I have recently listened to several podcast episodes by The Standard, an online news platform in Thailand. Its editor-in-chief, “Ken” Nakarin Wanakijpaibul, has been interviewing key persons in various industries and sectors on the so-called ‘new normal’. We have been hearing this term ever more often now and you can perhaps guess the now-cliché theme here: workplace transformation, online shopping becoming more prevalent, and people not hanging out in groups. From this general picture, each podcast episode offers some sector/industry-specific assessments of the effects of COVID-19 outbreak in the medium and longer terms.
Among the different sectors and industries, I wish to draw your attention to the airlines and tourism industries first. This is because tourism is one of the lifelines of Thai economy, amounting to roughly 17% of our GDP. One cannot talk about tourism without discussing airlines since they are very closely connected and both industries have been hit extremely hard. I think it is also fair to give them due priority since they were the first to take a hit and will likely be the last to recover.
Ken went to talk to Mr. Tassapon Bijleveld, Executive Chairman of Asia Aviation Plc. or the parent company of Thai AirAsia, and Mr. Poomkit Raktaengam, President of Phuket Tourist Association. The episodes of the podcast can be followed by clicking on the names of each guest. I have to say upfront also that by writing this article, I am not aligning my thoughts with any of the two gentlemen. There are points that I agree and there are also points that I am not so sure about.
What does “new normal” mean for the airlines and tourism industries?
So let us begin with the term “new normal” / “new norm” or whichever name we call it. Mr. Poomkit suggests that in the tourism industry, you may want to divide the new normal into demand and supply sides. In general, we may not see a big change, not in the short term anyway, of new normal in the demand side. The reason is that after a long period of lock-down in one form or another, people will still want to travel. They will need vacation. That said, the supply side is not going to be the same, at least until stock of vaccines or effective cure is readily available. We have seen efforts to gradually ease up the lock down measures in a number of countries. While the easing up differs from country to country, the general rule of thumb is to do it in stages. Businesses and governments share the same objective of not having an uncontrolled second or third wave of infection. Should that happen, businesses may be forced to close again and they understandably dread that scenario. Entrepreneurs have thus adopted a number of measures boiled down to checklists to prevent infection. This is the new norm that can generally be seen across industries throughout the world.
For airlines, Mr. Tassapon mentions that when domestic flights resumed in Thailand in early May, about 30 percent of seats on airplanes would be left vacant to be in line with social distancing principle. Cabin crew would be in protective suits and not permitted to serve (and sell) food or drinks on board. These would inevitably incur additional costs that airlines would not be able to carry the burden themselves. In the tourism industry, Mr. Poomkit talks about the need to increase the frequency of cleaning hotel rooms, the loss of lavish buffet lines at breakfast, and a limit of the number of visitors to pristine islands. These again will push up prices.
With these in mind, we can probably start to see how the supply’s new normal may then affect the demand of people craving for holidays. It has been suggested that the increase in price from adjustments made in the supply side of tourism industry may induce change in customers’ behaviour, leading to a change in demand. The scale of such change, Mr. Poomkit cautions, will also largely depend on how long before we have a lasting cure or a mass production of vaccines. If it is six months or more, we can be certain that consumers’ behaviour will likely change. Anything less than that, the behavioural change may not be entrenched enough to become a lasting norm.
Say goodbye to low fares (and mass tourism)?
Given the restriction of supply coming from the need to prevent community infection, costs of travelling will inevitably go up. To enforce social distancing measure on airplanes, 30 percent of seats will go unsold. In order for airlines to not cruising in the red, ticket prices will go up perhaps by at least 20 percent.
Many may have also wondered why many airlines seem to lack cashflows. I found the episode with Mr. Tassapon quite revealing. He mentions that low-cost airlines have fought price war for years. AirAsia had been making continuous losses. When a crisis like this happened, suddenly and without warning, airlines’s lack of liquidity has been exposed. Many airlines can continue to pay their employees for 2-3 months maximum. He also stated that if all low-cost airlines in Thailand raised their ticket by 100-200 baht (around USD 3) per 1-hour flight, all low-cost airlines operating in the country would have made profits.
Mr. Poomkit gives some prediction on the tourism industry. Many destinations that are normally packed with tourists will need to apply a quota system. Hotel breakfast may need to do away with buffet lines altogether. We may not see packed breakfast halls with long queues for egg stations but may start to see hotels offering a-la-carte breakfast menu with overlapping time for customers to sit in the restaurant. Needless to say that such burden of hoteliers will somehow find its way to customers. Visitors will have to pay more for travels and accommodation, leaving smaller portion for them to spend on food and other kinds of entertainment.
The ultimate consequence is that we are not likely going to see the same number of visitors and the same amount that foreign visitors spend. Mass tourism may not be as prevalent.
How will ‘MICE’ feature in the next chapter of tourism industry?
Given the uncertainty of mass tourism in the post COVID-19 era, Mr.Poomkit brings the audience to the question of MICE. Known in full as Meetings, Incentives, Conferencing, and Exhibitions, the MICE sector has generated a sizeable revenue. The usual strategy is to make people who come to meetings and conferences stay on a little longer and spend more locally. Mr.Poomkit at least has offered some hope for MICE since he believes that MICE can continue to grow. Companies will still want to take their employees out for teambuilding exercises and trainings outside the usual environment yet they may not be able to do them en-masse. Rather than taking all employees on a single busload to a sea-side resort in one go, they may need to divide into groups, each group taking up the space of one or two minibuses and organising their own teambuilding exercises at different times throughout the year. This obviously means change for event organisers but it also offers opportunities to be creative and grow.
Redefining ‘premium’ destination
From the point of business entrepreneurs in the tourism industry, they need to make the most of those who come to visit. One way is to explore the branding of ‘premium travelling’. This is not by all means a new term but the connotations associated with it may change after COVID-19 outbreak subsides.
Before COVID-19 took hold, people tended to think of bespoke hospitality and extravagant services part of the premium package (which almost always comes with spa vouchers). But in the post COVID-19 era, when people choose where they want to travel, they will probably give more weight to the state of healthcare at their intended destinations when making decision to travel. It is not that we do not think about it now. In fact we do. And that is where travel insurance comes in. It is there, sitting calmly and quietly in the corner to assure us that if we fall ill abroad, we will be treated. But in the future, we will also have to factor in the capabilities and capacities of healthcare system in those destinations.
Mr. Poomkit also suggests that with the need for social distancing, space may become another element of premium tourism. People may feel more secure and comfortable to be at least 2 metres or even 10 metres apart from those coming from different households/families. The affordability of a destination to have visitors spreading out may be its selling point. Who knows, there might be a ‘social distancing tax’ imposed in some areas to compensate for the opportunity cost of having more visitors.
So what’s next?
My intention when I began writing this article is to bring in some industry-specific perspectives to the so-called ‘new normal’ of life after COVID-19. By doing so, I have demonstrated that we can go a bit further than the standard ideas that things will not be the same. I personally am a bit cautious to say that things will change 180 degrees. In fact, changes will be far from uniform. In some aspects of life, we will probably find that old norms will carry more weight but we will need to balance them with health concerns. By exploring industry-specific perspectives, we may be able to see some near-future challenges, opportunities and even directions. And this is what I humbly encourage.
318 total views, 1 views today