David and Catherine speak to Nicolas Mayer, Managing Partner of PwC’s Global Centre of Excellence for Tourism. Building on his wide-ranging experience advising governments, destinations and tourism organisations, Nic believes that the industry is now waking up to the reality that recovery will likely take 12, 24 or even 36 months. But those market participants who use the time they have now wisely—on planning, scenario analysis, reflection and innovation—will be well placed to shape the new normal to their advantage.
In a post COVID-19 world, he believes the new consumer will turn their back on mass tourism and crowded destinations, coming out of this collective trauma far more conscious of hygiene, distance and isolation. In fact, he argues, this may finally be an opportunity for sustainable tourism to flourish, with tomorrow’s visitors seeking a much stronger interaction with local communities and ecosystems.
David Keen 0:08
Hi, this is David Keen. At QUO, we’ve worked for the last 20 years with many of the world’s best known travel brands. During this unprecedented global crisis, our world of travel has changed, possibly irreversibly. This series will see us speak with many global leaders to understand how they see the future of travel.
David Keen 0:43
Welcome Nicholas Mayer the managing partner of PwC Global Center of Excellence for Tourism in Dubai. Nic, good morning.
Nicolas Mayer 0:53
Good morning and thank you for having me.
David Keen 0:56
You’re welcome. And it’s an honour for us to welcome you on on the future travel podcast. Nic, the economic fallout from the virus is already wreaking havoc on the global infrastructure of tourism. Do you at PwC have any qualitative measurements for us on the severity of the crisis on the tourism industry?
Nicolas Mayer 1:26
So I’ll be speaking for tourism, which is of course the area that I look after, and I would say that we don’t have any of the quantitative measures other than observing what is happening in the market, right? The drop in occupancy; disappearance of airlift; loss of jobs that we see across across the globe, basically, related to this one. What is probably the more in the more interesting qualitative element that I observe very closely is to see our clients and in general the tourism stakeholders view of how fast they believe they will be recovering or not.
Nicolas Mayer 2:04
So basically the sentiment analysis, where we ask in regular intervals ,”How do you think this will play out for you or for your estimation in the long run?” And what I see there is that over the past 10 days, there is a certain sobering up and a certain reality returning in. And when each of these surveys that we do, you see that the respondents believe that it will take longer to recover. Originally, this was perhaps seen as a three- to six-month exercise. Now we increasingly see people believing that this will take 12, 24, 36 months. So I think there’s a certain realism and a certain pragmatism coming in there, and I think that’s a very important indicator for me to see, because that is ultimately what is going to shape how these entities, how these governments are going to react to what we’re currently experiencing.
David Keen 2:52
Do you think that given the news every day — and we were chatting about this slightly just before we came on air — do you think that the news, both positive and negative every day, is is still having such a variable impact on on the crisis that right now we’re able to actually make intelligent judgments?
Nicolas Mayer 3:18
I think sorting through the chatter is certainly a tough one, right? Because there is, indeed, on all your social media feeds and all the newspapers, so much news that at times you just want to step back and and bury your head in the sand, if you will, and of course you cannot do this, if you’re planning for the future. I believe that by now many have understood where good information is available, who writes pragmatically without a political agenda, without a bias, with good research. So perhaps it is becoming slightly easier now that the information becomes clear, and that in turn allows destinations, governments, private-sector enterprises, to plan based on a more broadly based consensus of research of analysis. And that is probably helpful.
Nicolas Mayer 4:09
And Nic, touching on what you were just saying about being more realistic about how long this is going to take: Do you think that each destination will recovered at different speed, or do you see a more of a synchronised recovery? How do you see that playing out?
Nicolas Mayer 4:24
I think it will be very different in different jurisdictions, for a variety of factors so these are affected by things such as when are school vacations? What is the climate? What are your primary source markets on which you basically rely to fill your destination?
Nicolas Mayer 4:44
And if you start doing pairings of all these elements of all these variables that you see that basically those markets that are relying on a Northern Hemisphere summer vacation, as the primary source of income — so Western Europe, the US, certain parts of South East Asia — so the classical beach fun and sun summer destinations, they would of course have a much more difficult time in the short run because their primary season which starts in June beginning of July, is probably going to be very very muted.
