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Talking Trade blog

Pivoting the business: Small business survival in travel and tourism

Published 03 June 2020

The COVID-19 pandemic has hit two groups particularly hard: smaller businesses that typically operate with limited resources, and the travel and tourism sector, with nearly all travel suspended. Unfortunately for many, the two groups often intersect, as many micro, small and medium enterprises (MSMEs) deliver travel and tourism goods and services.

The sheer volume of MSMEs in a catastrophically disrupted sector is a problem.  Government support, even when available, may be insufficient, late or inadequate to replace lost revenue from a collapse in demand.

While smaller firms that are teetering on the edge may be located in sectors or industries that may never recover, many of the MSMEs in travel and tourism are facing a short-term challenge.  It is, after all, highly likely that many tourism activities will resume.  Travel may not be exactly the same, but it will probably not vanish entirely.

It is therefore important to figure out how to help MSMEs sustain themselves until demand begins to slowly return.

Small businesses tend to be famously flexible and adaptable.  They are not constrained by endless meetings and “circling back” to the same issues but can make decisions quickly and execute nearly as rapidly. 

A crisis situation means that many MSMEs, like businesses everywhere, can be more open to new ideas and solutions than might otherwise be the case. 

Solving the demand problem for travel and tourism companies requires creative thinking. 

First, MSMEs have to get online.  Fortunately, being online today does not automatically mean a fancy website.  It can be as simple as a Facebook or Instagram page. 

Second, smaller firms need to think much, much bigger than they may have ever tried in the past.  Items that are sold to tourists on the beach may be attractive items for “couch surfing tourists” unable to even leave their house, much less visit a dreamy beach in person.  But finding these potential customers means that smaller firms need to figure out how to get their goods and services to potential global customers.

Third, finding new customers in new markets means that MSMEs need to figure out how to effectively harness existing platforms.  While there has been a lot of hand wringing about the increasing dominance of digital platforms of every kind, in a crisis, small firms need to find partners that are already set up and used to handling all sorts of issues that MSMEs may face. 

Platform companies exist for nearly every type of purpose—from marketing and selling goods to managing trade in services. 

Firms that sell “things” to tourists might find that the market for their particular products could be significant. This is especially true for MSMEs that create and sell unique items that reflect their location.  Customers that cannot travel may still want to have unusual items that remind them of future travel plans, bring a smile to their face, or reflect past travel experiences.

It might be assumed that MSMEs that deliver services to travelers will be unable to manage at all.  As an example, if no one is coming to the visit the city, site or beach, what good are tour operators or local guides?

However, smaller firms should not despair.  For many companies, it is possible to pivot and offer travel and tourism services online.  AirBnB, for instance, has been developing an innovative lineup of “experiences” from their local hosts that are in hot demand. 

Many of these offerings come with substantial price tags for customers, allowing firms to generate revenue even in a purely virtual world.  It may even be the case that some firms offering extremely popular experiences make more money in the downturn than before, as a global audience can provide more customers than those requiring a physical presence.

What do these travel experiences look like?  Could be learning the secrets of Japanese whiskey, frying spring rolls with a street vendor in Bangkok, creating a storybook for the whole family with an author in Mexico, or taking a scuba “tour” with a local guide in the Maldives.  Customers might sign up for virtual walking “tours” of far-flung locations like temples or forests in Bhutan or opt to make sangria with drag queens in Spain. 

Innovative offerings from creative MSMEs could dramatically expand the concept of travel, leaving customers even more eager to experience something similar in person once flights and travel resume.  Destinations that weren’t anywhere on a personal “bucket list” could shoot up during a time of lockdown and travel disruptions.

Fourth, even firms that are able to deliver digital products and services with the kind of quality and interest to draw a global audience will need to rethink their offerings to also attract more local tourists.  These local markets may have been overlooked as regional and global tourism boomed. 

The assumption has often been that locals do not or will not spend as much on nearby travel as travelers from far-flung locations.  It is important to remember that many of these same “locals” have, and will spend, plenty of money on travel to other locations.  If they redirect spending to nearby offerings, it may help reduce the fall in revenue.

Finally, it remains important to recognize that not all MSMEs will make it.  Not every small shop or stall that offers food to tourists will be able to pivot online.  Food that appeals to tourists may not sell well to locals or to local travelers.  The margins for the company will shrink as food aimed at tourists are typically priced higher than local food options. 

Even the most creative and flexible MSME may be unable to ride out the Covid crisis. 

But many more than might otherwise be expected could survive and even thrive in times of economic downturn and a sudden, sharp loss of demand for their goods and services.  Survival will require the kind of pivoting that is a hallmark of good smaller firms. 

Travel and tourism will return.  When it does, MSMEs will need to be ready to manage.  The best prepared could meet the future with brighter prospects than before the crisis ever emerged. 

© The Hinrich Foundation. See our website Terms and conditions for our copyright and reprint policy. All statements of fact and the views, conclusions and recommendations expressed in this publication are the sole responsibility of the author(s).

Dr. Deborah Elms is Head of Trade Policy at the Hinrich Foundation in Singapore.  Prior to joining the Foundation, she was the Executive Director and Founder of the Asian Trade Centre (ATC). She was also President of the Asia Business Trade Association (ABTA) and the Board Director of the Asian Trade Centre Foundation (ATCF).

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