Industry Agenda

While few industries have been spared by the impact of the Covid-19 pandemic over the past three years, even fewer have been hit as hard as the tourism sector. After Covid-19 had made 2020 "the worst year in tourism history", international tourist arrivals increased by just 11 percent in 2021, as travel restrictions remained in place for protracted periods in many parts of the world. Now, almost three years after the WHO declared Covid-19 a pandemic, optimism has finally returned to the industry. "Tourism always comes back," UNWTO Secretary-General Zurab Pololiksahvili said at the inauguration ceremony of ITB Berlin 2023, as the world's leading tourism trade fair celebrates its first in-person event since 2019.

As the following chart shows, global tourism bounced back strongly in 2022, as international tourist arrivals more than doubled compared to the previous two years. The recent reopening of China further fueled optimism in the tourism sector as Asia lagged behind other regions in the recovery from the Covid-19 shock. According to UNWTO estimates, international tourist arrivals could reach 80 to 95 percent of pre-pandemic levels this year, depending on how quickly travel bounces back across Asia. Last year, international tourist arrivals in Asia and the Pacific trailed pre-pandemic levels by more than 75 percent, while Europe and the Middle East came within 20 percent of 2019 numbers.

Prior to the coronavirus outbreak, the global tourism sector had seen almost uninterrupted growth for decades. Since 1980, the number of international arrivals skyrocketed from 277 million to nearly 1.5 billion in 2019. As our chart shows, the two largest crises of the past decades, the SARS epidemic of 2003 and the global financial crisis of 2009, were minor bumps in the road compared to the Covid-19 pandemic.




Statista/UNWTO | Mar, 2023

As we turn the page on COVID-19

There is no doubt that the aviation industry has endured many challenges over the last two years, as it grappled with the rapidly evolving pandemic environment. It was no surprise that many airport operators were staring at losses, and are even predicted to remain in the red as we are still some distance away from full recovery. During the pandemic, passenger traffic was down over 90% in many markets. A decline in revenue of this scale was not surprising since airport operators' revenues depend heavily on passenger traffic.

On the other hand, the airport cost structure is characterized by predominantly high fixed costs, particularly in the regular operations and maintenance of major infrastructure components, such as runways and terminal buildings. With supply side constraints on travel and the collapse in demand for air travel, airport operators did not have sufficient traffic to drive down operational costs and achieve economies of scale. As a result, many operators were burning cash at every passing day.

Though some governments provided relief measures and financial support to help airport operators stay marginally afloat, the support was nowhere near the losses that airport operators were suffering. As such, this phenomenon raises questions about how best airports can be managed and operated effectively and efficiently.

This is where the Airport Groups have distinguished themselves, demonstrating their resilience while managing the crisis so efficiently. The key advantage for smaller airports within an Airport Group is that they have access to resources that they would not have otherwise if they operated and managed separately as individual entities. While it is common for larger airports to enjoy a broad range of resources and expertise, it would be more efficient and sustainable for smaller airports to tap into the support of a large network.


Emergence of Airport Groups?

Over the last three decades, the airport industry landscape has witnessed the rise of specialized airport operators. Fundamentally, Airport Groups are multi-airport operators, leveraging their expertise and experience to expand their operations both internationally and domestically, many of which, are private companies.

Before the pandemic, these Airport Groups accounted for almost one-third of global airport passenger traffic and about a quarter of global air cargo volumes. Their significant contribution to the global economy included US$74 billion Gross Value-Added (GVA) to global GDP, 2.7 million jobs, and US$12.8 billion in payments to governments.

Airport Groups generated tangible value for a wide array of stakeholders, measured by conventional financial and economic indicators, sector-specific dimensions and the broader socio-economic impacts.


What's so good about Airport Groups?

Being part of an Airport Group facilitates knowledge exchange with other airports within the Group, including the sharing of best practices, application of new technologies and developments of innovative concepts. It also enables the operators to diversify risks, enhance resilience against shocks and achieve economies of scale and scope.


