Focus on Global Travel: Disruption and reinvention

The most disrupted character found in fact or fiction may well be Sisyphus. Every time he came close to his goal, he was sent back to the starting line.

It's a fact of this century that disruptive events are altering life and business at an accelerating rate. And like many industries, travel and tourism evolves along a continuum made jagged by disruption. But travel's timeline differs from Sisyphus' in a significant way: Travel's story is one of disruptions followed by reinvention and progress.

Travel actually appears to be particularly vulnerable to disruptive forces, from natural disasters to terrorism to political upheaval to economic downturns. But, perhaps as a result of its long list of vulnerabilities, it has also shown itself to be particularly resilient. Travel's proven ability to reinvent itself quickly and successfully resulted in growth last year that — once again — outpaced worldwide gross domestic product (GDP).

On April 15, an extraordinary collection of global CEOs representing every sector of the travel industry will convene in Madrid. They'll examine the current forces of disruption and share observations, research and best guesses about what challenges — and resulting opportunities — the industry is likely to see in the coming years.

The occasion for the gathering is the annual World Travel and Tourism Council (WTTC) Global Summit. And the speaker roster reflects the full range of the commercial and geographic diversity within what will soon be the largest industry in the world.

Airline CEOs from Turkey, Abu Dhabi, Japan, Ireland and Hawaii will be on stage, as will the top executives from the largest online travel agency in the world (Expedia's Dara Khosrowshahi) and the fastest-growing in China (Qunar's Chenchao Zhuang). 

The heads of destination marketing organizations, airport authorities, tour operations, car rental companies and hospitality groups from around the world will engage and debate.

Although the pointed focus will be on travel, the discussions will be informed by a wide range of outside expertise. Joining industry leaders at the podium will be bankers, researchers, analysts, journalists, politicians, philanthropists and a paleoanthropologist.

And keeping true to the theme of disruption and reinvention, attendees will hear from the full spectrum of forces shaping the industry. Not only is Hilton Worldwide CEO Christopher Nassetta a speaker, but so is an executive from the company most closely identified with the forces that currently roil the hospitality industry: Airbnb's Chip Conley.

Disruption and risk

David Scowsill

"If you look back over the last 20 years of this industry, each sector suffered massive disruptions and was forced to reinvent itself," WTTC President and CEO David Scowsill observed. "It has been disrupted by terrorism, such as the 9/11 tragedy, which completely changed the travel agency model for both leisure and business. Within aviation, the advent of the low-cost carriers, from Southwest to EasyJet to Ryanair, forced network airlines to reinvent themselves. With the rise of the online travel agencies, distribution channels were completely reinvented. And now, disruption is coming from the sharing economy, with businesses like Airbnb challenging the status quo."

Disruption, Scowsill noted, moves at different speeds; some significant events develop slowly and allow time for advance preparations, others come without warning.

"Climate change is ongoing over decades," he said. "It's forcing the industry to look very carefully at itself in terms of sustainability, environmental impact and managing-down carbon emissions. Others, such as terror attacks, sudden economic shifts or natural disasters, can force businesses to reinvent themselves within months."

And somewhere in between, perhaps, is technology, whose impact, whether it leaps or creeps, can have the most dramatic and long-term effects. A destination can repair itself after a hurricane or earthquake, or add levels of security after terrorism, but there's no returning from technology-driven transformation.

An immediate consequence of disruption is risk. Significant strategic and secular changes of direction must be made, and often made quickly.

"We wanted to start at the top and access the largest issues at the global level," Scowsill said. "Which is why we invited Richard Fenning to discuss how businesses manage universal risks such as terrorist or economic disruptions, and also Julie Meyer, who brings the perspective of how small and medium-size firms can better face risks inherent to their businesses."

Fenning is CEO of Control Risks, a consulting firm specializing in political, security and integrity challenges. It was originally founded to advise insurance companies to mitigate risk and has expanded its practices to corporations worldwide.

Meyer leads Ariadne Capital, an investment and advisory firm focusing on corporations that seek to build new digital strategies and revenues.

