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The Big Dip in Tourism and the Recovery – Interview with an Associate Professor of Corvinus

An original KÖZGAZDÁSZ ONLINE post.

The Hungarian and global tourism is going through an unprecedented dip, but just how hopeless is the situation? How will this affect student trainees? Dr. Ivett Pinke-Sziva, associate professor of CUB, DOS for BA in Tourism and Catering gives us a special glimpse at the present and potential future situation of the industry.

How is Hungarian tourism doing at the moment?

The best phrase to describe the current situation and the past weeks is “big dip”, and it refers not only to Hungarian but also global tourism. I think actors of the industry have got into a situation that could not be foreseen or predicted, and their situation is similar to a disaster movie. Just think about it: in the middle of March the ski resorts get deserted, and borders close from one day to the other. We have no official statistics from last month yet, but clearly, one of the most often used phrases in the sector are “zero” and “we could not possibly prepare for zero”.

From informal discussions with fellow professionals we can conclude that the hotel industry has come to an almost complete halt or a limited range of services, both in Budapest and in the whole country, and the often uttered “don’t cancel, just re-book” request did not receive a good response: 80-90% of bookings got cancelled, refunds requested and there were hardly any re-bookings or new bookings. This, by the way, meets a general understanding from the service providers, as in an emergency situation endangering people’s health a refund is justifiable. The fact that events and festivals, often until August 31st , also got cancelled aggravates the situation.

The crisis especially affects small and medium sized enterprises as with adequate set aside funds only for a couple of months it is extremely difficult to make plans in an unpredictable situation, when not even the international organizations trying to tackle the crisis can foretell the ending point, and which might shatter the whole global economy. This uncertainty harms the bigger enterprises too, as after every announcement concerning the crisis occurs a wave of cancellations for the autumn or winter season, with early summer “gone”, and almost no bookings until August.

The most burning issue is job retention (we are talking about approximately 400 000 jobs): hardly had the news headlines about labour shortage disappeared could you hear about downsizing in tourism, which comes from the uncertainty described above. Nonetheless, there definitely are service providers with good planning that have strategic funds, which are trying to transition into home office operation or provide paid leave, or even have maintenance work done under strict safety rules. Yesterday the second government package partly aiming at job retention was announced, so there is hope to act effectively.

At the same time, there are small but, in this crisis, hopeful initiatives, also written about in The New York Times, and the ones aiming to help medical workers by the industry (e.g. #feedthedoc, or giving up Airbnb apartments for them to use free of charge), or the closed Budapest hotels flashing 4U signs every night, signalling solidarity with other cities also experiencing maybe even bigger troubles, and emphasizing mutual responsibility.

How does the situation affect the student trainees who work in this industry?

The first victims of mass layoffs were trainees and fresh graduates, and the responsibility of the industry is unfortunately obvious here. At the same time let me state again that the corporate decisions had to be made in a situation when planning was not for a shorter recession, but a dragging zero.

Our university responded quickly to the situation of these trainees, and the management immediately started to work out solutions within the given legal framework.

Please note that the conditions for trainee-ship are secured in government decrees, and any change in these are subject to governmental decisions. I wish I could say something positive, that everything will be fine in a couple of weeks, but the situation is very dubious. All I can say is that we keep watching the trends and are keen to come up with a good solution together with both the unions and the policy making bodies, concerning the summer and autumn trainings, and not only in tourism but other industries, as the crisis may involve them too.

Was there any similar halt in the industry in the past? How did it manage to start again?

Quite frankly, such a global dip in tourism, especially as a result of a worsening economic crisis is without precedent. In mid-March the international organizations modeled the effects of the 2003-2004 SARS epidemic after which tourism recovered very quickly. At that time we witnessed a really dynamic rise as the funds allocated for travel was at the disposal of the customers.

But this case is different, the crisis may have starker consequences because other industries are affected too. The amount people can spend on traveling and free time is expected to be scarcer partly because of the job losses and partly because of the rescheduling of leaves. So, the international organizations have reviewed their estimates and predict a scarier but unfortunately realistic plunge: we can expect a 20-30% decline in tourist arrivals (in comparison with the year before) in 2020, according to UNWTO, the international tourism organisation. This is appalling if we consider the dynamic growth of last year and the great turnover of January-February this year, or even the annual 0,4% loss after the SARS virus or the 4% decrease after the 2009 crunch.

The pessimistic scenarios also talk about loss of trust and sense of safety. This is certainly reasonable to say, but I also think that the experienced travelers of today will quickly overcome these anxieties as a result of the urge to travel and experience after the lockdown.

Do you think environmentally conscious traveling will become more popular after the pandemic?

It is often said that after the Corona virus a completely new world will come, and that we do not know what will happen to the stress and frustration caused by the pandemic, will they be gone at all, and how will the consumers of the new world behave. This is all true to a certain extent, but the supply side also has a role in determining its response to all these.

I am personally happy to see that more and more destinations publish a new code of conduct relating to the epidemic which serves the interests of the community and the environment. I am happy that, in the name of global solidarity, the rate of charitable initiatives, as well as voluntary work is rising and gaining popularity among the service providers.

I hope that the necessity to handle the epidemic and obey the strict rules will teach people to behave more responsibly, which, I believe, will not be forgotten soon. All of this may help us to become more conscious of the effects we cause and to accept and obey the recommendations of the destinations and service providers with a new level of environmental and social consciousness.

How do you think Hungarian tourism will be able to recover after the virus-related crisis?

Again, we can only talk about scenarios: in case the epidemic threat recedes by early summer, the industry may restart in August or September. However, pessimistic predictions mention March 2021. A lot depends on the epidemiological measures and their effects on the local and global economy, whether the “bounceback” will happen. Basically, I think that being forced inside the home intensifies people’s motivation to travel, the only question is how much money they will have for that.

According to predictions, caution and diminished income levels will lead to shorter travel, mainly aiming at activity-focused and health tourism. On the whole, we expect the rejuvenation of domestic tourism, which is good news to service providers and destinations in the countryside. As Budapest is an attractive destination mainly for foreigners, according to this scenario, hardships may intensify, although this is not at all carved in stone, considering the travel and experience seeking attitude of experienced and younger travellers, who will probably want budget trips, and the changes in the HUF-EUR exchange rate may accommodate the service providers in Budapest.

I agree with the experts who maintain the necessity of preparing for a competition in prices, in other words, we can certainly expect a fall in rates even if we are not happy with such tactics. We need to create the framework that facilitates this to avoid a downward spiral of the prices, and to work on communication and creating more rigorous cancellation policies to offset the lower prices.

Unfortunately, the actors of the industry now have a lot of time at their hands to create and reconsider their strategies. These may be labour retention and replacement, online and mobile communication, strengthening sustainable tourism, resolving tourism-related local conflicts, or creating frequenter programs. This would help a lot in making the supposedly difficult and costly restart head into new, conscious directions.

By: Tünde Taxner

Images: Pexels, Corvinus University of Budapest

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