Peeking Into the Future: the Four Scenarios of the Post-pandemic Order for the Hospitality Industry
While the business of prediction is notorious for being hard (at least in the near-absence of well-structured data), almost none of us can fight the temptation to forecast the future of the hospitality industry in the post-pandemic era.
The recent news sentiment has been mixed, to say the least, which poses even more unanswered questions to the hoteliers’ minds: while China is faring relatively well with quite strong recovery trends, APAC at large, including Hong Kong, Japan and Vietnam (previously hailed almost invincible in the face of the disease), as well as the rest of the world seem to be holding the short end of the stick. Some European countries are pondering the possibility of the second lockdown, Great Britain is strengthening the measures against the virus spread, African hotels are pleading for extended governmental support, and the US is still setting anti-records in terms of the number of new daily infections – not exactly the best scenario for people working in the industry, whose business is to provide a “human touch”.
Nevertheless, there is also space for optimism. While some experts predicted a drastic decline from the demand side of the market, the recently dropped border restrictions show that these fears may be overrated: for example, when Russia announced it would resume international flights to Turkey, the UK and Tanzania, the flight aggregators blew up – the number of searches increased 3-, 7- and 60-fold for each of the countries respectively! The south of Spain and France are also experiencing a tourist influx – while the numbers cannot, of course, be compared to those of the previous years, they might be just high enough to make the governments worry about the speedy spread of the disease.
Taking these factors into consideration, our regional partner Mr. Victor Wong has outlined his vision of the “new normal”. The four scenarios rest on the currently available information and years of his experience in the sector, and are ranked according to how likely they are to occur, given the present circumstances.
Scenario One: "Resilient Travel" Back to Normal
In this relatively optimistic scenario, the majority of global travelers (all those who cannot afford private jets and first-class fares) will probably have to kiss goodbye the comfortable flight experiences. Multiple meal and entertainment restrictions, as well as newly instituted boarding procedures, comprised of health checks, physical distancing and subsequently prolonged waiting times, could certainly put off some tourists that would opt for road trips and self-drive vacations instead. An increase in demand for modes of transportation other than flights also means the localization of travel, whereby domestic tourism would receive a wave of newly discovered appreciation.
As to the lodging options, Airbnb looks well-suited to pose a significant threat to the traditional accommodation market, provided it could streamline its operations and ensure strict health provisions in all its properties (which could be a rather hard task). Not all the hotels will be able to weather the current storm and Airbnb could fill in the vacuum. More traditional lodging providers will also have to pay careful attention to the newest hygiene standards, which means a potential expansion of the health-related solutions market and the normalization of the “hotel – health service” collaborations.
Looking at the newly unpredictable world, guests will demand even more flexibility in regards to their travel plans, which will likely become the major reason for the brand websites revival – exclusive flexible refundable rates will be a potent factor for the travelers to consider, and might become a new dimension in the properties’ competition strategies. In the wake of direct hotel search, SEO analytics will become essential for the brands struggling to regain market share.
Overall, this scenario does not spell doom for the global hospitality industry at large, but rather points out the bottlenecks in the process of coming back to its feet. These obstacles could be leveled off and, perhaps, even leveraged in some cases, as both the society and businesses adjust their expectations and accept the changed reality. Given the current positive trends in China, more solid prospects of getting a vaccine in the nearest future, and the worldwide consensus on the huge dangers of global economic crisis with subsequent measures taken to help the hard-hit hospitality industry, we believe this scenario has a solid chance of becoming the “new normal” of the travel world.
Scenario Two: End of Mass Tourism
Given the issues airlines are likely to face due to the multiple restrictions imposed, many low-cost carriers may be pushed to the brink of extinction with others choosing to consolidate into larger alliances. This would likely spell the end of affordable air travel (at least until new technologies in the energy sector become commercially viable), as even full-service operators will have to raise fares to offset the loses experienced both due to the social distancing measures and decreased volumes of corporate and premium-class travel. As a part of the chain reaction, long-haul flights demand will spiral down globally, giving way to the popularization of other means of transportation.
Taking into consideration the above, both tourists and corporate guests may try to limit their travel plans to the absolute necessities, which would result into big city hotels, especially those reliant on international business, seeing their occupancy plunging down to single digits. Coupled with stringent social distancing measures and increased perceived risks of traveling and staying at crowded places, the crisis may develop even further. Following this turn of events, Travel Management Companies (TMCs) will see only a few large players surviving globally after consolidation.
This scenario is certainly gloomier than the first one, yet, we believe it could be considered as a somewhat likely prediction. Should the safe vaccine fail to be massively implemented in the nearest future and should the much feared subsequent wave(s) of the novel coronavirus hit the world, resulting into the repeated lockdowns and prolonged periods of economic stagnation, the end of mass tourism could, unfortunately, become much more real than we all hope.
Scenario Three: Size Matters
As a spin-off of the previous case, this forecast suggests an even further consolidation in the airline sector, whereby a few financially strong carriers in Asia and Middle East take a dominant position on the global market after acquiring the smaller full service and low-cost carriers. Following such a drop in supply and increase in fares, the lodging industry faces a sharp decline in demand, which results in the near-extinction of small independent brands that are now faced by a tough choice: get absorbed by bigger, more financially stable companies or constantly struggle, perhaps, unsuccessfully, to attract the evermore price-sensitive clientele. On the other side, global OTAs are now king after adjusting the booking policies and taking advantage of the economies of scale, and are ready to absorb many TMCs.
Given that this scenario is dependent on a very similar set of factors as outlined in the “End of Mass Tourism” case, the question of which one of them could actually take place remains unanswered, as the outcome may differ for various regions and markets. However, while we all hope for the best, we should be wary of ruling out any of these predictions.
Scenario Four: Micro for Elite and Affluent
While the previously described options might look dim compared to the travel style we have globally enjoyed and got used to in the past few decades, they by no means express the worst-case scenario. All of them leave sufficient room for large-scale travel - even if the focus switches towards domestic trips or more time-consuming commute.
This is where the present case takes a drastic turn. Should the global pandemic escalate, either due to the research failures or the virus’s mutation, the governments may fail to respond swiftly to the new dangers, which in turn would result into a deep shock to the worldwide economic systems, making the recovery of the hospitality industry a much harder process likely to last for years.
In such a scenario, only the affluent classes, capable of procuring private jets and secluded luxurious accommodation, are able to travel the world, still subject to multiple restrictions, while the majority of population is left to enjoy VR-supported experiences, provided by a consolidated network of a few large OTAs.
It is very hard to predict what sort of chain reaction such turn of events might set off. The one thing worth mentioning though is that such a forecast seems to be a bit far-fetched. Based on the current advances both in the medical research and effective governance, as well as previous positive experience fighting the virus in China, we believe the humanity is well-placed to find a timely solution for the future dangers the disease might pose. This, in turn, means that the world of wonder and discovery is likely not a thing of the past, and will hopefully come back to us in the due time, while we are getting ready to adjust to the new realities. Hopefully, the much-needed positive news is just around the corner.
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