COVID-19 killed the tourism industry. Now, governments and digital technology are playing a key role in helping them revive. At a Mastercard webinar, experts from the UN, Sweden, Malta, and South America discussed what’s needed for SMEs to overcome the challenges, embrace the opportunities, and thrive
When the COVID-19 pandemic started to take hold in early 2020, countries around the world locked down one by one. Borders were shut and people were unable to get in or out of nations. Tourism ground to a halt and many locations that are heavily reliant on domestic and international visitors bore the brunt of the economic pain. Businesses that sell directly to holidaymakers and those in the wider supply chain saw revenue streams dwindle to nothing and many established, well-run companies went to the wall through no fault of their own.
Now, as countries ease restrictions and open borders once again, people are starting to feel more comfortable about the idea of international travel. This presents a major opportunity for the tourism industry to capitalise on pent-up demand, with early indicators suggesting that in the aftermath of the pandemic many tourists are willing to spend more money than ever before on travel.
But how can governments help small and medium-sized enterprises (SMEs) capitalise on the return of tourism? And what role could digital technology play in ensuring there is a full, sustainable and inclusive recovery for SMEs in the tourism sector?
This was the topic of ‘Digital takeoff: how governments can help SMEs make the most of tourism’s revival’, a Mastercard webinar hosted by Global Government Forum last month.
One organisation set to play a key role in the recovery of the tourism industry globally is the United Nations (UN) through its World Tourism Organisation (UNWTO), the agency responsible for the promotion of responsible, sustainable and universally accessible tourism.
Speaking at the webinar Natalia Bayona, director, innovation, education and investments at the UNWTO, explained that tourism is a significant contributor to global GDP, and that to accelerate the economic recovery of the tourism value chain it is imperative SMEs are helped to gain access to technology and to learn how to use it.
However, in some emerging markets Bayona said it is impossible to pay digitally or via mobile phone and that this impacts the competitiveness of a location. Analysis undertaken by Mastercard Test and Learn bears this out. It found that digitally-enabled SMEs saw a 5% increase in customer spending and a 4.5% increase in transactions compared with their non-digitally-enabled peers during the pandemic.
Through its Digital Futures programme, the UNWTO aims to help two million SMEs across the world unleash digital technologies to create jobs and enhance the resilience of the tourism value chain over the next three years.
“Going digital is more urgent than ever because if we don’t give them access to digitalisation, we cannot talk about sustainable growth. We cannot talk about inclusion, we cannot talk about the diversification of our economy,” Bayona said.
Malta’s digital tourism strategic roadmap
The governments of some countries have been more proactive than others at driving the digitalisation of domestic tourism businesses. A good example of one that has been successful is Malta, which last year devised a recovery strategy for its tourism industry.
Euchar Sultana, chief information officer at the Ministry for Tourism in Malta, said part of the country’s strategy is to focus on 13 specific challenges and one of those challenges is understanding how digitalisation can help the nation provide a better quality product for tourists.
“We have planned a digital tourism strategic roadmap up until 2030 and the idea here is to enhance the tourist experience and introduce more technology in order to elevate the product,” explained Sultana. “So here we are not looking at digitalisation replacing the physical experience, but rather elevating and complementing the experience of visiting the island and the aim for Malta is being a destination with leading digital products.”
The first priority of the strategy is to help members of the Maltese tourism industry invest in digital products, and it is also focusing on skilling and up-skilling tourism workers by providing training via online platforms. The strategy takes into account the importance of research and innovation and investment in the technology and data infrastructure of the country.
Sultana said the key to the strategy’s future success is cross collaboration between all of the different stakeholders and engaging with these stakeholders at as early a stage as possible.
“It is not just the public sector, it is not just the private sector – there are also the NGOs and other different stakeholders involved. So the approach we are taking here is we are bringing different stakeholders around the table and we are ensuring that at a very early stage, there is co-design of the document, there is a co-design of the initiatives, and there is co-ownership of the document itself. So this document, this plan of implementation, this vision, is not the vision of the minister for tourism or the Malta Tourism Authority, but a vision that is being shared across different stakeholders, which is key in ensuring the success of such a plan and digitalisation going forward.”
