factors and adapting service standards (e.g. breakfast deliveries to your room over a public buffet offering).
Financial impacts – the iceberg beneath the surface
A lot of stress remains hidden beneath the surface which will only reveal itself in full when essential ‘comfort blankets’ begin to be withdrawn. Only once furlough support is removed, government support (in the form of Business bounce back loans) ends and financiers and landlords stop kicking the can down the road… will the full effects of the crisis on those weakest to survive it become apparent:
- The restaurant sector will change beyond recognition as casual dining brands were already in trouble pre Covid.
- Luxury will take time to recover fully and cruise ships are in trouble.
- Rents are moving from fixed towards turnover related formulae.
- But all is not bleak, with the road ahead bringing unexpected change. Looking at the positives:
- A wall of money still seeks a home.
- Opportunities exist for new entrants.
- Many investors recognise the inherent strength in the tourism, travel and hospitality sectors and will take a long-term view.
- M&A and asset purchases are likely when the dust has settled and/or when the casualty of existing players presents an opportunity.
Douglas Grant, Arc Consulting Partners with thanks to panel members and guests listed below for their active engagement.
Mario Bodini, Chairman Travel Curious, former CEO JAC Travel, Chairman European Tourism Association ETOA); Christian Mole, UK&I Head of EY Hospitality & Leisure; Richard Bursby, Head of Hotels & Leisure Group, Taylor Wessing LLP; Liz Hall, formerly Head of Hospitality & Leisure Research at PwC & Deloitte); Dexter Moren, award winning practice of architecture and interior design; Gerard Nolan, C1 Capital, Gerard Nolan & Partners, Hotel Owner & Hotel Real Estate Specialist & Investor; Nick Smart, Vice President Development, Hilton Hotels – North and West Europe;James Munro, Arc Partner, Hotel & Resorts Operational Management.
