Box 3: Seven Transformations that May Change the Travel and Tourism Sector—A Business Perspective
Although the T&T sector globally is growing more quickly than many other sectors, seven transformations currently taking place could have significant implications if not addressed in an appropriate and timely manner:
Administrative barriers are hindering the movement
of people. The huge growth potential of travel and tourism is being held back by the outdated practices of visas and border controls. While in other areas great emphasis is placed on the benefits of globalization and free trade, often we forget to think of tourism as an export, and overlook restrictions on the movement of travellers.
Progress is being made—according to a UNWTO study, the proportion of global travellers having to apply for a visa declined from 77% in 2008 to 62% in 2014 (UNWTO, 2014). However, much more could be done. Research estimates that removing travel visas at the bilateral level would more than triple travel flows between countries. Indeed, improving visa processes alone could generate an estimated $89 billion in additional international tourism receipts and 2.6 million extra jobs in APEC countries by 2016 (UNWTO, 2013).
The private sector is proactively engaging with national governments to highlight the economic case for travel facilitation, urging collaborative efforts among all relevant public and private stakeholders and proposing a fully integrated model to facilitate Smart Travel.1
Perceptions of instability are increasingly influencing tourist flows. Despite its resilience to shocks, ultimately the travel and tourism industry’s growth and survival is entirely dependent on people’s ability to have a safe travel experience. Advances made in the last decade could be undone by factors including current geopolitical tensions, from the Middle East to Ukraine; the growing terrorism threat from ISIS; and the risk of pandemics, as exemplified by the Ebola outbreak.
Whatever the root causes, the impact for the affected destination is the same: a decrease in the number of tourists and amount in revenues, which may be temporary but are nonetheless significant. In high-risk times, the natural instinct of nation states is to re-evaluate their borders and immigration policies. But closing down borders is not a viable solution—it will not resolve security challenges, and will lead to further significant economic losses.
To mitigate these risks, it is critical to implement technological advances and innovative processes that can increase both the efficiency and security of travel. There is a need to consider how to implement improvements in early warning systems, risk profiling and scenario planning, visa systems, data sharing and passenger profiling at airports. The key challenge is to generate the necessary levels of collaboration among international institutions, governments and the private sector.
Increasing difficulties in attracting top talent. Research shows that for every 30 new tourists to a destination, one new job is created. The aviation and travel sector is already the second-largest employer in the world, with huge potential for further job creation—travel and tourism is forecast to employ 338 million people by 2023, and aviation and aerospace an additional 58 million people.
Yet the industry has difficulties in attracting top talent, both for technical and managerial positions. According to the WTTC, the total global impact of talent gaps could cost the global economy nearly 14 million jobs and $630 billion GDP loss, with China, Italy, Japan, Russia and the United States suffering most. The public and private sector need to collaborate closely to update university and training programmes to ensure they keep up with market needs and technological advancements.
- Changes in the composition of tourist demand will define business strategies. As described above, the industry will need to deeply understand and cater their product offerings to the needs of new travellers (such as millennials and the new middle classes coming from emerging countries) and segments where demand is growing (such as senior travellers) to capitalize on shifting demographics.
Increasing attention to reduce carbon footprint. Passenger air traffic is forecast to increase by 31% by 2017, with environmental implications including a projected 20% increase in energy demand. Given targets to decrease carbon emissions, the industry is working to reduce oil dependency by improving aircraft and airport operations, aircraft design and material use and considering alternative sources of energy. The increase in tourism may also impact local destinations through an increase in waste, water usage and the possible deterioration of cultural and world heritage sites.
While global climate agreements are still a work in progress, the travel and tourism industry has taken active steps to reduce its environmental footprint and plans to continue to do so, including by implementing better measurement tools. International organizations and institutions—including ICAO, IATA, UNWTO, WTTC, ITP and the Forum—have brought leaders from the sector together to advance the dialogue on these issues and help set standards and targets for the industry.
Investments in infrastructure increasingly lag behind industry growth. While the tourism industry is growing strongly, infrastructure investments—airport development, road and rail, and communication technologies—are lagging behind, leading to significant bottlenecks. These will worsen if not addressed, given that cities are likely to triple in size in the next 20 years.
There is a need for dialogue between the public and private sectors, including airlines and airports, to ensure an integrated infrastructure strategy and alignment on issues such as investment, regulation, sustainability, security, safety and corruption. Airports are not destinations in themselves—people do not go to airports to shop or dine, but to move quickly and seamlessly on to their destinations. They will choose alternative destinations when access is difficult.
New technologies and innovations are revolutionizing the industry. As described above, new technologies and innovations, such as GPS-enabled smartphones and growing trust in online transactions, are reshaping parts of the travel industry and requiring businesses to rethink how to deliver services.
There is also a growing need for the public sector to redefine regulatory frameworks in response to the rise of the sharing economy—people are letting out their property as and when it suits them, acting as an ad hoc taxi service and even starting to crowd-source charter flights. The consumer peer-to-peer rental market is worth an estimated $26 billion, with Airbnb alone having more than 600,000 listings across 160 countries.
1. World Economic Forum, 2014