How is normality an illusion?

Christian Laesser: "Normality until 2022 is an illusion"

What does the 2020 corona year mean for travel agencies or the airline industry and how can the travel industry get in shape for the future? What role does climate change continue to play, what developments are possible with the new vaccines and how do we deal with the possible return of overtourism? The travel journalist Kurt Schaad and Prof. Dr. Christian Laesser, adjunct professor at the University of St. Gallen, held a kind of year-end interview.

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Christian Laesser, people like to take stock at the end of the year. How does it work for you?

It was an extremely extraordinary year. The travel industry was one of the most affected industries. For one thing, the business collapsed completely. On the other hand, there is a lot of personal suffering due to their small structure, because many of the measures taken, which are effective for larger companies, did not work for them. A small business with stationary business in locations where you pay high rents continues to have running costs, plus there are deficiencies in social security - you are affected twice or three times. So an exceptionally bad year.

And for you personally, what are the effects on your scientific work?

I am in a privileged position where you can function well online even temporarily, be it in teaching, in research projects or in collaboration with practice. In relation to practice, we are currently trying to provide classification aids with our knowledge, for example by means of various short reports or in various workshops.

The SRV has announced that the travel industry was healthy before the pandemic. Do you share this opinion?

I don't see any signs of illness. The travel industry is clear, and retailers in particular tend to have low margins. Therefore, lost sales have a devastating effect. It is also an extremely small-scale industry and a very personal business, especially in the leisure sector. The consulting area was therefore strengthened in the past and thus a new value was established. But weak margins and earnings are always a latent danger, especially in industries with low market entry barriers. As with the hairdresser or the restaurant.

Wherever someone can easily get into the market, there is also rapid flow. Then you’re quickly outside again, depending on the situation. High margins, on the other hand, indicate an extraordinary product or, however, a protectable business model. High investments also create a barrier. In shops and retailers, where you can ultimately only enter a market with a computer, the barriers are naturally deep.

To infer from this that the industry is unhealthy, I would definitely not say. With the crisis, and we really have to be careful, it is always euphemistic that it should have accelerated structural change. The fact is that it is primarily the structural breakdown that is accelerating. I would at least like to question whether that's a good thing.

What exactly do I have to imagine under structural dismantling?

That there are significantly fewer providers in the market when the crisis is over. Do we want that or don't we? Structural change is good when I'm in a growth phase of a cycle. Those who get knocked out can stay elsewhere. Those who are now being knocked out are out for the time being. Human suffering is also connected with this. It is almost cynical to say now that the crisis has accelerated structural change. The fact is that there is currently no change at all. The change is just dismantling and that cannot be the goal.

So I take my computer and from tomorrow I will have a travel agency. But I have to admit to myself that it is a relatively volatile industry per se with a general risk of falling.

What is the scarce resource in this business that allows me to differentiate myself from other competitors? It is the know-how about certain types of vacation and destinations or the knowledge of the customer and his needs. A travel agent owner is something of a doctor. He knows his customer, that is the patient. And he knows the therapies very well, i.e. what the customer could do. There's a reason around 2,000 travel agents survived the internet shake-out. Obviously they could hold their own.

But now the pandemic is rampant.

Yes, and now you have to ask yourself: what about after the pandemic? How much of this business will be done stationary in the future? And how much can I do digitally? I can also talk to my customers online, just like the two of us are doing now. So I don't even need a travel agency as physical equipment. In this context, the exciting time will only come after the pandemic, when it should become apparent that the customer's behavior has changed. And then how to properly adjust to the changed customer behavior.

Then, above all, entrepreneurial minds have a good chance of functioning in the market after the pandemic?

Absolutely. One must be clearly aware of the value of advice from the travel agent. Why should a customer use the support of a travel agency when he can organize everything himself? With a travel agency there is the time advantage, the search advantage and I have someone to whom I can delegate responsibility. If a consultant sells something to me, then I can hold him responsible if something does not suit me. It relieves me as a person.

One bad feeling a person can have is that they have made a wrong decision. When I have made a decision myself, it falls back on me completely. Otherwise, I can pass it on to the travel agent. Also when troubleshooting if something goes wrong. This leads to the question: what is the core of the value proposition of a travel agency?

If you imagine the travel agency of the future in your mind, then you first need some marketing money to be able to function in this direction. Money that you don't necessarily have.

No. You just have to mention countless horror stories that happen when you don't book through a travel agency (laughs).

Back to the unpleasant present. You have forecast the possible reduction of 3,000 full-time positions in the travel industry - as a result of the pandemic.

To finance an employee, you need a turnover of around 900,000 Swiss francs. When he's gone, an employee is gone. Employees are the most important value generators, but unfortunately also the biggest cost drivers. That is a relatively succinct assessment. With the option of short-time working, you can still stay afloat, if the size of the travel agency makes it at all possible. How long can you hold out under these conditions? That also depends on other factors such as rent or hardship benefits. The hard question is: how long will the crisis last?

With the hardship rule now coming, is survival secured thanks to the À-fonds-perdu-monies?

In the manufacturing industry, where goods can also be put into storage instead of being sold today, loans often also have the function of pre-financing future sales; one finances, as it were, the creation of inventory. This option does not exist for services. What wasn't sold is gone. An empty seat on a plane from A to B will never be sold again. In addition, if I can postpone a trip by a year, then I'm not going on a trip at this point in time.

What has not been done is hardly made up for, because the most important resource in this regard cannot be stored: time. In addition, the economic framework conditions can change, which further exacerbates the problem because people will then also travel less in the future. Now is the time for monetary aid à-fonds-perdu.

In connection with the vaccinations: how far is the end of the tunnel?