The sharing economy

Arguably, the most significant disrupter identified in travel today is the sharing economy. Anyone with an automobile can now compete with established black-car companies, homeowners with spare rooms can go head-to-head with hoteliers and local residents can offer their services as an alternative to guided tours.

Airbnb, among the best-known companies that enable sharing, currently lists as much room inventory as major hotel groups. Conley, the company's head of global hospitality and strategy, said that he didn't know yet exactly what he would tell summit attendees, but he said he looks at Airbnb as a "category creator" rather than a disrupter.

Chip Conley

"Hospitality has always been full of innovation," Conley said. "Holiday Inn created the first global brand. Embassy Suites and Residence Inn built the extended-stay category. Airbnb is also growing a new kind of supply: home-sharing in urban markets, and some vacation rentals. We facilitate a collection of people who have chosen to operate very small businesses, with three, four or five rooms."

Conley pointed out that 76% of Airbnb listings are outside the main hotel districts in cities.

"They're in different locations, and there are different-use cases for why people book with us," he said. "A lot of our travelers might not have made the trip if they didn't have Airbnb as a choice. Perhaps they have a relative in a hospital outside the financial district undergoing long-term treatment, and family members want to visit. Our average length of stay is twice as long as a traditional hotel."

Offering further evidence that Airbnb could be seen as a different category rather than a competitor for existing market share, Conley said, "In the markets where we are strongest — New York, San Francisco, Paris, London — these markets are seeing historically high occupancy rates at the same time we're doubling in size."

Convincing hoteliers that Airbnb's entry wasn't a zero-sum game went a long way toward creating an environment where a dialogue could be opened between his employer and established hospitality companies, he said.

A hotelier himself — Conley was founder of Joie de Vivre Hospitality and still has equity in 18 properties — he said he has seen a huge shift in the relationship between Airbnb and large hotel companies during the two years he has been associated with the company.

"They have moved from looking at us with confusion and curiosity — and maybe a little anger — to a genuine interest in learning from us and figuring out how to collaborate with us. In order to do that, we came halfway across the bridge and asked them to come halfway to meet us. The truth is, we have something to learn from each other."

Conley said Airbnb is in direct conversations with the six largest hotel groups and that executives from Hilton and Hyatt, as well as Marriott CEO Arne Sorenson, have visited their headquarters for "immersion" sessions. (Starwood executives were scheduled to visit the week after the interview with Conley took place.)

"There are lots of conversations about how to be collaborative and how we can work together to promote travel and tourism globally," he said.

Some governments, too, appear to be willing to meet Airbnb halfway.

In March, Britain's House of Commons "voted to formally legalize home-sharing," Conley said. "Last year, France did the same. San Francisco, San Jose, Portland, Grand Rapids, Nashville, Hamburg, Amsterdam — there's a long list of new laws around home-sharing. We started paying occupancy taxes even before some legislation occurred — for instance in Washington, D.C., and Chicago."

But Conley also acknowledged resistance to home-sharing. "Some, like New York, won't even accept our occupancy-tax checks," he said.

Although he doesn't know exactly what he'll say when he stands before politicians, tourism promoters, hoteliers and others in the industry in Madrid, Conley said he would be wearing two hats, representing his own traditional hospitality interests and the sharing economy.

However it's structured, his presentation will no doubt focus on collaboration between disrupters and the disrupted as a potential force in reinvention.

Disruptive demographics

Demographic trends can offer clues to future disruptive patterns, and the WTTC has enlisted Euromonitor International, a market research and business intelligence firm, to focus on how changes in cities will impact travel and tourism in coming decades.

Tim Kitchin

Caroline Bremner, head of travel research, spoke with Travel Weekly about what Euromonitor CEO Tim Kitchin will focus on during his presentation in Madrid.

"There is an irreversible shift to urban living," Bremner said. "It reached a tipping point after 2008. In that year, 50% of people lived in cities. Last year, it was 53%, and in 2050, it will be 67%. This is a fundamental shift and has significant implications for businesses and how economies will work."

Cities are already powering the global economy, she said, with New York's economy being larger than the entire country of Spain.

By 2050, Bremner said, more than 9 billion people will live in cities.

