Rafat Ali, Founder and CEO of Skift, shares his candid opinions with David and Catherine on the failure of governments to form a coordinated response to the crisis. He also touches on the infrastructural and societal issues across the US and Europe that are likely to slow down the travel industry’s return to normal. Rafat anticipates a new trend towards what he calls ‘radical localism’ due to consumers becoming far more aware of the 5- to 10-block radius around where they live—taking greater notice of those nearby smaller businesses and how they’re hurting.
In contrast to other guests on the series, Rafat believes price (rather than brand) will drive demand in the short to medium terms, while travellers will also look for cleanliness, space and reputation. As a result, he argues, vacation rentals are likely to come back first because we can drive to them, avoid crowds and control the cleanliness of the space (even if that means bringing our own cleaning supplies).
David Keen 0:11
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 0:47
Good evening Rafat Ali, founder and Chief Executive Officer of Skift from New York. I’m in Bangkok with Catherine Montienvichienchai, Chief Branding Officer of QUO. Good morning, Rafat — or good evening. Good morning.
Rafat Ali 1:04
Thank you for having me. I don’t think we’ve met face-to-face, but I guess this is the new world, we’re meeting — this is the new face-to-face
David Keen 1:13
How’s New York, Rafat?
Rafat Ali 1:16
New York is — obviously you’ve seen the headlines. It’s definitely very badly hit. It’s a city obviously that that I dearly love, and it’s, you know, certainly you don’t feel anything since you’re sitting in your house, but you can hear the sirens 24/7– the ambulance sirens 24/7. And, you know, we think that, unfortunately, New York is probably among the last of the cities to get back up and running whenever that happens. Though it’s still been cold, we’re in mid-April. And in many ways is probably good, because people just don’t go out that much. You don’t want people going out. And so, in general, it’s not like there’s a curfew, but people are now putting on the mask because now the new advisory is definitely put on the masks.
David Keen 2:10
How do you compare New York today to the New York of 911, and how is that impacting the tourism industry?
Rafat Ali 2:19
Yeah, I mean I was I was here. And I was obviously a much younger me at that point. I was just starting out in my career. And, you know, New York, then you could at least come together. Like once it’s done, it was like a one-time thing. It happened. It was a huge shock. A lot of people gathered physically after because that was the need of the hour — for everybody to gather. I remember 911 happened and I was living alone in Uptown Manhattan. And I came down to Time Square, because that’s the only thing I knew what — because there’s just a lot of people gathering there. Obviously, none of that can happen now.
Rafat Ali 2:59
So, you know, I think it’s a much bigger shock to the system. Just. We haven’t even begin to mourn, much less understand the impact of what has happened. The amount of people that have died in New York City is a lot more than people that died after after 911. And I think the hurt, unfortunately, to the city economy will be massive for a while, and in many ways, hugely related to our sector, which is travel. Because I think the tourists will take a long time to come back. I think New York City, from a city perspective, is probably one of the last cities globally to come back — from a tourism perspective. Just because, you know, thepsychic toll that it has had on the world image of New York City, I think will take a while to come back.
Catherine Monthienvichienchai 3:55
Rafit, do you think there will be a similar — is there a similar situation across the US, or do you think other parts of the US will come back more quickly than New York?
Rafat Ali 4:04
Yeah, I mean we’re already seeing — like I was talking to a friend of mine in Portland, Oregon, an hour ago. And they have 20 kids.
Catherine Monthienvichienchai 4:13
Rafat Ali 4:15
The western states were a lot better. They did the stay at home and clamp down on on events, etc. very early. So they’re in a much better position. So certainly the western part of us will open much faster than the eastern part of the — up the corridor. And so, yeah, different cities I think will have will have a different sense of it. LA, because it’s more geographically spread, would definitely be a lot earlier than, let’s say, New York. So, yeah.
David Keen 4:46
Rafat, you’ve said on the script that there’ll be no international travel until the vaccine, or that’s your belief. We’re hearing talk in Asia of a rebound, particularly, obviously from the Chinese market. How are you hearing, and how are you imagining, that we’re going to be crossing borders in the near to the short to medium term?
