Report Interpretation (III): Divergent Trends for Subdivided Sectors of Tourism, Diverse Self-Help Measures of Tourism Enterprises

On March 1st, 2021, the World Tourism Cities Federation (WTCF) released the Report on World Tourism Economy Trends (2021) in Beijing (hereinafter referred to as the Report). According to the Report, subdivided sectors of tourism have shown divergent trends and tourism enterprises have adopted diverse strategies to improve their varying operational performance.

OTA: The shock is followed by a gradual recovery while transformation becomes more salient. As the pandemic is slowly brought under control, OTA enterprises focusing on light-asset operation and domestic markets are the first to recover. Amidst the pandemic, demands have shifted from outbound to domestic tourism, from domestic long-distance to local and peripheral tourism, and from group to individual tourism. OTA players tend to follow the salient trend of proactive transformation to intelligence.

Hotels: Rise in debt ratio continues and the sector is likely to concentrate further. According to STR and Tourism Economics, the average occupancy rate for American hotels throughout the year of 2020 stood at around 40% and the figure will slowly rebound to 52% in 2021. Moreover, it will not recover to more than 60% of the pre-pandemic level until the year of 2023. Most hotels are debt-ridden at present. The American Hotel and Lodging Association (AHLA) published a report and showed that the debt value of hotels now is even higher than that during the financial crisis. Worse still, some small and medium-sized hotels might have to close down. Notably, the strike of the pandemic has accelerated market clearance which might further enhance the industrial concentration.

Cruises: Unprecedented impact results in depressing performance of the capital market. The epidemic forced the cruises to suspend their businesses and the industry has lost favor with the consumers.

Theme Parks: Light-asset operation potentially serves as a new way out due to tension in capital chain. Global competition in the theme park industry has become fiercer, and in its landscape, 70% of the players suffer from losses, 20% strike a balance and only 10% make profits. Amidst the pandemic, some players have taken a different approach, transforming from heavy-asset to light-asset-based expansion, and seeking external cooperation. They have upgraded the conventional heavy-asset model of investment, construction and operation, to a light-asset model which combines multiple aspects such as sole proprietorship, joint venture and authorization.

Aviation: Recovery in various regions is differentiated and unemployment is prominent. In 2020, the global aviation industry ran into a slump followed by differentiated recovery trends. According to the report published by the Air Transport Action Group (ATAG), as of the beginning of 2021, nearly 46 million of 88 million aviation-related jobs in the world might have been removed due to the pandemic, as layoff, compensation reduction and government bailout have become common approaches to help airlines get out of the plight.

The report also provided insight into the development trends for the tourism industry after the epidemic. Confronting the impact of the pandemic, tourism companies in different sub-sectors have adopted various strategies and posted varying operational performances. These strategies could be generally categorized into 4 types: strategy of reverse, strategy of contraction, strategy of maintenance and strategy of expansion. Specific measures taken include formulating a business recovery plan, making the business model more agile, adopting multiple measures to raise funds, conducting asset M&A to prepare for the future, and resorting to technologies to empower the industrial supply.