Success in South America and Sweden
Talk turned to the success of a South American programme aimed at enabling SMEs to innovate. The Central American Bank for Economic Integration (CABEI) – an international multilateral development financial institution – worked with governments in the region to create a recovery programme to support SMEs.
Dante Mossi, executive president at CABEI, said the programme started with US$350m of funding and offered SMEs five-year loans with a two-year grace period during the pandemic and encouraged them to use the money to innovate. He said a number of SMEs took advantage of the loans programme and started to do things differently and it has been so successful the fund has been increased to US$850m. Although the programme didn’t require financial support from governments, Mossi said conversations and collaboration with individual governments have taken place around making sure the necessary infrastructure is put in place to help these businesses thrive.
“For example, delivery services require a good mail service. How do you send stuff overseas? How do you send stuff to other countries? And how do you get paid for these services? The one area where we need help is relaxing or facilitating how easy it is to buy or sell across borders and make it affordable as well,” Mossi said. “The world is becoming smaller and smaller, so I think we need to bet on these [digital] innovations and help SMEs to reach out to markets that are no longer the traditional definition of your neighbourhood – it’s much larger than that.”
He added that “distance is dead” and it is now “possible to be small and to have a point of sale and be connected to the rest of the world and it doesn’t cost a lot of money” to do this thanks to technology.
Of course, capitalising on the short-term bounce back of visitors and tourism spend is vitally important to the immediate future of SMEs in the tourism sector, but it is also important that sustainable financial models that take into account environmental sustainability issues are built to support the sector so that businesses can weather the cyclical nature of the market. This has been a particular area of focus in Sweden, which launched a new strategy for sustainable tourism last autumn.
“The overall vision is to become the world’s most sustainable and attractive destination based on innovation by 2030,” explained Linda Mannerby, senior sustainability manager at Visit Sweden, which is a marketing company for the Swedish tourism industry owned by the Swedish state via the Ministry of Trade and Industry.
She added that a key focus of the government’s strategy has been breaking down barriers to enable tourism and hospitality SMEs in Sweden to thrive.
“In Sweden, a study found that laws and government regulation and a lack of access to suitable labour were the main obstacles to growth for SME businesses,” said Mannerby. “To ensure progress in this area the Swedish government will look to implement more digital processes, share knowledge about how digital tools can be used, ensure easily accessible information and a flexible education system for this area, and also probably more incentives for smaller businesses.”
Mannerby said that businesses, academia, local authorities and the government needed to collaborate and innovate to create new opportunities for a sustainable tourism industry within Sweden.
Collaboration between the public and private sector was a recurring theme during the webinar, which covered the many ways tourism SMEs could embrace technology and digitalisation to make their businesses more efficient, enable them to reach more people around the globe and ultimately be more profitable.
To achieve this Sultana said one of the key things SMEs need to establish from the outset is what the main challenges and opportunities they face are and then how technology can help to address and embrace them.
“Technology is the tool to enable these opportunities and in order to address these kinds of different challenges,” explained Sultana. “I think one of the key aspects for SMEs to focus on, especially now that we’re coming out of the pandemic, is how can they become more efficient and more cost effective in terms of their operations? And how then can technology play a role in the operation of the business? And how can tourism SMEs elevate their service, in terms of service provisioning and tourist experience? These are all important aspects.”
He added that one of the few positives to come out of the COVID-19 pandemic has been that businesses’ confidence in using technology has grown. Sultana hoped that the accelerated rate of adoption of digital tools would continue as the global tourism industry starts to recover post-pandemic and that as a result tourism SME businesses are able to close the digital adaptation gap and reap the rewards of embracing technology.
The webinar ‘Digital takeoff: how governments can help SMEs make the most of tourism’s revival’ was hosted by Mastercard on 27 June, with support from Global Government Forum. You can watch the 75-minute webinar via our dedicated event page.