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COVID-19 impact and survival strategy in business tourism market: the

COVID-19 impact on global and country tourism market

According to the United Nations World Tourism Organization (World Tourism Organization, 2020b), as of May 2020, 100% of destinations worldwide had travel restrictions associated with COVID-19. The pandemic has significantly impacted every sector of the travel and tourism industry: airlines, transportation, cruise lines, hotels, restaurants, attractions (such as national parks, protected areas and cultural heritage sites), travel agencies, tour operators and online travel organisations. Small and medium-sized enterprises and micro-firms, which include a large informal tourism sector, account for about 80 per cent of the tourism sector, and many of them may not survive the crisis without substantial support. This will lead to a domino effect in the entire tourism supply chain, affecting livelihoods in agriculture, fisheries, creative industries and other services. The loss of jobs in the MICE industry has a disproportionate effect on women, youth and the indigenous population. Women-owned and operated MICE companies are often smaller in size and have fewer financial resources to counter the crisis. Women hold such frontline positions in the tourism industry as housekeeping and front desk staff, which puts a particular risk to their health (Twining Ward and McComb, 2020).

According to the World Bank, the world GDP is expected to decline by 5.21% in 2020 (the decrease in 2019 comprised 2.38%) and grow by 4.16% in 2021. The dynamics of GDP of the United Arab Emirates will comprise −4.5% (compared to 1.7% growth in 2019), followed by the estimated increase by 1.4% in 2021 (World Bank, 2020).

In 2019, the direct, indirect and induced impact of travel and tourism industry accounted for 10.3% of the global GDP (USD 8.9 trillion) and 330 million jobs, or 1 in 10 jobs globally. As a result of the COVID-19 pandemic, in 2020, the global travel and tourism market is predicted to see a loss of 121 million jobs worldwide and USD 3,435 billion in global GDP (World Travel and Tourism Council, 2020).

According to the data of the World Tourism Organization (2020a), the United Nations agency taking charge of the promotion of responsible, sustainable and universally accessible tourism, as of June 22, 2020, the global fall in international tourist arrivals comprised 44% compared to 2019 (Fig. 1).

Fig. 1: International tourist arrivals decrease in January–April 2020 compared to 2019, by regions (%).figure1

Source: developed by the authors based on data adapted from the World Tourism Organization (2020a).

As shown in Fig. 1, the most significant decrease in terms of international arrivals in January–April of 2020 experienced the Asia and the Pacific region (51%) followed by Europe (44%) and the Middle East (40%). The decline in international arrivals in the Americas and Africa equalled 36 and 35%, respectively (UNWTO, June 22, 2020).

In early May 2020, the UNWTO has outlined three possible scenarios for the MICE industry which indicate a potential decrease in the total number of international tourists from 58 to 78%, depending on when travel restrictions are lifted. Since mid-May, UNWTO has identified an increase in the number of destinations announcing measures to resume tourism. These include the introduction of enhanced safety and hygiene measures and policies aimed at developing domestic tourism (World Tourism Organization, 2020b).

Geographically, the regions with the biggest relative drop in international tourist arrivals during January–April 2020 are Europe, Australia and New Zealand, and Western, Southern and Southeastern Asia (Fig. 2)Footnote 1.

Fig. 2: Distribution of countries in terms of international tourist arrivals in January–April 2020 (%).figure2

Source: developed by the authors based on data adapted from the World Tourism Organization (2020c).

According to Fig. 3, the largest absolute decrease in international tourist arrivals experienced Spain (10.8 million), followed by Thailand (7.3), Turkey (4.4), Singapore, Mexico, Italy, Vietnam (3.6 million each), Austria (3.2) and the United States (3.1)Footnote 2Footnote 3.

Fig. 3: International tourist arrivals in January–April 2020, by country (thousand people).figure3

Source: developed by the authors based on data adapted from the World Tourism Organization (2020c).

Despite several countries have positive values of international tourist arrivals (the United Arab Emirates, Belgium, Ireland, Jamaica, Guyana, Cayman Islands and Vanuatu), the data available in UNWTO report for them is for February 2020, when COVID-19-related travelling restrictions were not so severe. The same goes to a number of other countries with low decrease results (Aruba, Bhutan and Martinique).

