The Future of Tourism: Closing the Labor Gap; Enhancing the Customer Experience

As tourism recovers and builds momentum, the resilience of the industry is becoming increasingly evident – people have an enduring desire to travel. Despite the difficulties, international tourism rebounded significantly in 2022: tourist arrivals to Europe and the Middle East climbed to around 80% of 2019 levels, and the Americas recovered around 65% of their pre-outbreak levels. This achievement is made all the more significant in the absence of arrivals from China, which had the world’s largest outbound tourism market before the outbreak.

Recovery and growth are likely to continue. According to the World Tourism Organization (UNWTO), international tourist arrivals could reach 80 to 95 percent of pre-outbreak levels by 2023, depending on factors such as the extent of the economic slowdown, the recovery of tourism in the Asia-Pacific region, and geopolitical tensions. Similarly, the World Travel and Tourism Council (WTTC) predicts that by the end of 2023, nearly half of the 185 countries studied by the organization will have recovered to pre-pandemic levels or within 95% of full recovery.

Long-term projections also show optimism for the next decade. Travel and tourism GDP is expected to grow at an average of 5.8% per year between 2022 and 2032, outpacing the 2.7% annual growth projected for the overall economy.

So, are all systems fit for travel and tourism? Not really. It is also clear that the industry faces a chronic and widespread labor shortage that can be seen as structural. after the loss of 62 million jobs in the tourism industry in 2020, there is still an imbalance in labor supply and demand. Today,11%of tourism jobs in the EU are likely to remain vacant, a figure that stands at 7% in the US.

There has been a massive exodus of tourism workers (especially in customer-facing positions) to other sectors, and there is no sign that the industry will be able to bring all of them back into the system. Hotels, restaurants, cruise ships, airports and airlines are all facing staff shortages that can lead to operational, reputational and financial difficulties. If left unaddressed, these shortages could limit the industry’s growth trajectory.

Current labor shortages may be rooted in factors related to the nature of work in the industry. Chronic illnesses coupled with the effects of COVID-19 have made it difficult for the industry to rebuild its workforce. In general, most tourism-related work is informal, in part due to high seasonality and weak regulation. Conditions such as long working hours, low wages, high turnover and lack of social protection tend to be most evident in the informal economy. In addition, shift work, night work and temporary or part-time work are common in the tourism industry.

The industry may need to revisit some of its fundamentals in order to build a more sustainable future: either by making the industry more attractive to talent (and creating the conditions to retain staff for longer) or by improving products, services and processes to complement existing staffing needs or address existing pain points.

One solution may be to build a workforce with the digital and interpersonal skills to meet the rapidly changing needs of travelers. The industry can leverage existing technologies to provide customers with digitally enhanced experiences, address staff shortages and improve working conditions.

Supplementing Concierge Services with Chatbots

The pace of technological change in many areas of life has redefined customer expectations. Technology-driven services are often real-time and at the customer’s fingertips, with no lines or waiting. In contrast, the summer 2022 airport and airline disruptions widely reported in the media suggest that customers are not receiving the same level of digital innovation when traveling.

Imagine the following travel experience: In 2035, you embark on a long-awaited honeymoon vacation to a tropical island. The trip goes smoothly, with no obstacles or hurdles. You book your trip via videoconference with a virtual travel agent and destination travel specialist. Your itinerary is selected with the support of generative artificial intelligence, which analyzes your preferences, recommends personalized travel packages, and makes real-time adjustments based on your feedback. Before leaving home, you check in online and QR code your luggage. You take a self-driving cab to the airport. After checking your baggage at the self-service counter, you pass through security and biometric screening. You use the QR code on your membership card to access the premium lounge with a glass of wine and a club sandwich. After your flight, a pre-booked self-driving cab will take you to the resort – no check-in lines, everything is done online (including choosing your room and making sure the virtual concierge has delivered red roses and a bottle of wine) champagne). As the luggage robot delivers your bags to your room, your personal digital concierge will show you your honeymoon itinerary and all the required reservations. For romantic dinners, you order and check out the same through the restaurant app on your desk. So far, your human interaction has been minimal. However, during dinner, the sommelier will personally talk to you about the wines. The next day, hotel apps and digital guides make sightseeing easier, and you won’t get lost! With holographic technology, virtual guides bring historical figures to life and take your sightseeing experience to a whole new level. Then, as arranged, a local citizen will meet you and take you to their home for a local family dinner.

This scenario has less human interaction than traditional travel, but thanks to the underlying technology, it can go smoothly. The human interactions presented are real, meaningful, and add a special touch to the experience. This may be a far-fetched example, but the essence of the scenario is clear: using technology to alleviate typical travel pain points, such as queuing, misunderstandings, or misinformation, and elevate the level of human interaction.

