Travel and Tourism - A Catalyst for Economic Recovery and Growth
This is how the World Travel and Tourism Council describes the sector in its 12-point ‘100 Million Jobs Recovery Plan’ — backed by the G20 with input from CEO’s across the globe. Travel and tourism accounts for 330 million jobs (one in ten) globally and 10,3% of global GDP. Over the past five years, it has provided one in all four of all new jobs worldwide, in all sectors and industries.
The Council describes this as one of the world’s largest industries, playing a pivotal socio-economic role in reducing poverty, driving prosperity and reducing inequality, providing opportunities “regardless of gender, education, nationality, and beliefs.” 54% of the sector’s workforce are women and over 30%, youth.”
The report goes on to estimate the staggering costs of Covid for the sector as global travel collapsed: losses by end 2020 of over 197 million jobs and $5,5 trillion worldwide. In June 2021 the International Civil Aviation Organization (ICAO) reported a loss of $1,3 trillion in international tourism receipts in 2020, making it the year worst on record with international arrivals dropping by 74%.
Help is at hand
The G20 platform was created after the previous financial crisis and played a major role in world recovery via international collaboration and coordination. The 12-point plan for travel and tourism emphasizes that central to not the sector’s recovery, but very survival, will be enhanced international coordination to remove barriers and build traveler confidence. Collaboration between the public and private sector will be vital.
Private sector actions cover health and safety measures, innovative and digital technologies to streamline travel, with booking measures offering flexibility, promotions, affordability and value to incentivize domestic and international travel. Companies must cooperate with governments to promote open destinations. They need to adapt business models and collectively work in product and solution development (for example, incorporating Covid-19 cover in travel insurance).
Public level actions: G20 Tourism Ministers will collaborate across borders, working within governments and with businesses. CEOWorld warned that aviation in particular cannot trigger recovery if there are government level failures, and that governments will end up paying the bill if they don’t step up: “If governments cannot open their borders, they will need to open their own funds to provide the financial assistance to keep airlines afloat.” Echoing the experiences we cited earlier, the plan emphasizes “consistent and coordinated communication to travelers”. Its architects also invite organizations to install upskilling and retraining programs — specifically the “essential digital skills to adjust to new normal and for a more inclusive, robust and resilient sector.” Given the job losses suffered by the industry and the migration of talent, this will be particularly important.
Sustainability remains on the agenda. Practices should be reinforced, the report says, in partnership with local communities. Also with an eye on the future, the sector must continue to invest in crisis preparedness and resilience to future risks or shocks.
Leaders For What’s Next
Your customer base is dissolving and your organization is at the mercy of geographically uneven and constantly-changing regulation. Your costs are accumulating fast and many of your partners and suppliers risk financial ruin. Meanwhile, your valued staff are defecting to safer sectors.
Every time you devise a way out of this sticky web of logistical and operational problems, it changes form, so you need to reconfigure. What’s more, you are navigating in a fog.
Meanwhile, you must reassure your shareholders that their investment is secure, whilst seeking new funds. You must reassure your customers that they can trust your brand, whilst rescheduling or canceling their bookings. Not to mention juggling the needs of your other key stakeholder groups: suppliers, employees, and strategic external partners.
What leader would choose to pilot a multinational in this sector, in these times? And indeed, what kind of mindset and core qualities does it take to do it?
If few sectors have had an easy voyage through the pandemic, tourism has been at the sharp end, even as green shoots of recovery emerge. What can we learn from its leaders? If diamonds form under pressure, what is being mined at the present time?
Travel and Tourism Leaders – 9 Core Qualities
1 - Agility
Leaders in the travel and tourism sector are manipulating an engine with multiple moving parts. They are constantly adjusting, whilst keeping an eye on the horizon. This takes agility (and crisis management) to a new level, particularly when flexing to sudden fluctuations in demand as borders rise and fall. As Accor CEO Sébastien Bazin put it in a Facebook post in March 2021: “we are invading the world of innovation, audacity, the word I have is pivoting: it’s that ability, within the team members of this company, of thinking differently.” And it will take considerable agility to be set for the rebound of the industry. In its May 2021 half year report, TUI’s management simply states: “Crisis management is part of our DNA.”
