COVID is not the first pandemic that the world has faced, and it will certainly not be the last.
We are pleased to share with you a note created by our CEO – Andrés Sucre, published by Business Venezuela Magazine, where he shares his optimistic perspective on the future of tourism.
It is not news that one of the most affected industries after the pandemic has been the tourism sector. But, despite that reality, I would like to outline five reasons why the tourism industry can offer greater long-term opportunities.
The tourism industry is huge.
In 2019, the annual spending in the tourism industry exceeded 1.4 trillion dollars and came with an average growth of during the last five years of 5% annualized, according to Phocuswright. The last quarantines have generated a pent-up demand waiting for the right moment to go out and travel when conditions allow it.
History shows that travel always returns.
COVID is not the first pandemic that the world has faced, and it will certainly not be the last. And what we have seen in the past is that the tourism industry always recovers after a crisis. Skift published a graph showing the tourism industry’s resilience after pandemics (SARS, MERS, etc.) or economic crises. If history is any indicator of the future, we will have more trips in the years to come!
Slow but certain recovery
Despite its size and growth “megatrend”, this crisis has been particularly severe for the sector. For this reason, we can estimate that the recovery will be slow. Bain & Co published a report in June 2020 where they estimated a return to pre-crisis travel levels by 2022 in an optimistic scenario and by 2023 in a moderate one. With the return of lockdowns and new strains in recent months, it is more likely that we are looking at a modest recovery scenario.
Source: Bain & Co.
Recovery trends by segment
We can see how the current context benefits certain segments during the demand rebound process:
- Domestic destinations will be the first to resume their growth vs. international ones. Travelers have a preference for short distances and road access.
- The economic impact is beginning to be felt. So we see that cheap trips will have greater demand than those in the luxury segment.
- Due to the characteristics of COVID, young travelers are going to be the first to venture compared to the senior market.
- Flexibility in remote work and video conferences reduced the volume of business travel. While vacation trips or visits to the family will continue to see accelerated demand as the pandemic is controlled.
Companies that can invest will benefit.
“Every crisis brings great opportunities.” – According to Einstein. In this case, the pandemic has left a severely weakened tourism industry. The drop in passenger demand, combined with a forced closure of its operations, has reduced sales and therefore, cash flows of all companies in the sector.
The companies that will emerge stronger in the long term will be those that can access capital to invest in their technological structure and health protection processes and gain market share.
If these last years have taught us anything, it is that anything can happen in the short term. Despite this uncertainty for the tourism industry, we have every reason to be optimistic in the sector if we look at the long-term opportunities.
Written by: Andres Sucre
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