In the not too distant future, tourism and hospitality industry officials are going to wake up to the fact that the 2020 touristic season has been canceled by a pandemic. Already, Europe’s airlines stand to lose more than €76 billion according to the International Air Transport Association (IATA). And for every euro the airlines lose, destinations lose a multiple thereof. COVID-19 has decimated many industries worldwide, and we must come to grips with this contingency. It’s time for a reality check into the possibility of a global depression.
IATA is being optimistic in their prediction that COVID-19 will cause a 46 percent decline in passenger demand, and the 5.6 million jobs they say are at risk is optimistic as well. The air transport aspects of the coronavirus pandemic are the simplest impacts to estimate. Airlines, governed by tight margins and pricing, will need hundreds of billions in order that most survive. IATA has requested that aviation regulators worldwide suspend slot-use rules for the entire season (through Oct 2020). States and nations are canceling tourism campaigns. Airlines expect to lose a quarter of $1 trillion in revenue this year.
The cruise industry will not recover from the COVID-19 epidemic in years. A report from Ship Technology shows a growing list of cruise ships that have ferried the deadly virus. But, once again the experts are sugar coating what will be the end for many cruise operations worldwide. The industry is saying “coronavirus will probably impact” them, but the truth of the matter is that most of these lines are already on the ropes. If May cruises cannot leave port, some of the biggest names in the industry will be begging for public relief. Investors are already suing Norwegian Cruise Lines over allegedly lying about the severity of the disease in order to keep bookings, which caused the cruise line’s stock to tumble. And this is just one cruise line.
As for bailout relief for the industry, some experts are already calling for abandoning ship on saving cruise lines. “Let the Cruise Lines Sink,” by Alexander Holt at the National Review, basically calls for prioritization in the wake of the 21st century’s biggest crisis. Other experts say this pandemic is a convenient moment for hiding the fact that many industries were overextended and taxed by burgeoning debt. To quote Holt:
“There have been warning signs even before the coronavirus that corporate debt was at unsustainable levels, and cruise lines were already aware that publicity related to viruses on ships could significantly decrease demand.”
Looking at hotels, the fantasy thinking and fake smile of positivity shine in front of thousands of back offices already cutting everything to the bone. My wife’s hotel PR clients have already canceled all payments, including those which were due. And this is the case for almost everyone I know in the PR and marketing end of hospitality. Those fake smiles and goody-two-shoes attitudes over the situation need to be wiped off some faces. A close friend who’s a hotel industry CEO, who asked not to be named, told me in confidence yesterday:
“Phil, it’s looking like there will be no tourist season here in Greece this year.”
Another expert who is not prone to smoke and mirrors and the Disneyland version of 2020 travel is Doug Rice, Founder & CEO Emeritus at HTNG. Here is a segment from Rice’s telling report at Hospitality Upgrade:
“Regardless of the speed of recovery, 2020 will go down as the worst in modern history for hotels around the world. Many properties in hard-hit zones (now including the U.S.) are already closed or closing. They are already facing severe financial stress, and the dominance of mom-and-pop ownership of smaller hotels means that many have few if any options. Layoffs are already happening; if I extrapolate a few known numbers, we are probably already talking in the hundreds of thousands in the U.S. alone.”
Rice and a lot of other “no-nonsense” experts are telling people how it is. The gist of the tourism reality check is that bankruptcy is on the mind of the whole industry. Let’s just be real, shall we? The industry bean counters who slice and dice price and revenue simply did not account for this. Losing a whole season! But here we are, and pricing strategies are not going to take anybody out of the soup. Some “out of the box” thinking is going to be required. Hell, we have supposed experts suggesting that hotels underplay the dangers of COVID-19!
Believe One in Ten Experts
HospitalityNet asked industry experts to offer insight on COVID-19’s impacts on the industry recently. You can read the responses here. Like me, you will almost immediately note the shortsightedness of the opinions from some of the world’s leading hospitality experts I won’t single out any of the really obtuse ones, you can make those determinations for yourself. Other than Doug Rice, you’re going to read about opportunism in the face of disaster, short term fixes that the ship has sailed on, and some logical advice on pricing PR. Not exactly what you would expect from the hospitality geniuses of the world
There are those industry leaders outside of travel who paint the accurate picture for hospitality, cruises, and airlines. My old friend Ronn Torossian, CEO of 5W Public Relations, was cited recently on a Barron’s report by Eric Grossman. The New York PR guru gives this cold but logical advice:
“This is a historic time for the hotel industry for so many reasons. There are certain companies that will be changed forever, and others for whom things will recover quicker. Unfortunately, there are also some businesses which may never come back—who’s going to vacation in Italy this summer?—but other businesses will arrive.”
The report goes on to frame luxury hotel and resort closures and stopgap strategies to conserve cash. There’s even some good advice on how hotels can manage to weather the storm, but the good advice just clouds the troublesome waters of truth.
Forget the Luxury of Travel
Not many experts are revealing the true impacts of what is going on. From manufacturing to construction, real estate and investing, and in every industry you can name, a world lockdown for weeks or months is worse than a world war. Inman News is already telling readers in the real estate realm how to cope with the recession. Dr. Nouriel Roubin warns that this recession could easily metastasize into a global depression.
In this war, service industry workers are going to be the first casualties of trench warfare and survival of the fittest. What I mean is, hospitality and travel are “luxury” industries when all is said and done. Like Torrosian says, Italians are not going to be in the mood to travel or accept visitors in months or years. His words should be etched in the reality check tombstone of past business experience.
We need to project positivity, for hope is based on our resilience. However, painting rosy short to mid-term outcomes is a form of malfeasance in my view. We are better off preparing for the worst, and then being surprised at how sunny the actual outlook is. And this, is coming from the world’s biggest optimist. Let me give hoteliers around the world one good piece of advice. Save your brand. Project your vision. Be there for the world you want to welcome.
Emulate those who come up with lofty goals like that of Airbnb when they announced wanting to help 100,000 medical personnel fighting COVID-19 find free or discounted housing closer to their hospitals and health care centers. Here’s the story on Vogue. Also in the story, the Four Seasons Hotel on New York’s 57th Street has offered free lodging to health care workers. I leave you with this from Chip Rogers, CEO of the American Hotels and Lodging Association. Rogers says that the economic fallout from the coronavirus is already bigger than “9/11 and the 2008 recession combined.”
And that’s a reality check. The good news is that the IMF is predicting a recovery in 2021. I am only curious about their definition of “recovery.”