Abstract
The COVID-19 outbreak has been one of the most impactful and tragic pandemics of modern times. Currently, saving lives is the absolute priority. However, we also need to begin to address the recovery process for the tourism industry in the continued presence of limitations to international and domestic travel. A disease-induced crisis is not novel in tourism. The tourism industry has faced several scenarios in the past. However, the present crisis has been one of the most damaging. This industry will not look the same post-pandemic, and both the industry and government have a role to play in recovery efforts.
Along this line, the motivation of this editorial is to offer strategies that the tourism industry can adopt to adjust to the new ‘normal’ following this pandemic. We also discuss the role of government during this process. To prepare this editorial, we reached out to several experts and collected their feedback on these two specific issues. We divide the editorial into two sections. First, we discuss the role of the tourism industry moving forward, and second, we discuss the role of government.
The tourism industry
Decreased demand will certainly shrink the sector and increase prices. The first year following the pandemic will be challenging for the industry, with domestic tourism expected to bounce back earlier. Increased sanitization costs combined with regulations on capacity reduction (well below the maximum occupancy because of social distancing) may significantly affect the profitability of the industry and further increase prices. We believe that in the short term, flexible prices, terms and conditions can reduce financial risks. Also, non-price strategies can be helpful to change customers’ perception of products. A list of other strategies provided by our experts is summarized below: Cleaning and sanitizing should be emphasized and opportunely promoted as part of the supply. Cleaning protocols will likely change and PPE will be required for most tourism facilities. New health safety norms may require companies to partly refurbish their premises. In the short term, hard flooring, air handling systems and so on may become standard in new building designs. For example, front desks at hotels can be equipped with counter shields. Reduction of occupancy rate for hotels and restaurants can improve the safety perception of customers. However, if the government imposes limits well below the full capacity, this can harm business sustainability, and therefore increase prices. There can be a gradual shift from personal interactions to technologies in order to limit contact. More widespread use of check-in kiosks and payments via bank transfer are examples of this. Facilities may limit access by stipulating that gatherings be restricted to fixed numbers of guests. Room service at hotels can replace buffets or breakfast bars. Activities for guests can be limited to only those that take place in open air settings. Hotels can take direct control of room inventory rather than relying on third parties. In times of increased outbreak, some hotels and other tourism firms may reach agreements with government institutions to provide their facilities for people affected by the quarantine. In the long term, automation technologies, robots and artificial intelligence may help facilities to decrease their fixed costs, improve liquidity and resilience and help to maintain social distance. Market diversification can also reduce dependence on a limited number of source markets. Also, the outsourcing of some services through appropriately flexible contracts can limit risk. The purchasing of insurance services can be of help when faced with sudden and unexpected risks. Confidence in travelling and risk perception will affect the speed of the industry’s recovery. In the long term, tourism will most likely return to pre-crisis patterns. However, tourists may place a higher value on hygiene when selecting their accommodation choice.
The role of government
Actions from governments to support local economies have varied across countries. The tourism industry needs credible measures from governments to generate market confidence and reduce the risk from this virus. Overall, the role of governments should evolve over time during this crisis. They should move quickly from the first stage of subsidizing for liquidity to incentivizing sustainable recovery and innovation.
Some additional government measures should focus on the following: Following suit with what some countries have already done (or are planning to do), by offering interest-free loans, guaranteed loans, flexible mortgages, creative financing options and non-refundable subsidies. These can benefit all tourism or other related firms (e.g. hotels, restaurants, cruise lines, airlines). Provide funding for promoting tourism destinations (e.g. vouchers to residents which can subsidize demand). Lifting or easing of visa regulations for countries as they recover from the outbreak to boost international tourism flow. Allowing local governments to implement regulations – no heavy-handed rules/regulations from the central level. Introduction of a Pigouvian tax to partially internalize the pandemic – a sort of ‘COVID-recovery’ tax. Control of possible predatory investors to protect those enterprises that became weak because of the crisis.
Footnotes
Acknowledgements
The editors would like to thank Rodolfo Baggio, Chiara Dalle Nogare, Paolo Figini, Stanislav Ivanov, Rob Law, Rico Maggi, Juan Carlos Martin, Robert McCarty, Andrea Saayman and Steve Wanhill for their valuable feedback.