The international tourist arrivals worldwide showed stable growth in 2000–2019, except for some crisis years with a slight drop: 2003 (SARS pandemic, 3 million) and 2009 (global economic crisis, 37 million). According to the worst-case scenario of the UNWTO, the decrease in 2020 can reach 1.140 billion (Fig. 4).

Fig. 4: International tourist arrivals for 2000–2019 and the worst scenario for 2020 (USD billion).figure4

Source: developed by the authors based on data adapted from the World Tourism Organization (2020b).

The global international tourism receipts also experienced constant growth in 2000–2019, with the exception of one year, 2009, when the drop was USD 88 billion (Fig. 5). In 2020 the decrease may reach USD 1.170 trillion as per the worst UNWTO scenario.

Fig. 5: International tourism receipts for 2000–2019 and the worst scenario for 2020 (USD billion).figure5

Source: developed by the authors based on data adapted from the World Tourism Organization (2020b).

According to preliminary data, in the first quarter of 2020, the impact of aviation losses can reduce global GDP from 0.02 to 0.12%. Besides, if events develop according to the worst-case scenario, before the end of 2020, these aviation losses can be as high as 1.41–1.67%, with job losses about 25–30 million (Iacus et al., 2020).

Now, the UAE is at the forefront in terms of reducing demand for MICE services, as well as for global air travel. Emirati Airlines, hotels, and other travel and tourism-related businesses have experienced significant oversupply and must take decisive actions (Oxford Analytica, 2020). The Etihad Airways based in Abu Dhabi and Emirates Airline in Dubai have asked their employees to stay at home due to reduced number of flights thereby not excluding the possibility of layoffs (Siddiquei and Khan, 2020).

The global reduction of the scheduled departure flights comprised 2.8 million—from 3.234 million in January 2020 to 0.429 million on July 13, 2020. The anti-leaders in terms of the scheduled departure flights occurred to be the USA (−756 thousand flights), China (−363) and India (−112). For the same period, the UAE experienced a drop in 21 thousand flights, which is a comparatively small amount (Fig. 6).

Fig. 6: Scheduled departure flights frequency in January–July 2020, globally and by country (thousand flights).figure6

Source: developed by the authors based on data adapted from OAG (2020).

As shown in Fig. 6, starting from June, the situation with flights has begun to improve slightly. As to the UAE, the number of scheduled departure flights grew from 1.03 to 1.87 thousand weekly from June 1, 2020, to July 13, 2020.

In relative numbers, the deepest global fall of scheduled departure flights (compared to the same period of 2019) occurred in May 2020 and was 69% (Table 1). The countries with the biggest relative decrease were Singapore (97%, May), Spain (94%, April), Hong Kong (94%, April), Germany (93%, April), the United Kingdom (94%, June) and France (92%, May). The UAE had the most notable drop of 82% on June 1, 2020.

Table 1 Relative change in scheduled departure flights globally and by country in January–July 2020 compared to the same period of 2019 (%).

Today, more than 50 business events are scheduled for the fall of 2020 in Dubai, but they depend on the global and local epidemiological situation (Dubai Tourism, 2020).

Key performance indicators of the MICE industry

The computational results based on pre-pandemic data show that the long-term profitability of the MICE industry can be potentially stable and not influenced by investments in post-pandemic conditions. The rate of return on investment will decrease with a new tourism service. Competitiveness, however, has little relation to profitability ratio and hence is likely to increase.

The present findings are expected to facilitate marketing decision making. However, managers should decide on a strategy for competitiveness that will enable the reduction of MICE services cost, the increase of competitive services, and personnel training. An integrated multiplicative model of profitability that allows the assessment of the given strategy has the following form:

$$N_p = {boldsymbol{i}}^{6,927} cdot Sp^{0,287} cdot P_p^{0,128} cdot i^{0,284p};$$

(2)

Where, N—cost of services provided, USD;

S—number of those employed in the MICE industry;

P—profit spent on outsourcing strategy development, USD;

i—number of new services.

The results prove the theoretical significance of the selected model (Fisher criterion is equal to 29.01; the coefficient of multiple determination amounts to 0.97; and the relative approximation error is 0.14). The correspondence between results is expressed using the criteria of truth and authenticity.