Nicolas Mayer 5:16
If you look at destinations that perhaps play more on on a winter tourism — you know, the islands, vacation destinations for the Christmas holidays and so on that sort the Christmas to New Year’s vacation on for the Northern Hemisphere. There of course there is some, some justified hope that by the time that December comes around or even October when the booking start for that. There is already a little bit of a new normal that has arrived, that allows you to capture a part of the market and start servicing that segment. But I think even there, we all got to be realistic that in 2020, the year is pretty much lost. And we will be working at substantially lower levels of occupancy and profitability and cash flow, than we have in the past years.
Catherine Monthienvichienchai 6:07
And what about business travel? Do you see similar similar trends there?
Nicolas Mayer 6:13
Yeah probably similar trends for different reasons. So, as we all have a very very personally experienced, we’re all doing our business remotely right now — digitally, as we are speaking right now. And I myself and many of my colleagues that I speak and my clients and people in the industry, we are discovering that a part of the historic business travel that we did can actually very nicely be done on this virtual level.
Nicolas Mayer 6:43
A large part still will process of business travel because it is relational. You want to see the people. You want to spend time with your teams. You want to coach, lead. You want to bond. But I believe that we’re going to see that, certainly in the short run and perhaps permanently some part of business travel will start disappearing, because we have discovered that there’s a more efficient way of doing it.
Nicolas Mayer 7:08
In the short term, I could imagine that being amplified by the fact that so many companies are going to be cash conscientious, trying to keep their cash together, and therefore are going to further encourage your staff of saying, “If you can continue to working in a mode that you’ve worked for last two, three, four months, please do so, because it will save us travel costs.” So yes, I think we’re going to see a similar trend in business travel.
David Keen 7:31
Nic, everyone’s talking about the new normal and, as we’ve said several times, we believe it’s the change between analog and digital — with the virus in the middle — and we are actually entering a new age of tourism or a new a new economy for tourism.
David Keen 7:53
Do you see a huge desire for the new normal? And what fundamental changes do you see in the travel industry? Obviously some will survive, and obviously some won’t.
Nicolas Mayer 8:04
What I like about the new normal, is that, to me, it has much more of a positive resonance then a threatening resonance. The new normal — and everybody reads into it what they wish — basically, paints as a picture of how we can redesign, adjust, reinvent our tourism industry if you will, based on the experiences and this forced pause that we’ve had.
Nicolas Mayer 8:32
So I think there is a longing for the new normal, or at least an intrigued interest into the new normal, amongst those market participants in destinations that welcome and enjoy innovation. That say, “I see opportunities to serve as my guests, better to serve as my stakeholders, better to serve as my local residency better.” And I think, for those market participants the new normal is very much — they had a longing to it.
Nicolas Mayer 9:02
If you look at the consumer side of it at the visitor side of it, there is a new normal longing because it is a condition precedent that they started traveling again — at least internationally. There will be new needs — we’re coming out of this this this coven situation with a collective trauma, if you will, that basically arises out of the fact that we have become much more conscientious to elements such as hygiene, distance isolation, privacy and the ability to understand where the things that we eat, the people that we work with and the objects that we charge have come from.
Nicolas Mayer 9:44
So, there is a new long — there’s a longing for the new normal in the visitors collective post-COVID, trauma-driven desire to travel. And wherever destinations are able to accommodate and fulfill these requirements, there yet again the new normal is a desirable state.
David Keen 10:06
I have a comment on that: I mean I think that from a biology point of view, the evolution of the new normal is a fascinating concept, because someeveryone’s going to react at a different pace. It’s either going to be public sector or private sector driven. It’s going to be driven in in different forms. Yet, a new normal will evolve, and a philosophy of normal that a tangible elements of how things are done. And some will be created in America, in the US. Some will be done out of Europe. Some will be created out of Asia. And it’s a fascinating. It’s a fascinating idea of how it’s all going to coalesce.
David Keen 10:50
Do you have any thoughts on this?
Nicolas Mayer 10:54
I like the way you started this basically the new normals is ours to shape, right? And that means that it is not a fatality for which we wait till the governments tell us you may now travel again, and then it kicks off automatically on autopilot and you get back to old levels in one, two, three, four, five years. It is something that we shape, so you’re right.
