Big Changes in Store for Travel Business

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It is better to venture into other fields or go into suspended animation, reactivating the travel business only when tourism recovers fully in 2024.

There are over 5,000 companies registered with the Ministry of Tourism, Arts and Culture under “Tour Operating Business and Travel Agency Business”. All recorded little or no income since the Movement Control Order (MCO) was introduced on March 18 this year.

No one knows when global travel and proximity restrictions will end. When such controls are lifted, it is certain that borders would again be closed and countries under lockdown if a mutant strain of the Covid-19 were to spread rapidly, or another deadly coronavirus were to emerge.

In the early days, the focus was on recovery measures, hoping that the MCO could contain infections, but soon became clear that it will take many months. The emphasis was switched to helping businesses to survive and retain jobs. Measures such as moratorium on loans and rentals, and wage subsidy programme were implemented to overcome the cash flow crunch.

By May, the MCO was replaced by the Conditional Movement Control Order (CMCO) and further relaxed in June with the Recovery Movement Control Order (RMCO), which was extended from August 31 to December 31, but was cut short with the reintroduction of CMCO from November 9 due to the spike of infections, with a record 2,188 cases on November 24.

It is likely that over the next few months or years, RMCO will be in place for the economy to recover and life return to near normalcy, and CMCO swiftly reactivated whenever Covid-19 infections are out of control. The situation is very much the same for countries around the world, except for a few that have brought the pandemic under control through effective measures.

Covid-19 has ravaged the economies of almost all nations, with China being the only G20 country expected to see positive economic output this year. The G20 is an international forum for the governments from 19 countries and the European Union. Collectively, their economies account for around 90 percent of the gross world product.

It would be a big mistake for tour operators to think that they can just continue doing business as before, once safe vaccines and effective cures are made available. Many, especially those who have been phenomenally successful in the past, are hanging on to their companies, which have now been reduced to empty shells while the world is undergoing an unprecedented reset.

Sadly, the number of international travellers will be reduced to a fraction compared to 2019 for many reasons. Most people have lost businesses or jobs or suffered reduced incomes, with many struggling to survive. Those least affected would rather conserve cash, knowing the future is uncertain and prefer to save for a rainy day and not spend on non-essential travel.

Those bent on travelling could be discouraged by high airfares, as many airlines have collapsed. There will be a long lull before the days of cheap airfares and mass tourism returns. Tourists would be wary of paying for promised services upfront as many have not received refunds from airlines, hotels and travel agents when travel had to be cancelled due to the pandemic.

But what is more troubling is the fear of being stranded in a foreign country in a sudden lockdown, aware that many family members have been separated due to border closures while others are locked out, such as foreigners unable to return to Malaysia for work or residence, studies of overseas students disrupted, and surgery and treatment of medical tourists aborted.

Although Malaysia recorded more than 26 million foreign visitor arrivals last year, over 90 percent were independent travellers making their own arrangements. Hence, more income was collected for outbound tour packages than revenue earned by inbound tour operators. For example, the number of Malaysian pilgrims to Mecca amounted to more than 300,000 in 2019.

Travellers who were short-changed do not want to be caught in no-cash-refund quagmires again after dealing unsuccessfully with travel agents or tour operators that acted as intermediaries for airlines, hotels, ground handlers and other suppliers. Even passengers that booked directly with airlines could only get credit vouchers, as most airlines have no cash to pay for refunds.

Many airlines and outbound tour operators collect payments for future services to fund for today’s operations, much like general insurance companies collecting annual premiums in advance to cover for claims received earlier. If so, they might not be able to honour contracts, however fair it may be for both sides, and would be useless when these companies go bankrupt.

The safest way is to be covered by travel insurance that provides a full refund in the event of any eventuality, but premiums would be high. In their heydays, most tour operators would not be able to survive if expenditure were more than doubled and income reduced by more than half. But this is the likely scenario when tourism is recovering over the coming months and years.

While travel, hotel, theme park and other trade associations continue to call on the government to provide effective help for their members, only tourism industry players that have taken concrete steps gearing towards the new normal would be able to survive by grasping new opportunities before they slipped away. Now, more than ever, change is the new constant.

No doubt, many companies have embraced digital marketing to be more competitive. But then again, the market for outbound and inbound tours in the coming years will only be a shadow of its former self. Meanwhile, it is better to venture into other fields or go into suspended animation, reactivating the travel business only when tourism recovers fully in 2024.

The views expressed here are strictly those of The True Net reader YS Chan.