Rafat Ali 5:10
Well, my general sense is, we won’t — outside of essential travel. I mean, right now, it’s the most essential travel that’s happening, like a very very minimal, but the very essential travel.
Rafat Ali 5:27
In the next phase, international travel for important business reasons — that is non-medical, non-essential, seems like it will happen. You’re seeing evidence from your part of the world, which is like for instance, taking out the middle middle seat from planes. More checks at airports in China. What’s happening, which is multiple stages of checks. But the challenge in the Western world is that, you know, our infrastructure in the US, particularly at airports, has been terrible for decades. And so suddenly this thing which requires a coordinated level of response from multiple different parties, which in the best of times was was bad. So that means that either the private sector really really steps up, meaning give the responsibility to for instance the airlines to make sure that they have the right types of checks. Or does the government steps up hundred times more than what it has, in the last three months and be able to institute the check.
Rafat Ali 6:34
So you know one of the things that I was listening to somebody else and they said in general for such a giant global pandemic — a G 20, a whole-world response would it be needed. If neither of G20 responses, neither G 7 responses – basically achieve zero response. Meaning no two countries are coordinating on anything, and international travel as you very well know, requires coordination across multiple jurisdictions, etc.
Rafat Ali 7:07
So for that to open some sort of a — you could imagine the US and UK having some sort of a pact. Just because the US and UK are close. So, I would imagine when you when the US to Europe flights reopen, it will be us to UK. So New York or some US cities — New York maybe later — some US cities to London would probably be a first step. In which social distancing — middle seats taken out, temperature checks along the way. There was news this morning — I don’t know if you saw, or was it last night? — that Emirates is going to give rapid tests to any passenger before boarding. So 10 minute test everybody’s going to be checked, which is incredible. If it happens on a mass scale.
Rafat Ali 7:58
And I think, you know, hopefully we are a few months away from those types of tests becoming really really common. And then I think you will have you’ll be in a much better position to be able to do that. There’s also talks of, you know, a digital passport of some sort. I think it was maybe one of your guests in the previous episodes talked about maybe on ability to issue digital passports to know who had it, who has antibodies and some sort of — but again, that’s assuming a big amount of coordination between a lot of agencies, which just doesn’t seem to be happening at this point.
David Keen 8:38
The integration of technology, I mean, the digital passport is obviously, I think, fundamental, and I don’t believe that they can open in any way, significant borders or significant cross-border travel until there’s tracking.
Rafat Ali 8:53
Right, and tracking is a thing that China was able to do and some of the other Asian economies were able to do. But in the US: one, technology may not exist; two, the political will may not exist. And then there’s just the society may not be open to it. That’s what seems to be the early evidence of it, and but —
David Keen 9:17
Democratically, the impact that will have on privacy is extraordinary.
Rafat Ali 9:26
It’s phenomenal. I think that will definitely, unfortunately, become the new normal for a while to come. And I just hope at some point when the vaccine comes and big issues subside, that we’ve sort of revert back to a better understanding of privacy and why it matters, etc. so that’s — I know it’s kind of a naive hope.
Catherine Monthienvichienchai 9:47
If you think about the accommodation sector — obviously about the big hotel giants, the independents alternatives and short-term accommodation options like Airbnb — who do you see as the winners and the losers out of this? Who will come out stronger? Who might survive, or fall by the wayside?
Rafat Ali 10:02
For the first time in a long time we are very aware of the 5- to 10-block radius around where we live. It’s this hyper awareness of local. In general, you would pass by this $1 coffee and bagel shop that usually you would not give a second glance to. But now you’re hyper-aware that they exist, and that they’re hurting. Which means that potentially there’s a renewed understanding of local businesses and the region around you. Which means that, potentially, local travel — ‘radical localism’ is a phrase that I’ve been using — potentially makes a comeback in travel.