Nicolas Mayer 11:16
Those market participants internationally that are capable of now using the time that they have forced to do planning, scenario games, scenario analysis, some reflection, some innovation — those who are able to take this and convert it into a new service offerings will really be able to shape a new normal to their advantage. Whereas others that are hoping for a return of the old normal will indeed potentially find out that there is no longer a space for them, or that the space is much more crowded or much less profitable.
Catherine Monthienvichienchai 11:52
And when you’re thinking about the new normal and the different destinations around the world, which destinations specifically are best-equipped or best-placed to embrace this normal which may face challenges?
Nicolas Mayer 12:07
Yeah, I think you can probably classify these destinations based on the segments that they service. As you come out of this COVID crisis — yes, it is a crisis — consumers at least in the short term will be looking for a more personalised, a more safe, a more hygienic, a more sustainable — if you will — experience. And within that they will have certain requirements towards the destination that services them or where they’re considering spending their money.
Nicolas Mayer 12:46
So destinations that are able to adapt quickest to this, and are able to have a very rigid and a very well-thought-out programme of accommodating guests, of having the hygiene protocol in place, of being able to provide separation of spaces, distancing, isolation sometimes, you know the beauty of emptiness — if you will. They will have quite a bit of chance of success. Also those that will be able to rely on an intact ecosystem that has a connection to the local markets and the connection to the local food supply, a connection to the local labor base, in order to make that a credible proposition for for visitors.
Nicolas Mayer 13:33
Those that I believe will struggle are those that historically have been in a mass market segment. Those that basically worked off the premise of saying, “Let me see if I can pack a maximum of people into a minimum of space, and therefore maximise through volume.” Because I believe that, for the foreseeable future, the concept of being next to each other in small crowded spaces, being at at centimetres from your next door neighbor on the recliner chair in these large destinations where you are doing sightseeing and large groups — I don’t think that’s going to be a very attractive premise in the short term or mid term until, of course, collectively, we have worked over this trauma and go back to the old habits again, which may or may not happen. So whoever is basically working the volume game and doesn’t have a sanitary health distancing protocol in place, they will struggle, because people will not be very interested in buying it in the short term.
Catherine Monthienvichienchai 14:36
And building on that aside, from people having this fear of being in crowded spaces, I imagined that leisure travelers will also start to be — with the global recession, probably, there’ll be limited spend, limited available spend for leisure travel. So when they do travel, they will be a little bit more particular about where they go and why they’re travelling.
Catherine Monthienvichienchai 14:58
What role do you think purpose and meaning will have in trouble going forward? I mean, do you think leisure travelers will look for greater engagement with their destination, with their experiences, when they travel in a way that, perhaps, we haven’t seen before.
Nicolas Mayer 15:14
Yeah, just really cool question. If there is one positive outcome that I see of this otherwise really unpleasant situation, to say the least, it’s that it may finally be the time where sustainability and the demand for sustainable practices becomes a main component of what a visitor is seeking from a destination.
Nicolas Mayer 15:41
Historically, there have always been very very cool niche players that that that that did that very credibly, and they attracted a relatively niche following that said, “Yes, this is important to me.” As we’re sent to a destination such as Costa Rica, for example, it always said, we’re playing off when we’re playing out but we are a sustainable destination, it means we do certain things we don’t do or certain other things. And that meant that they shut themselves out of part of the market, and they had a really good penetration in other part of the market.
Nicolas Mayer 16:09
If we look at the post-COVID, I believe that what historically has largely been a marketing exercise of trying to put some sustainability appearance or some limited sustainability activities on top of an otherwise not very sustainable product. I think that will now transfer into the main offering. Destinations and private sector participants are going to have to very credibly demonstrate that they take steps of taking care of their people — making sure that they’re healthy, making sure that they can afford healthcare, making sure that they have a sustainable living so that they can fully focus on their job. They will be looking at food supply safety at the origin of everything I touch each drink and consume. There will be a demand for customer interaction with the local community, because we will be interested in seeing how they are faring post-COVID.
