What does the recession mean for developing a competitive and sustainable future for tourism?Stephanie Draper, Forum for the Future

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JT Group

JT Group

Overview

• Sustainability will define the future business context

• Sustainability during a recession presents more opportunities than risks

• There are short and long term strategies that you can employ to survive and thrive

Where do you think we are?

WV LU

Sustainability will define the future business context

There are a number of sustainability pressures that will shape the future of the tourism industry

Tourism in 2023?

We can expect…

Impacts of climate change

Drought and water scarcity

Growth in visitor numbers

Rising costs

Demographic change

Severe and unpredictable weather

Shifting rainfall patterns

Global target: cut CO2 80% by 2050

2025: 1.8 billion people living with water scarcity

China GDP growth in global recession: 7.9%

1.3 billion more people by mid-2020s

UK: 3.6 million more 65+ than today

Food, building materials, energy…

IEO2009: oil @ $130 in 2030

Eco crunch

Tourism 2023: we can also be pretty sure that…

• food and land use will be a key issue

• the natural resources will be under increased pressure. Many beautiful places that are often central to the tourism proposition will be under threat. Oil will be more expensive again following the recesssion

• consumption levels will increase – due to growing population and enhanced lifestyles

• low carbon technologies will have delivered some gains. A lot of the technology already exists – we just need to find ways to take it to scale

• aviation and shipping will be included in emissions trading and there will be some sort of global agreement on climate change

EU: 20% reduction in

carbon dioxide by

2020, 30% if there’s

global agreement

EU: 20%

renewables by

2020

EU targets 2008 and UK Climate Act 09

UK: 80% reductions on

1990 levels by 2050

including shipping, aviation

and all GHGs

UK: 34% by 2020(42% if there’s a

global deal)

Tourism 2023: …but there are clearly still lots of questions

•How much decarbonisation will technology deliver?

•How strong and sustained will the political response be to things like climate change?

•How long will the recession last and what will that mean?

•What lasting changes will the recession leave on the tourism industry?

•Will the promised growth in tourist numbers happen?

•What sort of experiences will people want?

•Will people’s consumption habits change?

• Quick recovery from recession, booming UK economy,high disposable incomes

• Globalised world with more visitors and moredestinations

• Travel fast, fashionable, regular, accessible, affordableand desirable for almost everyone in UK

• Rapid advances in technology e.g. breakthrough in algae-based fuels.

• Difficult trade-offs to meet the carbon targets.

• Over-crowding a serious problem – infrastructure startedto cripple and the natural environment damaged.Wilderness scarce.

Credit: Flickr/ NguyenDai; Virgin Galactic; Brandt; Lonely Planet

Signals today?

• Destinations less and less attractive: severe climate changeimpacts; violence disrupts key supplies (water, energy,food); huge volumes of new tourists “trash” remainingresorts.

• Unstable and fearful world. Protectionism. Closed borders.Accidents. Pandemics. Warfare

• Travel cumbersome, time-consuming, inefficient andunattractive. Advanced video conferencing replacing somebusiness travel.

• Visitors think they “make problems worse” - saturatingdestinations; destroying environments; appalling workingconditions; eroding cultures; climate change; and few realbenefits to communities.

• Attractive destinations rationed

Signals today?

Credits: Flickr/ JerryD (South Korea); Barney the Great (Venice)

• Dramatically high oil price, spiked towards 2023 erratically.

• Travel unaffordable for many; cheap, mass air travel a thing ofthe past.

• People try to get as far as they can for their cash. Overlandgrowing; or save up for years for “one in a lifetime” holiday

• Mass redundancies for industry worldwide; lots ofconsolidation

• Wealthy minority fly regularly; highly competitive “superexclusive” market

• “Low carbon” often the cheapest option – an economic, notenvironmental issue

• Massive pressure to offer cost savings; low margins indestinations; low wages

Signals today?

Credits: Flickr/Todayisagoodday; Financial Times; BBC

• Tight carbon regime; tradeable carbon quotas.

• Public support high - willing to make sacrifices to protectthe environment; awareness high, global connectivityonline

• Technology flopped, failed to deliver low carbontechnology - ticket prices expensive.

• UK economy struggling. Disposable incomes down, costsof food and energy have risen. Debt is more expensive.

• Less travel abroad; over-capacity in outbound sector.

• British operators focus on domestic tourism or globalbusiness

• Holidays longer; many looking for experiences and ethicalcomponents.

Credits: Flickr/ Andrew*/

Havenholidays; AP

The double crunch – the

combined credit and resource

crunch are the causes of the

recession.

