6 Suggestions to Recession-proof your Travel Business
As 2023 closes in, the world grows more and more fearful of the impending recession forecasted by a daunting number of leading economists and Wall Street analysts. This upcoming recession due to ongoing inflation and major global events will not just affect the world economy but possibly make a severe impact on the economies of developing countries. And with this unfortunate circumstance arising, making sure your business is recession-proof has become paramount.
The National Bureau of Economic Research (NBER) has defined a recession as a significant decline in economic activity which lasts for a few months. Though the year 2022 saw the travel and tourism industry make a tremendous comeback after the pandemic, especially with the inaugural ceremony of the FIFA 2022 World Cup, the approaching situation can’t guarantee that this trajectory will sustain in the upcoming years.
However, with new and interesting sites being introduced along with the restoration of historical attractions, there is nothing stopping people from travelling to the opposite ends of the world with the expectation to experience something new and different. This current trend means that at present owning a business in the travel and tourism industry can be very lucrative. But the most common concern in everyone's mind is, “how to make sure it can stand the test of time?” or in this case the recession.
Before discussing in depth the topic of this article, let’s first see how the Recession impacts the Travel and Tourism industry and what we understand by a recession-proof business.
The impact of the Recession on the Travel and Tourism industry
Fluctuations in the travel and tourism industry are very common. Tourism has suffered, time and time again, due to events like 9/11, the FIFA World Cup, the Russia-Ukraine war and of course Covid-19. Drops in travelling and bookings are always proportional to economic downturns.
Travelling is an integral part of our lives since people travel for business purposes, medical purposes, government or legal purposes, personal reasons, etc. but since 2020, for almost two years, the worldwide shutdown stopped all of it. Moreover, many people lost their jobs and businesses, leading to some major cutbacks on their budgets. This resulted in travelling becoming a luxury many will not be able to afford in the upcoming recession.
But no matter what happens, the activities of the travel and tourism industry will never completely standstill for anything. Even if it's for a week or a weekend people like to go somewhere by air, water or road just to release any pent-up stress. More importantly, people will take this chance to meet up with friends and family after spending two years apart.
A Recession-proof Business
We know that recession results in a visible decline in the GDP of a country, however, it is its unpredictability of duration that frightens all business owners and their employees. As recessions can last from two to 18 months, they can easily take down companies and businesses that are not equipped to deal with such situations.
How the company will perform during a recession depends on multiple factors from the type of services it trades to how they handle its clients. For example, educational, healthcare and technological service providers can ride the storm as their demands remain unimpacted during a recession.
A business that is operated by using different techniques and strategies that will ensure its sustainability during a recession or any other economic downturn can be coined a recession-proof business. Microsoft can be considered a prime example of such a business.
In order to sustain a business in the travel and tourism industry and reduce the impact of the recession on its overall activities, all they have to do is follow the 6 proven suggestions to recession-proof the business.
Contingency Plan
In any situation, whether it be personal or professional, it can never hurt to have a backup plan or a contingency plan for unfortunate events and circumstances. Rather than facing a situation like “a deer in headlights”, prepare a strategic financial plan to cope with any possible economic downturn.
By building a strategic financial plan and adhering to it, you can not only assess how well the business is doing financially at the present but also save up by building a cash reserve and be mindful of the business debts in case of a recession. The cash reserve should be set up so that it can sustain the company for at least 6 months into the recession. Covering any important business expenses during this time is the main objective of the reserve and it improves the chances the business can have in the long run.
Diversify Revenue Streams
It is often favourable to find a specific niche in the industry and improve upon it as much as possible. But it can’t be guaranteed that the niche the business is focusing on will be fruitful. So the key to recession-proof a business is to diversify revenue streams.
Having multiple ways of earning revenues and making a profit can ensure a constant stream of income. Recession can make it harder for any failing business to shift its focus to another potentially lucrative concept. So providing more than one type of product or service at a time can keep your business flexible and improve its sustainability.
Downsize and Cutback
Running a business is never a one-man job, it sometimes needs an army. But preserving a great number of employees is too costly which can backfire in the long run. When the recession hits, you will have to let go of some of your least productive or irreplaceable employees to sustain your business. So why not do it now?
Downsizing is a proven strategy to recession-proof the business. In this way, instead of leaving them out of work during a recession, you will be giving them a chance to look for another opportunity or prove their worth for the business. So you can effectively cutback on some unnecessary expenditures by cutting off any incompetent personnel from your business.
Invest in Marketing
Though we have talked about downsizing and cutbacks, this marketing is not an area any business should cheap out on. Investing in strategically promoting your business to the target consumers can help in attaining new customers.
Strategically constructed marketing moves can build your business in a new light making up for the losses of the recession. Keep a close on your company’s website analytics to ensure revenue generation. Keep in mind that even the most subtle strategic marketing moves or changes in your approach to the general public can make a huge difference.
Opt for Automation
Since we have already established that downsizing can help recession-proof a business, we also have to mention that adequate investment in the right technology and automation can help make up for the lessened number of your manpower. There are many automated technological tools that can help improve the customer experience in the travel and tourism industry. Investing in them beforehand will be a wise thing to do, rather than struggling to gather funds during the crisis itself.
Several technological advancements have been taking the industry by storm, especially during the pandemic. For instance, AR and VR have improved the customer experience by giving them a taste of the destination virtually, AI-powered chatbots made quick replies to customer queries possible, online payment ensures a contactless transaction of funds so clients can book their desired trips from the comforts of their home, and many more yet to be mentioned.
Prioritize Customer Service
In every product or service providing sector customer services are always prioritised to ensure the long-term stability of the business, and the travel and tourism sector is no different.
Repeated sales are very important in the travel and tourism industry. Through strategic marketing, we may be able to attract more customers, but keeping a hold on the already existing ones is more cost-effective. If you put more emphasis and focus on meeting your existing client’s demands and concerns, it can help in making your business recession-proof. Hence, make sure your staff is equipped with the proper training to provide the best client service.