Travel and Tourism was hit hard by the COVID-19 pandemic, it is also one of the sectors for which transformation is more likely once the crisis is over. In our brief on the signals of a post COVID-19 ‘new normal’ we identified 13 signals of trends that have started developing and will continue beyond the crisis. These signals are based on our analysis of travel data, consumer trends and industry actions.
The Travel and Tourism Sector Pre-COVID-19
According to the World Travel & Tourism Council, the industry value in 2017 was $8.8 trillion, which represents 10.4% of global GDP. It supported 319 million jobs, which represents 10% of global employment. Despite the industry size, or perhaps because of it, the sector faced many challenges pre-COVID-19. Overtourism, sustainability issues, high fragmentation and the need for regulation, are just some of those challenges.
Impact of COVID-19 on Consumer Behavior
Health and safety concerns and the shutdown of most international travel led to a boost in domestic travel; with the Organisation for Economic Co-operation and Development estimating that 75% of the total tourism economy in OECD countries will be from domestic tourism.
In the early days of the lockdown there was a spike in activities that replaced tourism and other forms of recreation. Netflix’s revenue increased by 28% compared to the same period last year, there was a 425% increase in online course enrollment on Udemy, an online learning platform, and a 101% increase in Zoom’s stock since the beginning of the year.
Impact of COVID-19 on the Travel and Tourism Industry
While the aviation and hospitality sectors faced the heaviest losses, the survival of small and medium enterprises (SMEs) was put to the test, with OECD predicting that 50% of SME’s will not survive. With SME’s accounting for 80% of the travel and tourism sector, this is not only a threat to those businesses, but a challenge for the tourism sector overall, with consequences to national economies.
Hygiene and safety concerns within the industry led to innovations in touchless travel as well as a myriad of hygiene and safety certifications issued by governments, the private sector and multilateral entities.
Despite the drastic drop in investments within the sector, some notable investments were secured even at the height of the pandemic. For example, Traveloka, an Indonesia-based online travel portal, raised $250 million in fresh funding; while Thayer Ventures, a venture capital firm focused specifically on technology innovation in travel and transportation, raised $80 Million to Invest in Technology Companies Disrupting the Travel and Transportation Industry.
Impact of COVID-19 on Government Policies
Governments had to provide stimulus packages for the industry given the heavy losses incurred, including 197.5 million jobs at risk. At the time of writing the Post-COVID-19 Signals brief, $9 trillion was provided globally by governments.
While most borders were closed amid health and safety concerns, several governments were in talks to form travel bubbles, including between Australia and New Zealand, as well as between Singapore and Indonesia, Malaysia, Australia and Taiwan.
Signals of a Post-Covid-19 “New Normal” for the Travel Industry
Hygiene as a criterion
Safety and hygiene will continue to be important criteria in travel and tourism decision-making by consumers
Contactless travel innovation
We are already witnessing an accelerated adoption of travel innovations across the industry which could continue beyond the crisis
Rise in domestic travel
The spike in demand for domestic travel due to international travel restrictions as well as health concerns could continue as people discover destinations a car ride away, and destinations continue to tailor their products and marketing messaging to their local markets to manage their risk.
Opportunity for boutique travel agencies
Smaller travel agencies could provide personalized assistance, including help with addressing new COVID-19-related regulations.
Millennials & Gen Zs an important segment
Surveys showed millennials are more willing to travel once restrictions are eased and they are more willing to take risks than older generations.
Sustainability as a priority
The share of the sustainable travel segment will grow within certain traveler segments.
Funding opportunities for travel tech startups
Travel tech startups are in a better position than other travel startups to raise funding.
Broadening business models to hedge tourism risks
Tourism businesses will broaden their business models by adding services that are not dependent on tourism
Signals of a Post-Covid-19 “New Normal” for Governments
Governments have realized that they need to strengthen their crisis preparedness plans especially in case of future pandemics.
Regulation of hygiene & safety certification
With hygiene and safety stamps being offered by international organizations (WTTC) as well as the private sector (Hilton, Accor), governments are expected to step in to regulate these
New tourism corridors through regional cooperation among countries will be created.
Destinations/attractions reconfigure for safety
Destinations will continue to make adjustments to ensure social distancing and other safety measures.
Incorporating sustainability in tourism plans
The forced pause in tourism has allowed governments, especially in cities previously suffering from over-tourism, to start planning sustainability regulations to implement once tourism re-opens.