The elasticity of service provision corresponds to t1 = 0.287 and t2 = 0.128, assuming low efficiency. That is, with a per cent increase of profits or employees, the number of offers for MICE services can potentially grow either by 0.287 or by 0.128%, respectively. Consequently, personnel costs and working capital may have little impact on the competitiveness of the MICE industry in the UAE in post-pandemic conditions. These data were processed to develop three theoretical forecast scenarios for the sales of MICE services in post-pandemic conditions (Table 2).

Table 2 Theoretical changes in the volume of the tourism service offer in the UAE over the period 2020–2023 (based on pre-pandemic data).

The above forecasts based on pre-pandemic data suggest that MICE service sales can increase by 61.6% in 2020–2023. That is, the average annual number is predicted to increase by 25%, gaining USD 35 thousand in 2021. Hence, the economic growth model can serve as an effective tool for improving the tourism development strategy of travel agencies.

The calculations confirm that in pre-pandemic conditions (average tax about 39%; the minimum return 6.9%) when tourism companies used to spend 89% of their net earnings, the volume of tourism services could not be maintained and the gross value added was likely to drop by 3%. Therefore, to ensure better performance and a broader range of tourism services, the minimum rate of return in ideal conditions should be at least 12.9% and the grow value-added tax should not exceed 38.9%.

Strategy for MICE survival and competitiveness

A queuing model was proposed to optimise MICE companies in terms of performance in the post-pandemic market. The Kotler’s extended marketing mix model may serve as a framework of choice for hoteliers, providing a competitive advantage over the existing participants in the MICE market. This model allows evaluating MICE services from various segments of the market by the in-depth profitability and demand analyses.

The five Ps of the marketing mix model are:

  1. 1.

    Product—a hotel in which a business tourist stays and rests, where a business event is organised, etc.;

  2. 2.

    Price—pricing policy, discount, price-quality (varies depending on hotels and airlines, plus insurance, travel and event organisation), etc.;

  3. 3.

    Place—distribution channels, internet platforms, etc.;

  4. 4.

    Promotion—meetings, incentives, conventions, exhibitions (product launch), state summits, public relations and advertising, etc.;

  5. 5.

    People—loyal customers and VIP customers, staff, other customers, etc.

It can be argued that meetings and events in hotels that adhere to this marketing model will bring additional income to stakeholders and corporate business travel agencies and hence improve the image of MICE companies. The consequences of this 5P marketing mix model can also be the improvement of the tourism service quality.

Normally, large hotel corporations associate themselves with the image, rather than location. Therefore, when choosing strategies for gaining competitive advantage through outsourcing, the economic and marketing models were used. The underlying sustainable competitive advantages of MICE companies are innovation; service quality control; flexible, adaptive and strong organisational culture; intangible assets (image and business reputation); and consumer behaviour management. Hence, the competitiveness strategy should more focus on these variables. In cross-border tourism, the most promising strategies for competitiveness are those aimed at ensuring consumer loyalty, innovation and adaptation to the external environment like heightened health and safety measures. The MICE industry leaders are increasingly focused on current trends in outsourcing business processes, namely: expanding the boundaries of outsourcing; use of best practices, tools and technologies to ensure better management; the ability to integrate new features with existing systems; ensuring information confidentiality; the transition from individual services to service packages; and global coverage of existing and new markets.

Where there is the opportunity to survive in the pandemic and post-pandemic world and gain competitive advantages by reducing costs while increasing the efficiency of performance, business travel companies turn to outsourcing (It Pulse, 2019). Key Account Managers settle issues with the business travel organisation on the key client’s behalf (Suvorova, 2012). The main factors of competitiveness are the image and reliability of MICE companies. Competitiveness is achieved by improving the quality of services (Tymchyshyn-Chemerys and Pasternak, 2017). The previous studies highlighted the following important variables: total cost of business events; expenditures on restaurants and hotels, transportation, etc.; additional costs associated with increased demand; and value-added income.

The scientific novelty of this study is that it offers an optimal competitiveness strategy for the MICE industry offering to introduce outsourcing practices and the 5P marketing model.

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