Hardly there is an industry that is so severely impacted by the movement and travel restrictions than the tourism and logistics industry. Chief Economist of IATA projects that the losses could be in the tune of 18% loss of global revenue amounting to 132 billion$ which is very close to what we saw in the Global Financial crisis.
While larger travel companies are cutting costs and getting support from the governments the effect on local economies and travel and tourism sector is unprecedented. The UNWTO estimates international tourist arrivals could decline by 20% to 30% in 2020. This would translate into a loss of 300 to 450 US$ billion in international tourism.
Source: UNWTO effect of Covid19 on global tourism
Image : recovery of hotel bookings in China. Source : str
If the trends from China are any indication there are hopes that the hotel industry will get quick recovery from the catastrophic drop in bookings.
Well, that's the global view which is being monitored by governments, industry associations, company consortiums. But what does it mean for the ground level entrepreneur, building their companies around tourism?
In a recent interview for the TechCrunch - Berlin-based - Get your Guide (a local experience booking company) and Omio (travel aggregator) and Barcelona based TravelPerk (business travel platform) expressed optimism. The common trends across these three startups are
- Close to 50% drop in revenue globally
- People just traveling very locally
- Shifting of resources towards customer support
All of these companies are diverting their resources for customer support, cutting down costs at the same time - investing resources and energy into product stabilization, new feature developments and cleaning up backlogs. Indeed the entrepreneurs believe the human need to travel is not going to change and once the restrictions come off there would be even more demand than before and this period would look like a small dip in the long term. Although the outlook looks difficult but secure for these venture capital-funded companies, its slightly different for small scale local entrepreneurs who do not have large tech teams, advisors, investors, a global presence or a soft cushion of recent fundings.
We talked to one such Berlin-based entrepreneur - Camillo Correa who has a small scale travel startup. His company provides software to local travel companies and also operates a local rental business. We talked to Camillo to understand his business outlook and the impact on his business.
Image : Tourists with the water jets which Camillo´s company rents out
leverist.de - Could you tell us more about yourself and your company?
Camilo - I have been in the travel industry for about 4.5 years. About 1.5 years back I started building an app for tourists in Mexico who want to book jet skiing and diving equipments. My company is based in Germany with support by some developers in Mexico. We plan to cater to tourists in Spain, Italy, Ibiza, Majorca etc where a lot of German tourists are flocking to every year.
leverist.de - How do you think the Covid-19 crisis is going to impact your work?
Camilo - In 2009, there was flu in Mexico and had a big impact in the tourism industry and it took several years for tourism to get back up on its feet. In my opinion tourism, this year would be more regional. German tourists traveling to Spain and Italy but international travel is going to reduce. Travel to Thailand and Asia towards the nice beaches - that will take a long time to recover. A lot of people are scared and now people will think it's very easy to get sick. On the positive side, I feel that digital methods of booking skis, jets, rental travel equipment, scooters or bikes would be preferred by travelers.
Image: Picture perfect trips would have to wait for a while
leverist.de - What makes the tourism sector more vulnerable?
Camilo -Problem with tourism is a lot of things are based on perceptions. Forexample - with Mexico - a lot of Canadians, Europeans, and American tourists perceive it to be a very unsafe country because of drug violence. In reality in today´s date - in the big cities it's like any other city. The perception - of the place has a big impact on decisionmaking. Tourism is a luxury so people will prefer to travel within their regions. For example - German tourists could go to Croatia. My impression is it will take a while before people of Northern European countries to travel south.
leverist.de - What are some aspects you had to adapt about your own startup?
Camilo- We do not have any cash flow right now. Tourist sites such as Cancun(Mexico)where we operate are closed down. So we are focusing on very small scale development work. We are trying to create an app for bookings which is going to be similar to an e-scooter booking experience. I am also discussing plans to move our software development and IT systems to Germany where I can get more reliability. I feel with the social distancing needed, the business at the reisebüro/TravelAgencies will start reducing and people will get more open to digital modes of booking travel related packages.
Editorial Reflections: We see that the bigger economic trends being reflected on every small or medium-sized entrepreneur. As a footnote, we would like to mention that at the German Development Corporation (GIZ) there is are teams working across the world with local governments, local bodies and the business community to support and improve tourism in emerging economies. GIZ sees sustainable tourism as a significant contributor to economic development. On leverist.de there are close to 15+ travel and tourism related business opportunities that need support from companies
Camillo Correa is the Founder and CEO of wateradventures.com - a Berlin based travel startup that provides IT solutions to travel companies and rental equipment at water tourism hotspots.