"That's an increase of 2.5 billion new urban consumers," she said. "That's an extra China and India combined being added to the world's population, but all in urban metropolitan areas."

In 1950, there was only one "megacity," defined as having a population of more than 10 million. Just 15 years from now, there will be 30. What will then be the three newest — Santiago, Chile; Bogota, Colombia; and Bangalore, India — are in emerging markets.

By 2030, Jakarta, Indonesia, will overtake Tokyo in population, but population demographics, she said, were only part of the story. Looking at GDP, Tokyo will still have a larger spending pool.

Travel businesses can use urban demographic patterns to help them plan, Bremner added.

"Cities are so strong and powerful, companies should really develop city-specific strategies rather than national strategies," she said.

For the travel industry, it could be an enhanced way of looking at source markets. "For the cities that are growing most — and most of those are in China — it's important to know what is the salary level people need to reach to have a propensity to travel abroad," she said. "The answer is: $35,000 per household. Any city that crosses that threshold [in large enough numbers] becomes a target market.

"Then, let's shift up a gear. What is the framework for a successful city to facilitate travel and tourism flows in and out? There is a framework for success, and it includes economic and environmental planning, levels of innovation, social elements and the actual travel aspect. These will dictate success or failure for a city."

All of this will cost money. Bremner said McKinsey & Co. estimated that $57 trillion will have to be spent from 2013 to 2030 to ensure that people can travel and grow the global economy.

"That's a huge amount of money," she said. "Looking at travel-related expenditures alone, that number includes $2 trillion for airports and $4.5 trillion for rail, with the majority being spent in the Asia-Pacific region."

The next question, she said, is to try to understand how new and old business models can work together. She feels many new models will emerge within the sharing economy, from ride shares to private room rentals.

"Things will need to work seamlessly," she said. Connectivity will be the most important underlying factor to making urban areas viable to live or visit, and underpinning all must be "the enabler of change, technology. Cities will be so much more connected," she said.

How?

"Smartphones," she said.

Inherently good disruption?

The WTTC has long highlighted examples of how travel and tourism can be "a force for good."

The industry is self-interested in preserving the attractions that form the foundation for so much leisure travel, and additionally it feels outside pressure toward corporate social responsibility practices. Criticism from without and proactive efforts within combine to frame yet another form of disruption and reinvention for travel and tourism.

Each year, a portion of the summit is devoted to "Tourism for Tomorrow" awards, which shine a spotlight on reinventions in this area through examples of conservation efforts, sustainable operations and ecotourism initiatives.

The organization has also, within the context of the Summit, invited self- and outside-examination of industry efforts toward being "a force for good."

Richard Leakey

Notable among speakers at this year's conference will be paleoanthropologist Richard Leakey, who along with his parents and others in his immediate family has been credited with several important East Africa discoveries related to human origins.

He has also been a driving force in anti-poaching efforts in Kenya and will be the subject of a film, scheduled to be released next year, by Angelina Jolie and Brad Pitt.

A lifelong conservationist and a part-time politician, Leakey seems to thrive on controversy, and he has a long history of interaction with the travel industry. He has seen its contributions, its shortcomings and how tourists' perception of a country can have tremendous impact on the health of its economy.

Authenticity, a key word for drawing tourism to developing countries, has been eroded in Kenya, Leakey believes.

"We, as Kenyans, haven't insisted on certain standards," he said. "On one hand, some of the Masai [tribal] attractions suffer from over-commercialization. And on the other hand, we're sensitive about people coming here to practice voyeurism. I think there's a happy middle ground, something that will stand up to state scrutiny" yet provide an authentic experience, he said. "Dialogue is important."

Overall, Leakey believes that tourism has created enormous opportunities for the economy.

"It's one of our big industries," he said. "But I worry about people who try to get the most amount of money in the shortest amount of time, which means pricing can put tourism out of reach for some, and could ultimately put us out of business."

Of immediate concern to Leakey is the belief that Kenya is unsafe to visit. "Unfortunately, tourists are very fickle, and we're at the mercy of perceptions that are partly driven by events, partly by media portrayal."