I think it's realistic that you can think of minimal travel activity in summer. Much should be relaxed in summer. And even more in autumn. For me there are two questions. First, will vaccination be a requirement for entering a country? Then comes the outcry, “That can't be done!”? My succinct answer: this has been around for a long time. For example, you have to show the money fever vaccination in your vaccination certificate in order to be able to enter certain countries.

Second: For me, the decisive factor is: does the vaccination prevent infectivity? So: Are vaccinated people still virus carriers or not and can they still infect someone? We definitely have to adjust to intermediate scenarios. For example, that we will have to continue to adhere to protective measures throughout 2021. Today we can assume that things will relax in the northern hemisphere. But it will take time before the entire world population is vaccinated. It is an illusion to believe that normal will return to normal by 2022.

What will then attract more attention is the problem of climate change.

Of course, you are primarily targeting air traffic. First of all, how will the easing take place? My assumption: Short and medium-haul flights with scheduled airlines as well as all charter flights will be able to be restarted in a relatively short time according to demand. In terms of complexity, this is not that difficult and the demand can be estimated to some extent.

The situation is different for long-haul routes. Because of the complexity of the network structures, one will shimmy from one equilibrium “demand-supply” to the next in the next 2 to 5 years. No airline can risk creating excess capacity and entering into a price war; the reserves for this will be too scarce - if they still exist at all. Airlines will therefore be cautious about increasing the capacities in intercontinental traffic more than necessary.

Even if they have earned the most money there so far with passengers who were seated in front and in most cases did not have to pay for the ticket themselves. But there will be fewer of them, with direct consequences for income and indirect consequences for the cost structure. One possible consequence of these adjustments will be that long-haul economy flights will become more expensive than before the pandemic.

The question was actually related to climate change

The topic of climate change is currently a minor problem for me. Demand will be subdued anyway because of the reduced business traffic and because of the leisure traffic, which is income-sensitive. So when the economy becomes more expensive, the airline ticket tax is added and the economic conditions darken, then one will also have to think about the vacation budget. The CO2 emissions in aviation will decrease accordingly and therefore the climate issue will temporarily no longer be the focus. And if you prefer to take the train for short distances, that's good too.

Finding an economic perspective will be a priority. Worldwide. In the northern part of Europe we live in paradisiacal conditions, compared only to the southern part, where we have high youth unemployment, for example. Where an entire generation fails to enter the job market. It's not getting any better, if not worse. The creation of life prospects for entire generations is of the greatest importance in the short term. But I would like to steer the discussion in a slightly different direction.

And what would it be?

If we need less fossil fuels, that is beneficial for everyone. Furthermore, the search for alternatives results in a boost in innovation. Either you take part in these episodes or you don't. If we want to be less dependent on fossil fuels - fuels that we don't even have in our own country - then we have every reason to look for innovative ideas in this area.

But I assume that the need to travel will not decrease.

Travel is a basic human need. But travel is also a regional phenomenon. If you take Switzerland, the proportion of intercontinental travel is around 15 percent. The rest is Switzerland and Europe. The same applies to North America but also to Asia. Growth is therefore initially absorbed regionally. Small parts of these trips then also go to other continents; the "masses" arise only because of the large populations in the broadcasting countries.

When it comes to transportation, in an increasing number of countries, tourists are taking high-speed trains at least on the racetracks. Thanks to such rail connections, the growth of domestic air routes is increasingly limited. More and more, they primarily serve to make places that are not connected to these high-speed networks accessible or as feeder flights for intercontinental traffic.

But the phenomenon of overtourism is likely to come back to us. Does the pandemic offer a chance that we can initiate corrections here now?

What you can do has been known for a long time. The phenomenon takes place selectively. Everyone who comes to Europe wants to go to Venice. There are the cheap flights, the new accommodation offers like Airbnb or the cruise ships, in which 30 hotels with 100 rooms each have space. How can I have a controlling influence? By creating relief offers, for example.

For example, Sydney does it with cruise ships so that they get passengers out of the city as quickly as possible, for example with excursions to the Hunter Valley. Or you can create entry restrictions with a corresponding reservation option and demand-driven pricing, as is the case with the Alhambra, for example. Lucerne is considering measures to limit the number of buses.

You actually know what to do. The problem is the will to and the feasibility of political implementation. What can I get through quickly in a political process so that all contact groups are reasonably satisfied? The keyword “visitor management” will become a hotter topic in the coming years than has been discussed so far. Marketing will have a more directing effect in the future, so that I can get people away from the hotspots for better distribution.

Can you now say that Corona is an opportunity in the sense of being able to plan the future better? Or will we be back where we are now in a few years.

It would be desirable, but I'm not sure that it will actually be done. There are already measures that have been initiated. But the question is whether I can find a balance between those who want to make a profit from the phenomenon and those who are primarily the recipients of costs. That those who suffer the damage can also benefit. That, for example, Airbnb profits flow back into the municipalities via taxis.

It is said that the time after Corona will no longer be the same as before Corona.

I wouldn't put it so radically. You will see changes in behavior. If I look at the business travel sector, there will definitely be changes. How and where to work will be resolved differently. With regard to the leisure sector, it takes a relatively large amount for people to change their behavior. There could also be economic developments that lead to reluctance or other uncertainties that make people more reluctant.

A thesis is currently being developed that examines what people have not been able to do this year and what the reactions to it are. But to be honest: I don't know where the future will lead us either. Anything can happen to me. Unfortunately, there are too many factors that cannot be controlled. But that is exactly what makes the “travel” phenomenon so exciting.

(Interview: Kurt Schaad)

 

 

 

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