Tourism after storm

The pandemic almost ruined the tourism industry; however, it slowly restores. People still tend to shift the environment and take a break from routine and everyday life. The tourism industry will handle the crisis, but it will change considerably.

A storm like COVID-19 has a significant impact on the tourism industry, having a dropdown in expenditures for $8.1B, according to Eliav Pollack, McKinsey, 2020. UNWTO, 2020, stated that because of restrictions the number of international tourists dropped by 65%, which caused a significant loss for touristic companies in 2020. Was it even real to survive the crisis? Kirils Himicevs, co-founder of Lastmin, an online travel agency, agreed to give some insights about the current situation in the travel industry.

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COVID-19 is passing away, but there are still limitations when traveling which are changing constantly. Kirils explains that it is all about desire as there always will be individuals who are afraid of changes and panic; therefore, they will not travel. However, many people are not scared of the restrictions. Comparing to last year, the number of tourists is growing. Nevertheless, this is 10-20% of all those who traveled before COVID-19. The requirement to make a test does not stop the travelers, as they want to break free and get into pleasant conditions.

So, who survived the storm with the lowest losses? According to a McKinsey report named “The travel industry turned upside down” 2020, online travel agencies like Booking or Lastmin have highly variable cost structures; consequently, they respond faster to market downturns comparing to other industries. Considering all companies in the industry, airlines and cruises survived the worst times while traveling agencies fared relatively better. Interviewee Kirils states that the level of automation of processes is the most important factor that allows surviving the crisis. Those companies who developed algorithms and interfaces for automatic purchase or consultancy will be less damaged by the lockdown. On the contrary, traditional tour operators, who started to build relationships from 20 to 30 years ago and still use the "offline” model, faced more difficulties. Online platforms are way more flexible in terms of their configuration and costs. At this time, tour operators were tied to the idleness of aircraft and rent of hotel rooms; therefore, the crisis affected them more. It should be noted that digital platforms and apps took the challenge of a pandemic to develop new algorithms and use their natural advantage: the potential for scaling. Crossing borders and entering new markets is in the DNA of digital platforms. They have a high level of process automation; therefore, it is easier to relieve a pandemic.

In the meantime, the government showed active during the crisis and proposed support for companies operating in the travel industry to survive hard times and save talented personnel. Losses caused by COVID-19 for Latvian travel agents and operators only in March and April 2020 were almost EUR 33M. Latvian government supported the travel industry, allocating EUR 19.2M to help 935 active tourism operators and travel agents. Kirils explains that there was state support in Latvia, but everyone can argue whether the criteria applicable were relevant and fair. It helped many companies; however, it was not clear for an inexcusably long period who will be eligible and what criteria will be applied. The support criteria were based on the gross salary that the company paid during the time of crisis. Many companies were idle; they did not pay regular salaries because workers were on unpaid vacations. However, the support received for the organizations, who fit the criteria, was significant and helped to move forward.

The travel industry will survive the crisis but will be different and full of innovation. It is hard to make a precise forecast, as the situation changes from day to day – new strains are found, the list of potentially dangerous countries is constantly changing. However, while some companies face difficulties and survive the hardest times, others see new perspectives. The model developed and used in the industry is quite old-fashioned. Now the total transformation is happening, as people re-assess some factors and features of travel products. They are ready to fly with few stops, stay in new hotels and go to new places. But still, they want high-quality service during their weeks off. Travelers will prefer reliable and effective apps interfaces to the agents who impose travel tours. The interviewee believes that things will get better, more interesting, and new players and start-ups will appear, the power of the old ones will diminish, which always adds drive to the story. Furthermore, the companies that will be able in a transparent way to provide exact requirements for the country entry will increase their popularity.

It seems that the travel industry is also transforming as other service industries in which travelers are choosing where to go, less offline communication with employees, and more usage of digital platforms to find the right spot to go.

Every crisis could be survived - if the wind will not serve, take to the oars.

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