There are several economic scenarios about COVID-19, ranging from the most optimistic, where global gross domestic product (GDP) declines by -3.5 percent in 2020, with recovery starting in July, to a more pessimistic scenario that sees global GDP decline by 9.0 percent in 2020 and recovery not starting until spring 2021. Against these scenarios, the International Monetary Fund is forecasting the worst recession since the Great Depression.
COVID-19’s impact on New Zealand tourism is significant, with our national carrier, Air New Zealand, grounded, international arrivals coming to a halt and the country in lockdown.
Our tourism future depends on the global economy, what COVID-19 scenario we are in and what alert level we are at. Even at Level 1 or 2, there are restrictions on business operations. In the best-case scenario, the general assumption is that for the next 18 months the focus is on domestic tourism and we will be in an economic recession.
As the most recent Westpac commentary states:
The outlook for domestic tourism is better. With the lockdown now firmly in place, there is little chance of domestic travel at present. However, as New Zealand gradually moves back to alert Level 1, we would expect domestic tourism to recover quite strongly. New Zealanders will probably be deterred from travelling overseas either out of fear of Covid-19 or by other countries’ travel restrictions. Consequently, Kiwis will holiday at home. The extent of domestic tourism, however, is likely to be tempered by the slow economy. All things considered, we expect that revenues generated from domestic tourism will be down by about $8bn in 2020 compared to 2019.
Given this scenario, tourist behaviours and spending habits will be different. Of the dozens of trends that shape this, I have identified 10 I believe will be substantially affected by the recession because of COVID-19.
This analysis is based on understanding three things: how previous economic recessions have changed tourists’ behaviour and activity; how this recession is different; and the journey tourists have taken to the present, which will condition their reaction to the recession and shape their trajectory out of it.
Recessions fall into two categories. Most are brief and shallow and provoke a short-term change in international arrivals and a downturn in tourism experiences—i.e., bungy jumping and restaurant spending. However, deep recessions are different. The Great Depression and Japan’s lost decade of deflation changed the mindset of the tourist and had a long-term impact on consumer behaviour.
So what are the trends ahead, the slowed trends, the trends that will be arrested and the ones that will advance?
Dominant trends
Connecting with roots: Visiting friends and relatives
The family is the most important feature in consumers’ lives. Its emotional attachment is at its highest in times of personal bereavement or economic recession. From primordial societies to the modern day, family members are those we depend on. As the nuclear family evolves, networks of emotional closeness are reconstituted. Even in a global society where families and friends are spread around the world, where have never had greater connection with them through social networks, these are the people we want to be with when times are hard. Hence one of the important sectors will be visiting friends and families.
Simplicity: In search of slow
During an economic slowdown, tourists tend to travel less, stay near home (with increased domestic tourism) and seek simplicity such as value-based holidays focusing on basic facilities, meeting locals, lots of free time and bargains. Here, tourism is about the beach or the view from the mountain. It’s about being less plugged in and less always-on-the-go lifestyles.
Focus on the boardroom
During a recession, corporate excess and governance comes under the spotlight. Misbehaviour boards might get away with in good times arouses the ire of consumers and regulators. The focus on corporate social responsibility has never been higher. This is about how a tourism business behaves.
Advancing trends
Staycations
Unsurprisingly, in a recession tourists focus on a domestic rather than international holiday. For the domestic market to be successful, innovation and experience are important. At present, the domestic market is shaped by the short break or the serious leisure user (someone who takes their hobby on holiday—i.e. recreational fishing, photography or tramping). The market struggles with long-stay or touring holidays.
Mercurial consumption
During recessions, impulse purchases dramatically decline. Tourists seek out bargains. This means planned purchases come to the fore. In particular, women or those with responsibility for household budgets search more deeply for information. They want to know about everything, including activities, experiences, reviews and prices. From a destination or tourism business perspective, it’s about internet content. The Faroes Islands promotional campaign during COVID-19 is about tourists taking a virtual holiday, thus providing pre-purchasers with an immersion experience of being there, virtually.
End of adventure
With big data and web analytics, we know everything about you when you visit a holiday website. So online businesses using predictive algorithms can make a series of recommendations of what you like, what you could do, where you could stay and your price point. Hence it’s the end of adventure, as big brother knows everything about you and can tailor your experience accordingly.
Slowed trends
Green consumerism is contested
Sustainable tourism seems to be mainstream but during a recession that deeply ingrained mindset is increasingly challenged and abandoned due to price pressures, especially where ecotourism is a luxury experience. To some, being green is an unnecessary luxury when cheaper options will suffice. Tourists cut back on the credentials of being green and ramp up value.
Materialism
Based on the theory of social change and human development, during a recession values and behaviours change. We become more concerned for others and with collectivism and move away from individualism. One of the notable trends is concern about consumption and waste. Thrift and mercurial consumption mean materialism and personal possessions become less important. Volunteering and social tourism have a higher priority in a more inclusive society.
Arrested trends
Decline of deference
We live in a world of fake news, populism and Donald Trump. Public respect and trust for institutions, experts and government has declined. There has been a degree of scepticism about the quality of information provided by economists, academics and leaders of the tourism industry. A recession changes this. We look to institutions and government for leadership, for the right information in a world of Facebook, Twitter and the clutter of social media. This is why Tourism New Zealand and Tourism Industry Aotearoa bring clarity and direction in an environment of uncertainty.
Extreme experience seeking
The desire to accumulate experiences in addition to material possessions will continue to flourish, but mostly those that are relatively cheap and connect people to nature and wholesome thrift. Exotic experiences that are expensive, frivolous, risky or environmentally destructive—such as driving a racing car or bungy jumping—will suffer. Part of the appeal of extreme experiences is people feel the experience differentiates them. But conspicuous consumption is now out of favour as simplicity and thrift trends dominate.
Ian Yeoman is an Associate Professor of Tourism Futures in the School of Management at Te Herenga Waka—Victoria University of Wellington.
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