By: Associate Professor Dr Daniel Chong, Associate Dean of International, School of Hospitality and Service Management, Sunway University
Joy to The World of Travel
The tourism industry is expected to rebound in a V-shaped pattern in 2022 as countries gradually reopen their borders, with domestic travel accounting for a large portion of that growth.
A V-shaped tourism rebound is defined by a rapid and sustained recovery in economic performance measures following a sharp economic decline caused by pandemic-related travel restrictions.
According to the most recent World Travel and Tourism Council (WTTC) research, 2022 is poised to be the year for a strong recovery if governments continue to open up and remove travel restrictions.
The Council also predicted that during this period of recovery, the global tourism industry could generate more than 58 million jobs and $8.6 trillion.
In the United States alone, the latest WTTC economic modeling predicts that travel and tourism will rebound strongly in 2022, reaching $2 trillion in U.S.GDP contribution, exceeding pre-pandemic levels by 6.2 percent.
Supply Shock and Disruptions
However, an increase in tourism recovery does not always translate into an increase in profits and revenues for hospitality players.
Instead, some in the tourism industry are facing higher overhead costs as a result of labour shortages and raw ingredient price increases.
The 2020 downsizing of labour forces is now exacerbating the shortage. Airport operators, airline companies, hotels, and restaurants have all identified labour shortages as a major strategic threat. Some have had to raise pay, reduce operating hours, reduce offerings, and simplify services in order to remain profitable.
Hotels across the United States are utilising room-service robots to address staffing issues, while Hilton’s latest enhanced employee benefits mitigates the labour shortage crisis by retaining existing talents and attracting new talents.
According to Fáilte Ireland’s survey of 1,000 businesses and 3,500 workers, 30 percent of hospitality businesses are at risk of closing if recruitment and retention issues are not addressed.
Furthermore, general inflation is affecting all segments of retail, commodities, and day-to-day costs. This means that staying in operation will simply cost more, and travel and hospitality operators may choose to cut costs or adjust prices to offset rising costs.
In Malaysia, since the outbreak of the pandemic, border restrictions have exacerbated the country’s long-standing labour shortage in the hotel and restaurant industries.
Customers are experiencing a drop in service quality, even as they recognise and understand the challenges that businesses face. Some hotels and restaurants have attempted to mitigate the impact by speeding up digitalization and technology adoption, but there are limitations.
The hope now is for the easing of recruitment for foreign labour to alleviate the labour shortage, which will most likely be gradual and intermittent. From February 15 onwards, the Malaysian government has started accepting applications for the recruitment of foreign workers in permitted sectors.
Ways Forward
While the travel and hospitality industries are currently facing a joyful but challenging landscape, it is an opportunity to rethink their recovery plan.
I believe that more travel and hospitality operators can overcome challenges by pivoting to new ways of working in 2022. Here are five strategies that I would propose to the industry for dealing with operational deficiencies during supply shock and disruptions.
Invest in More Employee Benefits
The days of “McJob” is over. With travel and hospitality operators struggling to attract and retain qualified staff due to the pandemic, we anticipate that more companies will look for ways to create more conducive work environments for their employees, such as expanding benefits for further education, time off, competitive salaries and wages, and career development schemes.
Dine-ins To Take-Off
Restaurants should reconsider their revenue streams ratio this year (dine-in vs. delivery vs. takeaway). Though online delivery and takeaway are here to stay, restaurant owners should ration their distribution in accordance with labour shortages and customer expectations. The endemic phase will encourage in-person dining on a larger and more consistent scale. Though consumers may be understanding of service switching, uninformed or temporary switching can be agitating and negatively impact service experience. To avoid being caught off guard, many consumers conduct preliminary research before making a purchase. To avoid last-minute disappointments, restaurant operators should communicate any specific restrictions or routine closures of their online delivery and takeaway services to customers.
Robotic Investments
Airports, hotels, and restaurants are adapting to the realities of a shrinking workforce. Automation is no longer a nice-to-have in this new environment; it is a requirement. The goal is not to replace employees, but to use technology to automate basic tasks, making employees more efficient and allowing them to focus on what they do best: serving guests in greater detail to maximise experience. The hospitality robots’ market was valued at $290 million in 2020, and it is expected to grow at a CAGR of 25.2 percent between 2021 and 2027. Evidently, athletes staying in the Village at the recently opened Beijing Olympic Games are served by robots for breakfast, salads, and even cocktails.
Make Self-service a Pleasant Experience
Self-checkout, self-service, autonomous stores, and DIY are all examples of how the retail industry is preparing for a future with fewer human workers. While brick-and-mortar stores will continue to account for 72 percent of retail sales in 2024, hospitality-related retails such as convenience stores, hotel and theme park in-house merchandise stores, and airport lounges are expected to install interactive signages, smart price tags, and remote checkout systems to facilitate and enable a new level of self-service experience. Self-service systems should not be just focused on user-friendly customizations, but should also be aided by a hybrid chatbot.
A Greater Focus on Localising the Supply Chain
With the pandemic’s hardships wreaking havoc on hotels and restaurants, many are being forced to tighten their belts and address the significant cost of logistics and transportation. As a result, businesses could start looking at prioritising the use of more local ingredients and suppliers, reducing their reliance on global supply chains and transportation, which can be costly. Not only will this strengthen your business’s financial position, but you may also begin to establish a reputation in the community for supporting ‘green hospitality’ experiences as well as supporting the local economy.
Conclusion
According to UNWTO projections, international tourist arrivals could increase by 30 percent to 78 percent in 2022 compared to 2021. However, the surge in oil prices, increase in inflation, potential rise in interest rates, high debt volumes, and continued disruption in supply chains may put additional strain on the effective recovery of international tourism. It is time to fortify our foundations and structures before the floodgates open.
Dr Daniel Chong, is an Associate Professor cum Associate Dean for International at Sunway University with more than 16 years of experience in hospitality training and education. He has a French degree in tourism and hospitality; an Australian Master of Business Administration (MBA); and a Doctor of Business Administration (DBA) with major in sustainable branding under his belt.