Rafat Ali 10:45
That means that hotels that are an accommodation — that you can drive to, that give you a sense of personal space and control over your personal space — are the ones that stand to benefit. By that logic, you would imagine that that vacation rentals and professional Airbnbs should have a better chance of coming back first, because you can drive right up to this place. There’s not enough people around, potentially, you have the ability to clean your own space. We’re all going to be traveling. From now on, for the foreseeable future, with our own cleaning supplies. It’s just a fact of life right now.
Rafat Ali 11:32
And so, I think that vacation rentals, from a leisure perspective, will probably start seeing demand, first. If business travel doesn’t come back in any major fashion, some of the big channels that are hugely dependent on obviously group and business travel, obviously they will be hurting for a while. Potentially, the independents and the small boutiques that don’t have a lot of density, potentially could also ride this local wave, if that’s what’s happening.
Rafat Ali 12:05
We’re seeing early evidence, again, from your part of the world in China, of obviously domestic travel, having — it’s not recovering as fast as people thought it would. It still fits and starts. But at least there’s domestic travel — people going out to the local tourism sites, etc., etc.
Rafat Ali 12:25
So we did a story earlier today on some of the smaller chains like Wyndham, etc. — that are smaller compared to the giants — are potentially takeover targets. Wo we will — what happened after 911 with the US airlines, that the number of airlines shrunk obviously now down to like four majors, I think you will see that happen in the big-chain hospitality sector. And so, I think, three years from now, we’ll be sitting here and some of the corporate names that we’ve known may not exist. I think that’s probably what’s going to happen on the larger end of things is my sense.
David Keen 13:12
It’s a perfect segue into the bigger brands. Do you feel that there is enough — that through loyalty, or through history, or through familiarity — the bigger brands have enough empathy and purpose in order to retain the limited demand that’s coming, that’s going to be, certainly in the short to medium term?
Rafat Ali 13:43
I think from a leisure perspective, because most of it will be, you would imagine, would be leisure. There’s not going to be any group [travel] for a while.
Rafat Ali 13:54
I don’t know how much — this is a controversial statement — I don’t know how much brand matters in that perspective. I guess it matters to the extent that Marriott can say, “I have these standards on cleanliness that I can guarantee that we will have this level of cleanliness multiple times a day. We have the resources to do it.” People could potentially be reassured to go back, so I think the brands that have the muscle to potentially market and actually deliver on the safety parliament will be the ones that are best-positioned going ahead is my sense. I mean, I don’t know if that’s your sense.
David Keen 14:41
I think our and what we’re hearing and, if you listen to Michael Lavie in his in his interview a few days ago — and Puneet Chhatwal saying, very similar things — it’s the emotional connection that consumers have with the brand that is going to outlast or be the most persuasive element in those decisions. And that’s coupled with the generations Z, or the younger generations, we are becoming much, who — as we all know –are far more discerning, are far more conscious, and are far less brand-loyal and are more interested in choosing to stay, or to interact with a brand, which they feel has purpose.
Rafat Ali 15:38
Yeah, I mean, they have to say that, right? This is what — I just think that it’s going to be price first. Because price right now will be, you know, will be down for a long time to come. Then there are other intangible elements whether — well actually, tangible elements. Cleanliness; what is the reputation?; what is the sense of space in those hotels? And then I would say brand loyalty. SoI feel like, yes they’re overplaying it. Well, yes, they have to say that. But I just don’t — every recession after that has been the phase of OTAs, and it’s there for a reason. Because OTS can basically push a lot of inventory for the cheap. And we all extremely well now that that’s not about the hotel brand, that’s just about price and availability
Catherine Monthienvichienchai 16:38
Which is a good way into this conversation about otas. What role do you see OTAs having in the future? There have been some hoteliers saying, you know, “We want to break free of the OTA stranglehold, and go on our own, and drive more direct bookings. What what’s your take on that?
Rafat Ali 16:51
Yeah, I mean whatever fills the hotel rooms at this point I think is what’s going to happen. OTAs were losing a little bit of the mojo as you know, going — you know — leading up to it. At least the majors were. Booking[.com] has always been in a strong position — was in a strong position. Expedia and TripAdvisor were troubled going into it. So they will continue to have those troubles.