Nicolas Mayer 17:07
I myself know that my next two or three vacation destinations that I will be picking will in those small measures also be influenced by where I believe I can make the biggest impact, and contribute to the local community the most, right, because I’ve just seen how many people are currently suffering and are threatening their livelihood by this. Some people will go straight back to old patterns, so this is not a binary choice. But yes we will see purpose, sustainable practices, and basically community engagement as a much more stronger ask for many of our leisure visitors.
David Keen 17:45
Yeah, I mean a lot of segments in the in our industry are going to suffer, and some will presumably suffer much worse than others. The one that that sort of stands out is the cruise industry. What’s your prognosis?
Nicolas Mayer 18:04
So, the cruise industry, certainly has a particularly acute requirement to do their homework, right? They are a tremendously innovative and successful industry, but a lot, a lot of their success that they’ve had historically was based off models that basically contradict or doesn’t fit well with this new-normal demand for distance, space, annotation, etc. A cruise line experience, you are by definition, at least in the in the larger ship segment, with one, two, three, four, five thousand people — and you are being shipped to a place where, afterwards, you are being basically offboarded and go into a local ecosystem on an island, on a beach, or whatever.
Nicolas Mayer 18:55
So I think there will be skepticism by certain visitors, or certain tourists who are saying, “I may not wish to expose myself to this just yet.” And there will also be skepticism, potentially, in receiving ports, which are going to be reticent in saying, “Is it really a good idea for me to welcome 5,000 foreign — well foreign or visitors that are not from my local domestic market — and have them intermingle for a day with my local populace? What does that do from a pandemic, from a hygienic point of view?”
Nicolas Mayer 19:29
So, I don’t have a prognosis, but I think the prognosis of how the cruise liners are going to fare are going to be dependent on how credibly, they address these concerns — both from the port side and from the visitor side — and put processes, protocol, policies, digitally supported transparency measures and perhaps things such as infrastructural adjustments in smaller ships, separated cabins, etc. — how quickly and how credibly they put that in place.
Nicolas Mayer 20:02
They have an unbelievable capability for innovation so I am confident that there is a path forward, but it’s going to look different in the future probably than it is in the recent past.
Catherine Monthienvichienchai 20:16
And Nick, a last question: Everyone talks about recovery starting at home, starting with domestic tourism. How do you see that working?
Nicolas Mayer 20:26
Domestic tourism is probably our lifeline to start ramping up the engine again and again we need to recognise that different destinations have different domestic tourism bases, right? Some have a very strong domestic tourism base. Others simply don’t have a very large domestic population and hence, it doesn’t exist. But it could perhaps also be extended to be proximity tourism, so — regional proximity tourism — and that is going to be what is going to save us in the short term and perhaps provide us with the cash infusions that we’re going to need to start revving up this motor again. Because this can basically take place from the moment that the respective authorities in each jurisdiction give the all-clear for travel.
Nicolas Mayer 21:17
And then, many many visitors will not immediately go overseas on a 12-hour flight, but itwill start retaking their travel habits by saying. “Let me say a little bit closer to home. I may have a slightly smaller budget. I may wish to stay in a place where I’m more familiar with the local healthcare authorities, I may have built trust in my local government on how to handle the crisis and therefore wish to stay there a little bit more in case we have a second wave or whatever comes.”
Nicolas Mayer 21:43
So, there is going to be a — the other way around. Domestic tourism can provide answers and solutions to many of the concerns that travels we’re going to have in the short term. Also, it allows you to do day trips. It allows you to do short weekends or extended weekend trips. So that one will rev up very quickly again, quite frankly, even during the current periods of time where locked down, policies, allow for domestic travel and there are jurisdictions in Western Europe for example where that is the case. Even now we actually do have domestic tourism going on. It’s just a little bit more lonely than usual because you can’t interact with the people at less than two metres. But it will come back first, and it should certainly be a big first focus in planning because it needs to be activated to give us the cash that we need to get to the new normal full stop.
David Keen 22:36
Nic Mayer, managing partner of the PwC’s Global Centre of Excellence for Tourism from Dubai, we thank you so much for your candid views on The Future of Travel. Stay safe.
Nicolas Mayer 22:50
Thank you very much. Have a great day.