When the World Health Organization declared COVID-19 to be a pandemic last March, travel largely stopped in its tracks. At the time, many people were preparing to set off on their annual school holiday breaks, with plans to stay in hotels, eat out in restaurants, see some sites and perhaps pick up a few items from local retail outlets.
But the decision by the WHO caused many to cancel their trips over mounting safety concerns, the effects of which quickly rippled through the entire industry and left everything from airlines to small cafes reeling in its wake.
Lorn Sheehan is a professor in the Rowe School of Business whose research is related to tourism destination management and is interested in the relationship between tourism, entrepreneurship and the sustainable prosperity of communities. We spoke to him about how the COVID-19 pandemic has affected the travel and tourism industry and how businesses have gotten creative in a bid to weather the downturn.
What has the impact been on the travel and tourism industry?
Certainly nothing has hit the tourism industry in modern history as hard as COVID-19. Some have estimated the impact on the industry to be more than nine times that of 9-11 and those were in the early days of the pandemic. By April 1st ten percent of Canada’s restaurants said they had closed permanently and a further 15 percent said they would be out of business if the situation persisted for another month. The CEO of Marriott has said Covid-19 has been worse than 9-11 and SARS combined, so it’s really significant.
The tourism economy is significant. Globally, direct spending on tourism represents 3 percent of GDP – 10 percent if you include indirect and induced expenditures. It is arguably the biggest industry in the world and so when it gets affected the impact ripples through the whole economy globally and it is felt everywhere eventually. In the US, loss of the economic impact from tourism alone is enough to push the entire U.S. economy into recession. This reality is not too different for most developed and developing countries. With regard to Covid-19, there is probably no part of the economy that has been affected worse than tourism.
We have to understand that this industry is really a collection of different industries: it’s accommodations like hotels and resorts; it’s transportation, like airlines and taxis and buses and trains; it’s attractions, like parks, historic site, museums, theme parks which are really what draw people to come to destinations; it’s about special events, like concerts or sport events or the Calgary Stampede; it’s about food and beverage, like our bars and restaurants; tour operators, like here Nova Scotia’s whale watching tours and sport fishing tours, the Harbour Hopper; and the cruise industry which was entirely shut down for the year.
So, this industry is very big and far reaching indeed. For example, retail is not something that comes to mind when we think tourism, but if you reflect on your behaviour as a tourist, you almost always do some shopping so retail always gets hit when tourism gets hit.
All the business in the tourism industry pay taxes, which is a huge source of taxation revenue for governments at all levels and on top of that the industry generates a lot of employment - it’s about one in 10 people if you look at the entire impact of tourism, so that’s a big number. I like to think of it as a great social employer presenting opportunities ranging from unskilled and semi-skilled people to in a variety of highly skilled professions as well managers and executives.
How did people and governments respond to travel restrictions?
A survey done in April of Americans showed that 84 per cent who planned to travel in the next six months were going to change their plans or cancel them. More than half that group was going to cancel them completely. Forty-three per cent were going to reduce their travel plans, 22 per cent were going to go to a destination that they could drive to and 13 per cent were going to change from an international trip to a domestic trip so you really saw that people were starting to change their travel patterns.
Of course when our governments made the very wise decision to close borders to travel or put severe restrictions in place, we tried to capitalize on that here by encouraging people to travel within province - in NS and eventually within the Atlantic bubble. I was very supportive of these initiatives - it was at least something we could do to limp our businesses through this summer season and a way to ensure that everyone in Atlantic Canada could have a travel experience here in Atlantic Canada. It was something that could help our businesses survive -- maybe not thrive -- but survive. Because some of our tourism businesses were not sure if they even going to open this year
The other very important piece is that people, irrespective of government decisions, were choosing not to travel because they didn’t feel safe. The two things that are foremost in consumers’ minds are safety and security and if they don’t feel safe, they tend not to travel. And certainly, that filter was being applied with the health issues posed by COVID-19.
Do you think that that model of having a bubble was a good way to make people feel safe while also stimulating travel?
I definitely think that was being viewed as very positive by people in the industry, they were begging for it I think and for some of them I think it was definitely going to be the difference between if they even opened this year or not – the situation was and still is that dire. My message certainly was, “Get out and explore those places, those Atlantic Canada gems in your backyard that you always wanted to see.” Our local and regional trips can generate word of mouth that that can be used to attract we call the VFR market -- the visiting friends and relatives market. And that really helps reinforce future tourism for the communities in the bubble in this case.
Which sector in the industry has suffered the most?
My strong feeling is that it is the airlines that have been hit the hardest for a couple of reasons. Airlines are really about people (and some cargo) moving from place to place and you’re pretty hard pressed to define someone on an airplane as not being a tourist. And what also made it difficult for the airlines was the perception that it was a very risky place to be, just because it is an enclosed space, people are close together and you’re there for a prolonged period of time. That is the perception. While our restaurants were forced to close for a little while they were allowed to open with social distancing and PPE measures. They also have a local customer base as well so they don’t get hit quite as hard.
A travel agency in Halifax has proposed offering direct flights to Cuba this winter for Atlantic Canadians only. Are there creative strategies that companies can adopt to get through?
Yes, the idea of extending the Atlantic bubble to this Cuban resort is a very innovative idea and the owner of the company emailed me and said it had been unbelievably successful in terms of the demand. They don’t know if they’re going to be permitted to do it yet. But I think it’s a really creative option, as long as they follow the protocols that are laid out by the province, Canada and Cuba. It is something worth exploring. I would encourage the government policy makers to let this go as a trial and explore it, while being very careful. I’m not surprised the demand is as high as it is -- people are dying for this opportunity and it’s just shocking how important travel and tourism is to people.
What does the road back to normalcy look like for the industry?
The real answer is we don’t know, but one of the ways of preparing for this kind of uncertain future is scenario planning. I was part of a working group where we attempted to map out potential future scenarios for what tourism would look like next season - in 2021. We came up with four possible scenarios based on a two-by-two matrix. One dimension is what demand will there be for tourism and that will be a function of what our government permits in terms of travel and also a function of people’s perceptions of the risk associated with travel. The other dimension is what is our product will be like - what experiences we can offer people, and that is a function of what businesses remain.
The individual businesses can and are making a variety of decisions to reduce their cost structure -- they’re in survival mode now so any costs they can cut, they’re cutting, any new revenue stream they can develop they are -- they’re trying to be creative and reposition in ways they hadn’t in the past. An example of that are the dine-in restaurants that started doing take-out and delivery. So, there are some ways to come up with new revenue streams but there is a limit to that.
Are you travelling at all?
Just in the province. In fact, the real downer for me is that I was on sabbatical from July 1, 2019, to July 1, 2020, and the way I had planned my sabbatical was totally wrong because I said, ‘I’m going to spend a nice fall in Nova Scotia and really enjoy September and October,’ and then I had travel lined up every month of the new year! And you won’t believe this, but the number 2 trip on my agenda was Wuhan, China! I taught in their international MBA program for the last four years. And then Europe where I have taught in Bavaria for the last 17 years -- that didn’t happen. And I was also planning on going to the south of Italy because I have a lot of research collaborators and I didn’t get to see them this year. Lastly, my South Carolina and even Alberta trips were cancelled -- So, it was a total bust! But I did thoroughly enjoy Nova Scotia including the best summer weather I can remember!
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