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How Can You Protect Value in Travel & Tourism?

in Travel
How can you protect value in travel & tourism?
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Pent-up demand for global travel

Travel operators are preparing for a busy summer, fuelled by an accumulation of demand from leisure customers and business travellers. Though global tourism is still a far cry from pre-pandemic levels, it rose by 4% in 2021, according to the United Nations’ World Tourism Barometer. Moreover, almost two-thirds of tourism professionals predict greater gains in 2022, despite concerns over new COVID-19 variants and inflationary pressure on disposable income.

The recovery timeline

Given that travel and tourism likely won’t return to pre-pandemic levels until 2023 at the earliest, it is important for carriers and operators to understand the staggered nature of the recovery and adapt to it. Matching supply and demand is a balancing act, which must be underpinned by smart analytics to manage cash flow and scale workforce and service capacity.

Immediate The pandemic itself created opportunity or increased businessShort term Business is already beginning to bounce-backMedium term Recovery will happen but more slowlyLong term Industry needs to be restructured to generate effective recovery
Customer attributes(age, affluence, reason to travel)iYounger More affluentOlder Less affluentCorporate
Travel type(domestic or international)iDomesticShort haulLong haul
Destination type(remote/rural vs tourist hot spot or city)iRemoteBeach City
Group size(people travelling alone or as a group)iIndependentGroupConferences and events
Mode of travel(land, sea or air)iRoadRailAir Cruise
Accommodation type(size and format of accommodation)iSelf-catering Small formatHotels Large format

The ripple effect

It is not just the airlines, hotels and car-hire companies that are affected by border closures and unfavourable market conditions. There are a lot of businesses relying on the same consumers, and their need for investment support is often overlooked. If you have a stake in this interconnected industry, consider the value-preservation levers shown below, which could help your company survive and recover.

How can you create value amid disruption? Use a value bridge.

For companies surrounded by economic uncertainty mixed with a competitive surge of deals worldwide, creating value is a real challenge. A value bridge can be used to identify actions that can prevent value loss and preserve value in times of disruption, while also strengthening your company’s competitive positioning to help it come out ahead.

What levers can you pull to preserve value?

Matching portfolio to demand

As travel markets adapt to a ‘new normal,’ a robust portfolio review is necessary in order to optimise operations, sharpen focus on core activities, and consider divestment or retrenchment in others. For those companies with funding, it may be the right time to pick up distressed assets.

Greener growth

Ensuring that Travel & Tourism has a positive impact on the natural environment is a complex and growing priority in the industry. Amid developing regulatory requirements and an increasing focus on sustainability by consumers, setting ESG (environmental, social and governance) targets and building the capabilities to track and report performance are important—and often overlooked—value levers.

Managing cash flow

A laser-like focus on liquidity must continue, and that includes making the most of your working capital. As travel bookings return, securing financing to fund growth should also be a priority. In current market conditions, this may call for additional debt, equity investments or strategic disposals.

Being agile in turbulent times

In travel markets that are increasingly defined by new rules and disruption, it is imperative to understand where customers are migrating and build your organisation’s reactivity to short shifts in demand. Robust data-driven reporting will enable a fast response to changes and prevent profit leakage.

(Courtesy PWC. By David Trunkfield, Partner, PwC United Kingdom. Eleanor Scott, Director, Strategy& Travel & Leisure, PwC United Kingdom.  Heather Swanston, Global Business Restructuring Services Leader, Partner, PwC Japan)

Tags: PwCTourismTravel

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