Size matters

Just like any other multinational company, economies of scale and scope is another major benefit. Airport Groups benefit from the efficiency of centralized processes and functions, as well as the ability to buy materials in bulk to reduce costs.

Having a more centralized management function enables less competitive airports within the group portfolio to reap the benefits of strategic planning, business development, service sourcing, and capital investments that are otherwise difficult to achieve individually.

Airport Groups often operate and manage airports of different sizes globally. As such, they generate resilience against geographic or market-specific shocks. In addition, some Airport Groups belong to wider commercial conglomerates, where business interests may spread to multiple sectors and industries. The diversity of a group creates an additional safety net against negative sector specific exogenous factors and events.

Similarly, operating as part of a group enables airports to benchmark themselves against other airports within the group. Policies, procedures, and standards at group level allow airports to share practices and measures for achieving those common goals. Operation and management standardizations are often achieved by knowledge exchange through different channels, such as meetings of leaders and experts of different airports, or the rotation of staff across airports.


Gearing up for the future

As we come out of the pandemic, the term "normal" may carry a total different meaning. The expedited implementation and use of innovative technologies perhaps is one positivity and silver lining over the past two years. The process of digitalization and technological advancement have certainly enhanced the operational efficiency and improved passengers' experience at airports, while ensuring hygiene, health and safety.

Airport Groups enjoy the privilege in utilizing group resources for research and development. With multiple airports in their portfolios, Airport Groups can deploy their technologies in a diverse range of airports to ensure their latest services and products remain human centric in different operating environments.


The upshot

ACI predicts global passenger traffic will recover in 2024. The above-mentioned benefits have the common attribute of sharing and leveraging the knowledge, expertise, and experiences of a resource pool far larger and more diverse than any individual airport would possess. The benefits of the Airport Group business model are considered critical and would certainly facilitate the pace of recovery, and growth, going forward.



ACI - by Guest Author | Oct 28, 2022

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ACI's comprehensive study on Airport Groups, also known as multi-airport operators, examines the value created by the business model and how it benefits the entire aviation ecosystem.

The Travel & Tourism sector was one of the hardest hit by the COVID-19 pandemic, leaving not only companies but also tourism-driven economies severely affected by shutdowns, travel restrictions and the disappearance of international travel.

In 2020 alone, the sector lost $4.5 trillion and 62 million jobs, impacting the living standards and well-being of communities across the globe. Moreover, the halt in international travel gave both leisure and business travellers the chance to consider the impact of their choices on the climate and environment.

Amid shifting demand dynamics and future opportunities and risks, a more inclusive, sustainable and resilient travel and tourism sector can be - and needs to be - built.

The WEF's Travel & Tourism Development Index 2021 finds that embedding inclusivity, sustainability and resilience into the travel and tourism sector as it recovers, will ensure it can continue to be a driver of global connectivity, peace and economic and social progress.

According to Chief of Market Intelligence and Competitiveness at the United Nations World Tourism Organization (UNWTO), some of the top global trends we're witnessing currently in the travel and tourism sector are the following. Given the extended lockdown that we had on travel with the pandemic, vacation for friends and relatives (VFR) is now a high priority for people who haven't been in touch for a long time thanks to the pandemic. So, people are reconnecting. And that kind of links to the second trend, which is multi-purpose or blended travel. Never before, particularly now that we can connect digitally through Zoom, has the ability to work from anywhere enabled travellers to cover multiple purposes, like visits with friends and multiple business trips. So, we'll find that the duration of travel and the length of stay is longer. And third is the continued high focus on safety and wellness which is top of mind for travellers due to the pandemic. All travel is wellness-related now.

