8 Jun 2023

Travel and Tourism – the trials, tribulations and trends

A global pandemic brought the tourism sector to its knees in 2020 and forced us to reimagine travel as we knew it. Far from jetting off on last minute European city breaks, topping up tans on far-flung shores, or immersing ourselves in foreign traditions and cultures, we had to embrace the ‘staycation’.

This enabled us to appreciate the beauty and majesty of our own ‘green and pleasant land’, with seemingly everybody descending on our holiday resorts. This presented significant challenges but also opportunities for our campsites, B&Bs, hotels, and a multitude of other tourism businesses up and down the country.

As the sector started its recovery, the sector was then hit again by global events. The war in Ukraine caused further supply chain issues and caused costs of pretty much everything – fuel, food, energy, etc – to soar. There was also little opportunity to shop around to manage these costs, as prices went up across the board.

Many tourism companies have therefore been forced to increase their prices to cover these costs – as have many businesses generally, but holidaying at home is still the cheaper option than international travel and it’s the businesses that have been able to adapt and remain agile that are thriving.

Not everyone enjoys camping, but, when scientists proved that we were less at risk of exposure to COVID in nature than in hotel rooms, we explored our options and found a happy halfway house in glamping. Sites that were able to make small investments and install camping pods, shepherd’s huts and even converted shipping containers, brought in a different section of the consumer market, who were keen to venture out into the ‘great outdoors’ whilst still getting a decent night’s sleep. A slight change to the business model was all that was needed to capitalise.

Hints of the pandemic also linger in some of trends that have emerged from its wake. For example, COVID has caused us to be more ‘germaphobic’, meaning that hotels – many of whom were already cash-strapped – are having to invest in additional protocols that ensure elevated levels of cleanliness.

The above concerns about germs have also facilitated – or forced, depending how you look at it – the growth of touchless technology, which is increasingly allowing people to access menus, activate lifts, gain entry to their rooms, etc, on their phones. According to a recent Deloitte study, 60% of travellers are more likely to stay in a hotel that allows contactless check in and the ability to use a smartphone as a room key, and 16% even say it’s a ‘must have.’

Of course, technology is here to stay and, from the very ‘simple’ end of being able to book online and self-service check-in, to room service through a mobile app, even voice-activated rooms, hotels have to be hot on these trends in the digital age.

For some of the bigger players in the market, the necessary investment is achievable, but it begs the question as to how the smaller businesses will remain ‘current’ when costs are such an issue?

Compounding this is the fact that interest rates have also risen, putting even more cost pressure on businesses that are borrowing. So, while investment may be a necessity, this may be a struggle for small businesses if financed by debt. A projected easing in the rate of inflation may help matters but there is still a long way to go to return to historic levels.

Organisations must therefore return to what they have sight of when making business decisions and this reinforces the power of information. For example, there is the hint of occupancy growth, and the International Monetary Fund’s upgraded outlook on the UK avoiding a recession sheds a hint of positive light on forecasting. Meanwhile, a PWC report forecasts growth in the hotel sector in London this year, with “Revenue per available room in real terms … forecast to reach between 101% and 105% of pre-pandemic levels by the end of 2023,” but businesses across UK regions must pay a little more heed.

We’ve said it before – and PWC’s report reiterates it – that ‘cash remains king’ in the current climate. Now more than ever, cash management of what’s coming into your business and qualifying it against outgoings is crucial for a steady balance sheet, especially as those wanting to invest may find that financing is more expensive.

Monahans works with a large number of SMEs in the travel and tourism sector. For advice on the latest in the market or to discuss your business’s next steps, get in touch today.

Simon Cooper