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7 minute read 2 Jul 2021
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How to prepare for tourism’s rebound post COVID-19

By Keiran Hutchison

Partner at EY Cayman Ltd. and Regional Strategy and Transactions Leader, EY Region of the Bahamas, Bermuda, British Virgin Islands and Cayman Islands

Leading strategy and transactions advisor focusing on restructuring and recovery approaches. Advocate for diversity and community engagement.

7 minute read 2 Jul 2021

Destination and tourism businesses should be nimble to manage abrupt restrictions to prevent future infection waves and new variants of the virus.

In brief

  • The travel and tourism industry should start preparing for an uncertain future.
  • COVID-19 has provided the opportunity to rethink and improve approaches to help satisfy the needs of the post-pandemic travelers.

COVID-19 has been harsh on the hospitality industry. In 2020, global international tourism arrivals fell by 73%, according to the World Tourism Organization, and recovery hopes for 2021 have been dented by waves of new infections. As vaccination programs advance around the world, opportunities will arise for restrictions to be gradually eased. Destination and tourism businesses should position themselves for a rebound of uncertain strength and timing while also being sufficiently nimble to manage abrupt tightening of restrictions that could be imposed in response to future infection waves and the emergence of new variants of the virus.

For many island jurisdictions, where tourism is a strong contributor to gross domestic product and employment, readiness to capitalize on the growing appetite for international travel is of high economic importance. Preparation for this uncertain future may focus on a number of key areas.

Market intelligence in tourism

Two key questions that hospitality industry stakeholders must ask themselves are:

  • When will people return?
  • How has the pandemic changed travelers’ preferences and expectations?

Market research and data can help find some answers, but with factors including infection rates, vaccinations, national entry requirements and bookings in a state of flux, hospitality businesses should seek to track trends from reliable sources to inform their planning decisions.

For jurisdictions such as The Bahamas, Bermuda, the British Virgin Islands and the Cayman Islands, the United States is the largest source of visitors. The EY Strategy and Transactions team in the region is in frequent contact with US colleagues to gain insight into American market intelligence.

Their observations include:

  • Strong pent-up demand for tourist travel exists in the US market.
  • Decisions on destinations will largely be made on the grounds of safety, flight availability and relative strictness of travel rules.
  • Cruise ship bookings are strong for the summer of 2021 and beyond, helped by demand from an older age group, among whom vaccination rates are highest.
  • Business travel will look different, with fewer trips and longer stays, as a post-pandemic desire to fly less is accentuated by carbon footprint considerations. Here’s our views on the future of business travel
  • Corporate group-rewards travel may be particularly slow to recover because of concern over employee well-being and sustainability concerns.

Risk versus reward in tourism

Destinations that will succeed as the world recovers from the pandemic are those that can rebuild airlift quickly and make it as easy as possible for travelers to visit. Having travel rules that are strict relative to rival destinations can be a competitive disadvantage.

For governments, it is a matter of risk versus reward, weighing the need to revive tourism with the desire to combat the spread of COVID-19. Striking the right balance is easier said than done in a fast-changing environment. Approaches have differed in the region.

Strict lockdowns and quarantine requirements were implemented across the region in the early stages of the pandemic. Destinations that opened up to visitors went on to impose testing protocols, including pre-arrival tests and further tests at intervals, which have varied by island, during the stay. Some have dropped the requirement for post-arrival tests for vaccinated visitors, while others have not.

Generally, the islands that have been the most risk-averse in terms of travel restrictions have consequently seen the largest fall in visitor numbers, but they appear to have been the most successful in controlling the virus. A strong record on combating the spread of COVID-19 will likely appeal to safety-conscious travelers when a fuller reopening occurs.

The flip side of a stricter approach is a greater decline in hospitality-sector revenue and more business closures, temporary or permanent. Foreign hotel workers have left in great numbers, and replacing them may not be quick or easy. In this respect, hotels and governments are looking at increasing local involvement in the hospitality industry in order to meet the challenges of getting back up to speed. Proactive efforts will also be needed to rebuild airlift and cruise ship schedules.

 Vaccination programs and their progress can have a significant bearing on where islands can position themselves on the risk-reward scale. Reaching “herd immunity” can give governments greater leeway to be adventurous in easing restrictions and in allowing visitors greater freedoms to make the most of their stay.

Post-pandemic appeal to the tourism industry

The future of tourism cannot be viewed through the prism of 2019. The pandemic’s pervasive impact on the way we live means that travelers will likely think harder about their choice of destination and have new expectations.

Messaging may need to be fine-tuned to adjust for this change in mindset. Destinations need to present themselves as safe and secure, easy to get to and with COVID-19 travel rules that can be seen as appropriate, but not overly disruptive to travel plans. While visitors may be drawn to countries that appear safer than their own, the safety message can be pushed alongside promotion of the particular destination’s other attributes, such as beaches, a focus on health and wellness, water sports and activities, food, golf and history, to benefit from the strong pent-up demand to finally escape the confines of home and have fun.

The COVID-19 tourism downturn provides islands in our region with an opportunity to rethink, refresh and adjust their brands to meet the preferences of the post-pandemic traveler and to broaden their appeal. Destinations that are predominantly high-end, for example, may be tempted to explore expanding their “luxury-lite” options, accommodations that are stylish and modern, but not necessarily five-star, in order to appeal to a broader and younger group.

Making travel industry future-ready

Upheaval in the travel industry caused by COVID-19 has caused a severe drop in revenue for many tourism-reliant businesses. Between April and December 2020, monthly reported hotel occupancy rates in the region ranged between 7% and 26%. For many hotels, a review of finances, capital structure and cost base may be beneficial, since they assess the impact of the pandemic on them.

Looking to a future that may bring the anticipated rebound, interrupted occasionally by shutdowns in response to new outbreaks and virus variants, management can consider the following areas for examination:

  • Visitor profile: What kind of guests stay in the hotel? Where do thmaster-books.come from? Is there a mix of leisure and business visitors, families and high-end guests?
  • Networks: Routes to market are of high importance, and the ability to tap into broad networks, such as global hotel groups and rewards programs, is an advantage in reaching travelers who have numerous options.
  • Revenue profile: Sources of income on site can be explored, such as restaurants, and additional opportunities may be identified.
  • Staff profile: This includes the appropriate numbers and type of staff and the assessment of employee housing solutions.
  • Energy costs: Electricity costs are high relative to most of the world on the islands in the region. Explore opportunities to introduce renewable sources of power and to reduce power consumption through actions such as installing LED lighting, or upgrading aging or inefficient air-conditioning units.
  • Digital transformation: Identifying the potential of new technology to transform front- and back-office operations, such as e-commerce platforms can create a seamless experience for the customer and automation of certain operations and supply chain to improve efficiency.
Contributors
  • Igal Wizman, EY Partner and Bahamas Strategy and Transactions Leader
  • Mike Penrose, EY Bermuda Restructuring Professional

 

Return to the EY Region of the Bahamas, Bermuda, BVI and Cayman Islands main page

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Summary

While one can never predict the future with 100% certainty, the COVID-19 tourism downturn has provided the opportunity to rethink and improve approaches to help satisfy the needs of the post-pandemic traveler. Businesses should also remain nimble in positioning themselves for a rebound that is balanced with the flexibility to manage any new restrictions that could be imposed in response to future infection waves.

About this article

By Keiran Hutchison

Partner at EY Cayman Ltd. and Regional Strategy and Transactions Leader, EY Region of the Bahamas, Bermuda, British Virgin Islands and Cayman Islands

Leading strategy and transactions advisor focusing on restructuring and recovery approaches. Advocate for diversity and community engagement.