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
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