2 - Energy
The performance of tourism leaders brings to mind top tennis players battling through a five-set match. In a crisis that has now lasted for nearly a year and a half, agility is not just the matter of a moment. It takes relentless, sustained energy to stay on court. Sébastien Bazin told the CNBC Conversation in March that it’s been necessary to “accept the pain and show the energy to stay in the battle and come out stronger.” Like TUI, he refers to an inherent, genetic trait: “Energy is part of the DNA of any hospitality player, it has to be.” Together with energy, the resilience of industry leaders has been clear: many have had to take what the Lufthansa Group refers to as “deep dive” structural measures: swathing headcount reductions via forced dismissals and voluntary redundancies. This portfolio-heavy industry has also seen its fair share of divestments. All painful decisions, with human costs, needing to combine a sense of financial and social responsibility, before moving on to the next challenge.
3 - Optimism
Motivation, a leader’s driving force, has three components: direction, effort and persistence. A tennis player will find it easier to sustain her agility, resilience and energy (effort and persistence) if she believes she’ll be holding that cup at the end of the tournament (direction). Looking at what the leaders of the multinationals have to say (and indeed how they say it), their positivity is striking. Hilton Group’s Christopher Nassetta described himself to Bloomberg in January as an “eternal optimist”, adding: “that’s why I’m in the industry I’m in”.
Accor’s Sébastien Bazin acknowledged that business had dropped by 20%, but will be back by 2023-24: “Don’t bet against the hospitality sector.” In his Facebook message he underlined the importance of optimism (and set out all the reasons why it was justified). “I’ve been reflecting on the last twelve months,” he said, “and I need to see the glass half full…”
Meanwhile, TUI CEO Fritz Joussen positioned TUI’s re-financing of via an equity-based package not as a worrying symptom of a organization in trouble, but as a sign of confidence in the industry. He too believes that this serious game is being won, noting that for the last 15 years the travel and tourism sector has been outgrowing GDP by a factor of two. Older, healthier people with more time and money are a key factor, he says, “experience is the new luxury” and the “fundamentals are intact”. Like Sébastien Bazin, and seeing 2021 as an intermediary year, he forecasts that by latest 2023, demand will be back on track and the market more consolidated.
4 - Patience
Agility, energy and optimism can have a natural downside: the rush to make rapid decisions. Hilton CEO Christopher Nassetta told Bloomberg that it was important to exercise restraint. For example, one bright spot in the gloom has been Hilton’s ‘limited service, extended stay’ offer. Its Hampton Inn and Hampton Suites have been significantly performing all the other brands, he said, as they combine the (relatively resistant) leisure and drive-to markets. However this should be seen as a moment in time, he cautions. Whilst things already in motion that speed up will have a lasting impact, it is important to avoid making “a bunch of key decisions” on the basis of “snapshots in the darkest part of a storm”. Saying that it was impossible to predict the duration of the crisis with any certainty, Accor’s Sébastien Bazin also pinpointed the importance of patience. As the vaccine program was rolled out, he said in his Facebook message: “It’s going to be there, it’s for us to grasp… we know we’re going to be back on the road and have a lot of noise in the different hotels, at the bars, and we’ll be back in business.” Again, it’s easier to be patient if you are optimistic about the reward at the end of the road.
5 - Brand Thinking
Marketing expert Elisa Chan, writing for hospitality.net, considered that hotel brands, prior to the pandemic, were “at a crossroads with increasingly brand agnostic consumers and ever-expanding brand portfolios.” She says that consumers are increasingly gravitating towards a reputable and trusted name, especially given the difficulties so many customers have experienced during the pandemic. Brand authenticity will be key to a more sustainable future, she believes. As the industry intensifies its push towards digitization, Dr. Chan emphasizes the importance of discernment for brand-conscious hoteliers. They must “meaningfully fuse technology (AI and robotics) into a hotel brand’s identity,” rather than limiting it to undifferentiated, operational functions.