There is a bigger concern with sustainability, which is very welcome in our industry. Consumers, particularly the younger generation, are much more aware of the impact they have, not only on the environment but also socially and on the communities they live in. We've also seen an increase in expenditure per trip, so I think people are very eager to go outside, and they're staying longer. And on the other side, I think there are some challenges: we're seeing a rise in late bookings because restrictions can change at short notice and that's having an impact on the decisions of travellers. This is putting pressure on the industry in terms of planning and anticipating fluctuations in demand.


What is community-based tourism and why is it important?

One of the positive impacts of the pandemic is that people are looking for local experiences and are spending more time with communities. So, the concept of community-based tourism is obviously one that puts the community at the core of every development, ensuring that it's engaged and empowered and that it benefits. At the UNWTO, we worked with the G20 and the Saudi presidency back in 2020 and produced a framework for tourism development in communities, which states that communities need to be part of the planning and management of tourism activities. We need to go beyond traditional definitions of community to a point where the industry leans on partnerships between the public and private sectors and communities.


Are we seeing a growing trend towards domestic tourism?

We're talking about 9 billion people travelling within their own countries. And in many countries, for example in Germany, more than 80% of the tourism spending actually comes from the domestic market, similarly in countries like Spain and even smaller economies. Whenever it's possible to travel again, domestic markets tend to be more resilient. They kick off first mostly due to perceptions of safety and security issues. As the world economy recovers from the pandemic, there is a good opportunity for nations to rethink their strategy, look at the domestic market in a different way, and leverage different products for domestic tourists.

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When it comes to sustainable tourism, how quickly could we mainstream eco-friendly modes of transportation ?

Transport is one of the key contributors to energy impacts and tourism. But it's also important that we look at the whole value chain. The UNWTO together with the One Planet Sustainable Tourism Programme just launched the Glasgow Declaration, which includes green commitments from destinations and companies. We're seeing a strong movement in the airline industry to reduce emissions. But I think, obviously, technological developments will be very important. But it's also very important to look at market shifts. And we can't forget small islands and developing states that rely on long-haul air travel. It's important to make sure that we invest in making the problem much less impactful.

Travel and tourism' is such a broad encompassing term that it's not fair to call it an industry: it is actually a sector of many industries. The pandemic taught us how broad the impact of the sector is in terms of sustainability. There's a big movement in terms of destination resilience, which is the foundation for achieving sustainability in the journey to net-zero. We now have standards to mitigate that impact including meetings-and-events (MIE) standards and standards for tour operators. There are multiple areas within our industry where progress is being made. And I'm really encouraged by the fact that there is such a focus not just within the sector but also among consumers.

Global travel remains subdued in second pandemic year.
A full recovery of the global tourism sector isn't expected until 2024.

• The tourism sector is one of the worst affected by the impacts of COVID-19.
• International arrivals have increased by just 4% in the second year of the pandemic; with 1 billion fewer arrivals when compared to pre-pandemic levels.
• Most experts from the World Tourism Organization (UNWTO) believe the sector won't fully recover until 2024.

As 2021 drew to a close with severe limitations to travel still in place, the World Tourism Organization (UNWTO) reported that international tourist arrivals increased by just 4 percent last year, remaining 72 percent below 2019 levels. That equates to more than 1 billion fewer international arrivals compared to pre-pandemic levels, keeping the industry at levels last seen in the late 1980s.

Prior to the coronavirus outbreak, the global tourism sector had seen almost uninterrupted growth for decades. Since 1980, the number of international arrivals skyrocketed from 277 million to nearly 1.5 billion in 2019. As our chart shows, the two largest crises of the past decades, the SARS epidemic of 2003 and the global financial crisis of 2009, were minor bumps in the road compared to the COVID-19 pandemic.

Looking ahead, most experts no longer expect a full recovery until until 2024 or later. UNWTO scenarios predict that international tourist arrivals could grow between 30 and 78 percent in 2022 compared to 2021. While that sounds like a significant improvement, it would still be more than 50 percent below pre-pandemic levels.

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