As prospects for normality finally seem within reach, business leaders, investors, employees, suppliers and the professional community are all planning their respective climbs back up the mountain. The path to a reset is becoming clearer, if still surrounded in uncertainty....we explore how this will evolve in our article below.
A shot in the arm will enable both winners and losers to review what has been learnt and look to the future. With that potential positive backdrop but recognising the enormous challenges ahead, we cast our eyes over the hospitality and tourism landscape to look over recent themes and identify some trends that could emerge.
Unlocking the path to reset
The sector recovery will be spearheaded by leisure demand with initially at least rural /outdoor destinations favoured over city centres. The UK staycation market, let alone the pent-up demand for delayed weddings and social events should strongly boost recovery potential in 2021. Business demand is likely to return more cautiously as travel is re-established and offices begin to fill up again with meetings and events possibly favouring venues with 'space’ although exhibitions are likely to rebound as suppliers seek again to display their products and services.
The question is when? Timing remains uncertain with businesses having just experienced a see saw of opening and closing now in a balancing act trying to respond to the latest government and restrictions driven timetable.
We summarise some of the influencing factors that will drive recovery below.
Consumers Behaviour and Mind over matter. Consumers behaviour in the pandemic has been driven by the psychology of the individual. This has ranged from fear to relief as the various stages of the pandemic have evolved (depending on the age group, aversion or otherwise to risk and attitude to life) and is a genuine factor in how confidence and recovery will be shaped. Maslow’s hierarchy of needs (where comfort and safety is usually at the bottom rather than the top of the pyramid) have been reversed in recent months (as highlighted by Andrew Sangster of hotel analyst and usefully tracked in BVA-BDRC consumer research.
Whilst sensitivity is likely to remain at its highest in older age groups, vaccinations provide confidence for many to revert to type: booking holidays, meeting, eating out etc (provided the hygiene factors remain largely in place and the R numbers are under control).
This pent-up demand will start to recreate business opportunity for our hotels and hospitality offerings-recent STR Global briefings illustrate the relatively rapid occupancy recovery in certain markets during times of eased restrictions
Planes,Trains & Automobiles. Travel alone will unlock city centres, currently eerily empty as they begin to fill again and the coffee bars will be back to producing our daily hit of lattes and cappuccinos.
Arc's tourism Partner Jim Fletcher reminds us that we have been here before (remember smallpox) and once health passports are in place and greater confidence exists of cross border controls (alongside more open corridors between countries) the sky will fill again. The pandemic will undoubtedly reshape tourism management in some overcrowded areas but overall the desire for experiences and travel will stimulate activity once again.
The C Word No not the C19 one... Consolidation. As furloughs end, landlords rethink, banks move to restructure and better funded entities look to explore potential mergers and acquisitions not only is change ahead but consolidation too.
Unfortunately this will include many healthy businesses but others which were already over geared or over rented and reflects a pandemic induced speed up of a process that was already underway. Witness the previous plethora of restaurant chains in the high street.
Debt restructuring, largely pushed down the road until now, will begin to forcefully recreate revised business models hopefully enabling some to flourish again or for new investors to move into recalibrated businesses. Amongst the carnage this will create there is talk of a ‘wall of money’ waiting to be invested and we may see some of it soon. Opportunist acquisitions will follow and create the much-needed transaction benchmarks that valuers are currently lacking as evidence of asset value.
Zooming In, Zooming Out.. The attraction and convenience of working from home is here to stay for some but its benefits may fade to others who yearn for the social interaction and stimulus to ideas that face to face meetings offer. Employers may enforce more limited office usage but it hasn't gone away-its coming back just in a different form.
Physical Meetings may be replaced by technology in many instances, but the need for face to face business contact will re-emerge and businesses and cultural events will once flourish even if at smaller venues or with restricted capacities. Recent Arc UK interviews with major international meeting organisers (supported by findings in a recent paper by CBRE on the shape of convention demand in the US) support the idea that MICE events will return as ‘people have an inherent need to meet people’.
Government Support . At last the value our sector offers in a wide range of ways-employment, social engagement and mental wellbeing is recognised. The need for support to be extended to help further transitioning through moratoriums on business rates, extended furlough and reductions in VAT must be enacted. The case is undeniable and some level of further support will be forthcoming.