Hilton Hotels and Resorts manages and franchises a portfolio of eighteen brands, from Waldorf Astoria, to Conrad, Canopy and DoubleTree. In January 2021, CEO Christopher Nassetta was asked by Bloomberg about the impact of the pandemic on the group’s brands. Mr. Nassetta countered with a gentle reminder that Hilton had been in business for nearly 102 years: “We build our brands to last, longer than you and I are going to live.” The underlying brand segmentation philosophy, he said, remained valid, even if certain brands were doing better in the current circumstances. When it comes to brand legacy, the roots, in other words, remain intact, even if above the ground certain branches may be temporarily flourishing more than others.
6 - Night Vision
Christopher Nassetta’s reference to “the darkest part of a storm” expresses the turbulence and obscurity surrounding travel and tourism these past months. No leader can be considered legitimate without a vision. But travel and tourism leaders have a striking ability to not only envisage a future state whilst trying to stay afloat in a tornado, but to take immediate steps to bring it alive. For example, airlines have been investing in enhancements to their fleet and engaging in collaborative partnerships to open up new routes. Hoteliers have been bringing on more franchisees, adding room capacity and renovating existing real estate. Or they have re-purposed rooms to welcome the resurgence in business meetings, (with an eye on hybrid formats) or developed their private home offer.
Both sectors have invested in digitization, mainly to streamline and improve the customer experience whilst assuring quasi-clinical levels of hygiene. A cynical eye might view these measures as mere adjustments to existing models, safe, incremental steps. And particularly digitization has the potential to revolutionize industries, rather than enhancing them (recalling that TUI is looking beyond the crisis, with the priority of transforming into a digital platform company, with “digital mass individualization” as one goal). But given the relentless pressure under which industry leaders have been operating (and the need for extreme risk management), the fact that they are looking ahead and investing signals an innovative future. And indeed, the most visionary had innovative ‘credit in the bank’ prior to the onset of the crisis — for example, some key digital measures were already underway; Covid has only acted as a catalyst in concretizing them.
7 - Tough Love
Hilton’s Christopher Nassetta also emphasized in Bloomberg the need for the hotel industry to care for people, given the extended impact of the crisis for “those that can least afford it”. And in his Facebook message, Accor’s Sébastien Bazin openly expressed his regret for the difficult decisions he had been forced to take in the crisis. Thanking his employees for their immense efforts and reminding them of their importance, he also underlined the group’s intensive activities towards its coworkers, ‘the Heartists’ — a fund giving access to nutrition and medical care and remaining close to the small businesses in the group’s ecosystem.
Indeed the industry needs to demonstrate that it will be a great place to work going forward, for three reasons. Firstly, to re-invigorate an exhausted remaining workforce, secondly, to attract talent back into the industry, and thirdly, to bring in new talent to equip it for future expansion. As business picks up, and given its unavoidable human cost-cutting measures, tourism and travel risks its very own war for talent. Being a caring organization in this battered environment will give corporates the competitive edge.
8 - Transparency
Posting an honest (and detailed) message on a public Facebook page, as Accor’s Mr. Bazin did, opens the floodgates to every possible comment after a particularly tough period. Indeed all of the statements we cite from the leaders of this heavily challenged industry have one thing in common: they are publicly accessible. Furthermore, those leaders are striking a difficult balance. Whilst radiating positive energy and optimism for better times to come, defending the core fundamentals of their businesses, they clearly admit just how tough the environment has been in the previous months and that the crisis, even if it is calming down, isn’t over yet.
9 - Paradox Management
During the Covid pandemic leaders have been intensively activating all organizational functions in a close and constant interplay: digital, operations, marketing, purchase and logistics. When it came to taking some of the most difficult decisions and reporting them to shareholders and stakeholders, the CEO/CFO duo, for example, has been very much in the spotlight.
The idea of duos, or dualities, takes us into the fascinating arena of paradox thinking. Simply put, a paradox contains two contradictory, yet independent elements that operate simultaneously. Dealing with paradoxes demands a particular kind of mindset. As we discuss in our article ‘From Tension to Transformation’ this is a key facet of wise decision-making. Paradox leaders wisely acknowledge opposing ideas and tensions, take a more holistic view and embrace the ambiguities of fast-moving contexts. They do not choose between ‘either/or’ but allow ‘both/and’ to unfold into a new reality, transcending opposing ideas and opening up innovative, competitive avenues.