He wants to emphasize that there is "no threat of terror groups whatsoever" in the national parks. "I think we need to understand that Kenya as a whole is larger than Texas. What might happen on the Gulf Coast doesn't really impact Amarillo. No one is going to take you into areas of high risk, and that needs saying. "

The conflict between wildlife management and the admittance of local domestic animals into parks also troubles Leakey.

"We have some local communities that until recently believed that wildlife was being maintained only for the benefit of foreigners and don't feel that it benefits the country," he said. "I don't think the benefits to communities are realized at their level, and the government has been singularly inept at putting forward the case."

Kenya is not alone in failing to deal with the issue adequately, Leakey believes.

"I don't see any country in this part of the world that has figured it out yet," he said. "Kenya must set its priorities; if everyone can have goats, there's not room for wildlife. You then have to make policies and stick to them, even if that's uncomfortable and unpopular in certain communities."

Leakey hopes next year's Jolie-Pitt film about his work will inspire both an anti-poaching sentiment and tourism.

"This movie will carry a very positive theme," he said. "Even though it's about poaching, there's an upbeat message in the film. Most will be shot in Kenya, with a huge amount of beautiful scenery. And not just in the parks. It will also capture the beauty of the dry, desolate north, an extraordinary area, where we found the Turkana Boy skeleton. There's an enormous potential benefit to create a hub for tourism in the cradle of humanity, not just in Kenya but in Ethiopia, as well."

Fellow Kenya native and Abercrombie and Kent CEO Geoffrey Kent will interview him on stage at the summit, and Leakey said he hopes Kent will "ask me questions to allow me to realistically say that there are still enormous opportunities in Kenya."

World leaders, thought leaders

In addition to the speakers mentioned above, during the day-and-a-half summit delegates will also hear from Jose Manuel Barroso, president of the European Commission from 2004 to 2014, as well as several prominent citizens of the host country, including Simon Pedro Barcelo, president of the Barcelo Group of hotels; AnaBotin, executive chairwoman of Banco de Santander; Luis Gallego, Iberia CEO; Luis Maroto, Amadeus CEO; Federico Gonzalez Tejera, NH Hotel Group CEO; and Emilio Butragueno, institutional relations director of the Real Madrid soccer team.

Among industry figures well-known in North America who will also be speaking are Roger Dow, CEO of U.S. Travel; Michel Taride, president of Hertz; Michael O'Leary, CEO of Ryanair; Adam Weissenberg, global travel, hospitality and leisure sector lead for Deloitte & Touche; Sean Donohue, CEO of Dallas/Fort Worth International Airport; and Howard Eng, Greater Toronto Airports Authority CEO.

Less well known in the U.S., but no less influential, are these global industry speakers: Masaru Onishi, chairman of Japan Airlines, and Hiromi Tagawa, chairman of Japan Travel Bureau; Kuoni Group CEO Peter Meier; former TUI executive chairman and chairman of WTTC Michael Frenzel, as well as TUI Group Deputy CEO Johan Lundgren; Shi Boli, CEO of Beijing Capital International Airport; and Chen Feng, chairman of HNA Group.

And the WTTC has nurtured relationships with other global industry organizations. United Nations World Tourism Organization Secretary General Taleb Rifai, Pacific Area Travel Association CEO Mario Hardy and IATA CEO Tony Tyler will also be speaking.

Author Gary Vaynerchuk will lead a session focusing on the industry's use of social media, and model Petra Nemcova will discuss how she has partnered with industry companies to the raise money for her nonprofit, Happy Hearts. David Munoz, chef/owner of DiverXO and StreetXO and Desiree Bollier, CEO of Value Retail, will also speak.

Moderating various sessions will be journalists including CBS News Travel Editor Peter Greenberg, BBC presenter Stephen Sackur, summit anchor Nick Ross and the author of this article, Travel Weekly Editor in Chief Arnie Weissmann.

Why now?

WTTC CEO Scowsill says the timing is right for the theme "disruption and reinvention."

"Everyone in the industry is looking forward to two or three years of growth and job creation, but equally each CEO knows there are going to be points of disruption," he said. "They can't predict disruption. But they can plan for disruption."