Rafat Ali 17:15
But, in many ways, again, not after 911 after the financial crisis, OTAS have certainly become a big channel for just filling inventory. I think that’s what is going to be. The one factor that could potentially be there for the hotels is just the customer service. Because the human element of customer service that was so needed during this phase, the whole crisis phase of over the last two or three months, OTAs have a terrible reputation on customer service. They really have zero reputation — maybe negative on that.
Rafat Ali 17:54
So I think hotels can potentially play up the human element part, which is cancellation policies obviously. They can play up, potentially, the fact that they are re actual people to pick up the phone all this other stuff so I think that will help hotels fight back against OTS. And then I’m sure Google is going to come in and continue to make its pitch that has always been making, which is, “Don’t use OTAs; come to us; we’re sort of a semi-direct channel for you. And I think that will continue to be the case even after this.
David Keen 18:32
We talked before we started recording about the analogue versus the digital age, and the virus being in the middle of it, and being the bridge between some academics are calling the analog versus — the analog in the digital age. Do you see 1) that being particularly relevant for the hospitality or for the travel industry. And 2) if you do, what methodologies of the traditional components will become an anachronism and will phase out into something more technologically efficient?
Rafat Ali 19:15
Yeah, again this is all hypothesis for now because we’re still too early in this, but I still think there’s enough disruption to be done in the check-in — the front of the house — check-in part of the world. And I think our generation and the generation below is completely primed for it. Whether we see enough movement from different hotel brands and sub-brands on trying to put more tech into the check-in part of the of the, the process. And I think that digital keys. etc., that have had the fits and starts through the years, for instance, potentially will definitely become a bigger part of it. So I think front-of-the-house, which is, I guess, arguably easier than back-of-the-house. But, you know, I’m not a hotel operator, but potentially front-of-the-house will see more tech being adopted than back-of-the-house in my sense.
David Keen 20:20
Actually my question probably wasn’t clear enough. My question was more about methodology in terms of the booking process. In terms of operators travel agents, the whole…
Rafat Ali 20:31
Yeah I think so. There’s still some economies — for instance, Germany that, has a weird hesitation of adopting online commerce. And so I think it will probably speed up the adoption of online booking, in general, in terms of trends. So certainly, it seems like that will happen.
Rafat Ali 20:54
I think, not that travel agents were making any money from selling airline tickets or hotel bookings in general. More obviously probably on the luxury side, but you know it’ll be interesting to see how travel agents respond. They’re hurting right now, because obviously travel agents are — a lot of them are independent businesses that are that are small. Whether the pitch that having humans as part of the process, that can help you deal with an unforeseen event like a pandemic, is a long-term pitch. And I think that it remains to be seen whether that uncertainty of booking or circumstances will help travel agents go through this process, versus people leaving being able to do this DIY on the web.
Rafat Ali 21:46
One thing that I do think will happen from a tech perspective is customer service and cancellations will become a lot more DIY. They will have to be for for hotels and airlines and tour operators, etc., to deal with this volume of change, etc., that was needed to happen. So I think that will be the case as well.
David Keen 22:16
And at Skift you’ve written a lot about tour operator or tour operator consolidation. There’s been huge investment into TUI, abviously the Thomas Cook downfall.
Rafat Ali 22:27
Yeah. I mean, it remains to be seen whether package travel package — which was going through a hiccup in Europe for all the financial reasons — will come out of this in a better shape or worse shape The better case is, people want self-contained holidays, which is potentially what package is. You go to a resort, stay there, sort of stay within the confines. It’s safe enough. So hence package travel, potentially, so that’s that’s the bull case for it. The bear case is, you just don’t want too many people around, so package travel, which is just, you know, a herd people — so that’s the bear case. So it could go either way. The one thing that’s in favour of package holidays — at least the mass package holidays is that it’s cheap. And, you know, cheap will potentially win the day for now.