Tourism and travel provide fertile ground for leadership paradoxes. And indeed, all the leadership qualities we raise in this section contain paradoxes. Energy and patience, for example. Or brand legacy-thinking and vision.
Let’s look at some more paradoxes.
Short-term and Long-term: CEOs and CFOs are having to address the urgent realities of a slide in revenues. At the same time, they are equipping the business for a sudden, short-term resurgence in demand, as well as ensuring performance over a three-year, longer-term time frame.
Shareholder and Stakeholder: The CEO/CFO duo are having to reassure nervous shareholders, whilst also representing other key stakeholder groups: employees, franchisees (in the case of the hotel industry) customers, and beyond. Customers are increasingly looking to a brand’s sustainability record, (emphasized by the UN’s Sustainable Development Goals (SDGs) and ESG imperatives). And sustainability is still high on the sector’s agenda, despite the current turbulence.
Wealth and Health: In an industry that plays such a vital socio-environmental role, community and ecological perspectives need more than lip service. And this leads to another paradox in a resource-heavy industry with pressure on margins: wealth and health. Clear action plans are broadcast by all the players we examined. How far these can be followed through as they structurally recover from the costly pandemic will only become clear in the next couple of years.
Collaboration and Competition:The travel and tourism sector is a web of inter-dependencies and alliances. The first example of ‘codesharing’, (where airlines publish and market the same flight under their own designator and flight number), was seen in 1989, according to upgradedpoints.com. Qantas and American Airlines coined the term to describe a business arrangement which spanned the spectrum of routes officially connecting Australian and U.S. cities. In 1997, five airlines forged the Star Alliance as the first of its kind in global aviation. Star Alliance now comprises 26 member airlines who “come together to offer smooth connections across a vast global network”, coordinated by a Frankfurt-based project company. The alliance includes co-locations at airports, infrastructure, communication initiatives and other services aiming to improve the travel experience.
Airline CEOs have also united to lobby political leaders, in the push to open up the transatlantic corridor, for example. And the World Travel and Tourism Council’s ‘100 Million Jobs Recovery Plan’ backed by the G20, was developed with input from private sector CEO’s across the globe and calls upon industry leaders to collectively work in product and solution development. If the Covid pandemic has intensified competition in the industry, it has also intensified collaboration.
Sanitization and Humanization: Digital has accelerated and expanded during the pandemic, leading us to a new paradox: sanitization and humanization. On one hand, tech has enabled contactless transactions for hygiene and efficiency. On the other hand, the ‘human touch’ — personalized and empathic — will be a bigger brand differentiator in the future, especially in the premium segment. If good paradox thinking sparks new and creative solutions that elevate a firm or offer above its previous state, then this particular one has great promise.
In the Full Article we explore the solutions that business leaders of 6 multinationals on the frontlines are devising to forge a path out of the crisis and into a sunnier future. While the road has been rocky, a brighter horizon is in sight.*
Our tour of the Covid-hit travel and tourism industry reveals just how rough the ride has been for its leaders. They have been engaged in a relentless and high-profile exercise of resolving multiple business paradoxes to ensure that their legacy organizations not only survive, but transform and flourish.
This is a daily balancing act that involves unpacking and synthesizing seemingly contradictory perspectives to arrive at higher-level solutions. From short-term and long-term, shareholder and stakeholder, wealth and health, sanitization and humanization, collaboration and competition.
The next generation of travel and tourism leaders — or any leader stepping into this industry, can expect to encounter a fascinating and fertile strategic field. Developing this rich terrain will take a very particular blend of qualities. More than being acquired or trained, these need to be deeply anchored in their DNA.
Agility, energy, optimism and patience, brand thinking and night vision. Tough love and transparency. It takes a particular kind of mindset to embrace what are, in themselves, paradoxical qualities. Something to consider next time you open an airline app, check in to a hotel, or reflect upon your next career move.
Download the article for the full story.