Sustainability therefore has to be

critical to getting through, and

beyond the downturn

like the tour de france…

it’s how you deal with the difficult (mountainous) bits that really defines who wins when the going is smooth

Sustainability during a recession presents more opportunities than

risks

Recession – good or bad for sustainability?

• What opportunities can the recession present for

sustainability? (positives)

• What are the limitations (negatives) of a recession

for sustainability

Opportunities• Efficiencies – save money, save the planet

• Value with values – shifting down, but not out of their ethics (UK supermarket Sainsbury’s states this is the case)

• Low cost, low consumption opportunities – local tourism, more focus on leisure as a whole

• Necessity is the mother of invention – an opportunity to rethink and recreate

• Time - an opportunity to properly consider the social and environmental implications

Risks• No investment available - deferrals are a risk

that we loose out on efficiency gains (sometimes need short term investment for long term gain)

• Short term thinking, misses long term opportunities

• Other priorities more pressing, especially for consumers

• Seen as a luxury or an add on

Business context after the recession

will be driven by the challenges of

sustainable development:

‘living within our means’

– financially, environmentally, socially

Credits: Financial Times; BBC

oil price will go back up

Sir Nicholas Stern,

Stern Review | April

2008

“The world does not need to

choose between averting

climate change and promoting

growth and development.”

There are short and long term strategies that you can employ to

survive and thrive

ways sustainability can help your company in the recession

1. Identify direct cost savings

2. Focus on the really crunch issues for your region or business – value at stake

3. Radically decarbonise – for efficiencies now and in

future

4. Innovation which defends your revenue and promote loyalty – longer stays, local, price

incentives and rewards for SD

5. Think beyond the recession and plan for a

sustainable and competitive future.

Andrew Winston’s Green Recovery…

• Get lean – by revving up your energy and resource efficiency to survive the downturn

• Get smart – use environmental data about products and value chains to save money, innovate and generate competitive advantage

• Get creative – rejuvenate your innovation efforts by asking heretical questions like ‘can we run our business with no fossil fuels’

• Get (your people) engaged – ask employees to solve the company’s environmental challenges

Green Recovery, Andrew S. Winston

WTM Euromonitor recommends…HOTELS: STRATEGIES FOR SUCCESS IN A RECESSION

Launch promotionsHotels and resorts worldwide have developed aggressive promotions that allow children to stay free, offer free nights and give credits to spas and/or golfing to boost demand and avoid losing sales to less expensive options

Offer discountsAlthough not preferred by most hotels, discounts started to be offered by leading hotel chains in Europe and around the world to further stimulate global demand

Enhance loyalty programmes

The continued expansion of loyalty programme benefits worked well in enhancing overall brand loyalty and keeping customers from moving to less expensive alternative travel accommodation in the second half of 2008 and helped protect business travel

Introduce exclusive services

The introduction of exclusive services such as luggage pick-up and delivery have helped raise margins and capitalise on guests searching for unique experiences at a justifiable cost

Focus on international expansion

Strong pipeline development in international markets has proved successful in combating the downturn in travel in markets such as the US, which have been hard-hit. Key regions of focus include Asia, Middle East and Latin America

Undertake hotel management restructuring

Divestment /restructuring of property portfolios by hotel groups has proved successful during periods of limited credit

Offer early booking discounts

As consumers feel financially strapped and less willing to make future travel plans, leading hotel chains such as Hilton started offering early booking discounts to stimulate sales and continue attracting new guests

Offer free perks Free golf equipment and complimentary massages have been offered by 5-star hotels and resorts to bring high-income consumers back to their outlets

PeopleHelping staff and

guests to fulfil

their potential

InfrastructureCreating a built

environment that

supports

sustainable living

EconomicCreating long

term value

CommunityBuilding strength,

cohesion and pride

with the local

community

Sustainable

tourism

developments

EnvironmentDeveloping and

operating within

environmental

limits

a time for long term vision…

a time to innovate…

and a time to get serious about savings…

Conclusion

• Sustainability will define the future business context

• Sustainability during a recession presents more opportunities than risks

• There are short and long term strategies that you can employ to survive and thrive

1. Understand your exposurea. Consider different scenarios.

b. Quantify the impact on your business - "Be sure to confront head on what you see as the worst case“

c. Assess rivals vulnerabilities

2. Reduce your exposurea. Protect financial fundamentals

b. Protect the existing business

c. Maximise value compared to rivals

3. Gain long-term advantagea. Invest for the future

b. Pursue opportunistic and transformative M&A - not relevant

c. Rethink your business models