David Keen 23:25
Yeah, I think you’re probably right but for some reason I’ve been having visions or images of Italian beaches in Rimini or the Adriatic coast in the middle of summer where people are like flies. And I wonder if we’ll ever see that again?
Rafat Ali 23:43
Yeah, you know, just as little as four months ago we were talking about over-tourism. And of course that completely went out the window, so you know at this point they’ll take any tourism. So it’ll be interesting to see — I mean the structural issues over tourism don’t go away. Which is climate change and excess of humans tramping through the world. And, you know, excess pollution, etc., etc. How will that change in the short term, obviously, that has changed but how does it change medium to long term? I think that’s the big question.
David Keen 24:26
Unfortunately I mean we could talk for much longer, but but we’re going to cut short in a few minutes — just a couple more questions. The first one, I think it would be remiss of me, and given the amazing work that you guys are doing at Skift across the industry, what do you feel is going to happen to cruising? Obviously it’s just one catastrophe after another.
Rafat Ali 24:50
Yeah. So here’s my personal opinion. If you look at, you know, you look at anything and you say, “What’s the net negativeeffect of any thing, and what’s the positive effect. And what’s the net-net that happens? As we sit here today, leisure cruising net-net has a negative effect on the world as we see it here today. And so, if there’s a case to be made for leisure cruising to be stopped for a while, not be rescued by the government, etc., etc. I think it’s a completely persuasive case.
Rafat Ali 25:30
And I just don’t — so cruising has always had trouble attracting new cruisers it’s a very loyal base that’s been their base forever. I think it will have an even worse time attracting new cruisers — ever, maybe. And so, I’m just — personally I’m not a fan of all the things the cruise industry, how they behaved historically and how they’re behaving now. And it hurts, not just the cruise industry, I think it hurts travel as a whole. The fact that the were saying they wanted to defy the CDC in the US — CDC’s instructions to not fail 400 days as late as yesterday. This was made April. Until today they had to come out and say “No, we’re actually, we’re going to follow the guidelines.” We did a story yesterday saying cruises are not going to adhere to the 100-day rule. Today they came up saying we’re going to move the sailings until June or July. CDC has said cruise industry has not done a good job. It is one of the reasons why the virus spread so badly around the world. Not the only reason but one of the reasons. And so, I just think they have a big problem on their hands.
David Keen 26:54
The responsibility, and then my last question, the responsibility, has fallen more significantly on either city marketing, destination marketing or country marketing. How much are — how well is infrastructure in both in states in the US and destinations around the world that you’re familiar with — how well are they able to come up to this?
Rafat Ali 27:21
I mean, again, I think in many ways the newer cities of the world seems to be better equipped for it. And that means, sort of Asia in that part of the world. US and Europe, and particularly US I would say, is less well-equipped. it’s not, I mean, we knew the infrastructure issues going in to this. And I think it’s one thing, unfortunately, this is proven the US infrastructure is crumbling in so many different ways. And I think so US — the one silver lining of US is that the governors and the mayors have stepped up in a big way. And so I think that is the one factor that gives me hope in terms of responses from cities, versus a national response. I think in Europe, obviously, different countries have done better jobs. And France has done a good job. Germany has done a good job. And obviously now Italy potentially has it under control. Pain is still early in that phase. UK is just starting out, well they’re just about, you know, shooting through the roof. So I would say different countries in Europe have a different sense of response. You know the countries that my family comes from, India, I worry a lot about India for the all the reasons you know well: giant country, did not have a great infrastructure to begin with; huge amount of medical issues, the health issues, etc already going into it. So I think we’re just seeing the beginning of what’s happening in a country like India which is 1.5 billion people.
David Keen 29:03
Rafat Ali, I just want to — on behalf of QUO — I’d like to thank you and all of your team at Skift for the incredible work that you’ve done. Not just now, but over the last few years, and the the the amazing analysis and candour that you’ve brought to the travel industry. And thank you Rafat for being our guest on our podcast — on The Future of Travel. And please, you and your family and all of your team, please stay safe.