Travel with less human interaction may be considered a disruptive idea, as many travelers rely on and enjoy human connection, known as “smile service”. This will always be the case, but maybe it’s time to consider incorporating digital experiences into it. The industry may not need to rely entirely on humans to serve its customers. Maybe the future of travel is physical, but digital augments (and with a smile!).

Digital solutions are emerging to close the workforce gap

Digital innovation is improving customer experiences across multiple industries. Car sharing apps overcome the service counter waiting times and endless paperwork that travelers have traditionally had to deal with when renting a car. The same applies to time-consuming hotel check-in, check-out, and payment processes, which can annoy tired customers. These pain points can be eliminated. For example, in China, Huazhu Hotel Group has installed self-check-in terminals that allow guests to check in or out within 30 seconds.

During the pandemic, the adoption of some digitally-enhanced services accelerated in search of safer, contactless solutions. During the Beijing Winter Olympics, a restaurant designed to minimize physical contact used a system of tracks on the ceiling to bring meals directly from the kitchen to the table. Customers around the world are already familiar with restaurants that use apps to display menus, accept orders, and pay for them, as well as hotels that use bots to deliver luggage and room service. Similarly, theme parks, movie theaters, stadiums, and concert halls are deploying digital solutions such as facial recognition to optimize entrance control. For example, Shanghai Disneyland offers annual pass holders the option to opt for facial recognition to facilitate park admission.

In these examples, technology can close the workforce gap by reducing the need for personnel. Automation and digitalization can also free employees from repetitive tasks that can be handled more efficiently through applications, leaving the human to the roles that add the most value to employees. For example, technology can help customer-facing employees provide more personalized services. With access data analytics, frontline staff can easily grasp guest details and preferences. With the help of technology, interns can become experienced butlers in no time.

While guest-facing technology can reduce human needs, facilitate contactless interactions, and provide convenience and personalized service to travelers, the industry is only beginning to explore its potential. A report by Skift Research shows that the hospitality industry, in particular, has yet to tap the potential of technology. Only 11% of hotels and 25% of hotel rooms globally are supported by hotel apps or use in-room technology, and only 3% offer keyless entry. Of the five available technologies examined (guest apps and in-room technology; Virtual concierge services; guest messaging and chatbots; digital check-in and self-service terminals; and keyless entry), all technologies have relatively low market penetration.

While apps, digitalization, and new technologies may be the answer to deliver better customer experiences, the travel industry is also likely to face competition from technological advancements, especially virtual experiences. Through AR/VR technology, museums, attractions, and historic monuments can become interactive and, in some cases, more lifelike, enhancing the physical travel experience by reconstructing historic locations or events.

So far, tourism is arguably one of the few industries that cannot be easily replaced by technology. It is impossible to replicate the actual experience of traveling to another place. With the advent of the virtual universe, this may change. Potential travelers can enjoy an activity or experience from the couch without any logistical hurdles and without committing to travel to another country for any time. For example, Google offers a virtual tour of the Pyramids of Sultan Meroe through an immersive online experience available in multiple languages. Cryptocurrency banking group BCB Group has created a virtual universe city that includes representatives of some of the world’s most visited destinations, such as the Great Wall of China and the Statue of Liberty. According to BCB, the total cost of flights, transfers, and admission to all these landmarks would amount to $7,600, while a virtual tour would cost just over $2.

The metaverse also offers potential for business travel, especially in the convention, incentive, convention and exhibition (MICE) sector. Participants can attend events in the same immersive space while connecting from anywhere, greatly reducing travel, venues, catering, and other costs.

The appeal and convenience of this digital experience makes it all the more urgent to offer seamless, customer-centric travel and tourism in the real world.

Outsourcing and remote work are also helping to address labor shortages

While COVID-19 has pushed organizations across industries to embrace remote work, there are many hospitality industry roles that rely on direct physical services such as laundry, cleaning, maintenance, and facility management that cannot be performed remotely. If faced with staffing shortages, these roles can be outsourced to third-party professional service providers and existing employees can be retrained to take on new positions.

In McKinsey’s experience, the total cost of service for this type of work in a typical hotel can account for up to 10% of the total operating costs. For the most part, these personas are not guest oriented and contribute little, if any, to the hotel’s brand value. For these reasons, digital-based professional solutions may become an integral part of third-party services for hotels looking to outsource this type of work.

One of the lessons learned after the COVID-19 pandemic is that many tourism industry employees have moved to similar positions in other industries because they are disappointed with the working conditions in the industry. Compared to long and seasonal jobs in the tourism industry, specialized multi-industry companies have been able to shift their employees from the tourism industry to other industries that offer stable employment or more regular working hours.

The remaining travel and tourism workers may be looking for more flexibility or work-from-home options. This can be an effective solution for employee retention. For example, travel agents with specific destination expertise can work from home or receive counseling as needed.

Where remote work or outsourcing is not feasible, the hospitality industry can explore other solutions to improve operational efficiency and employee satisfaction. More flexible staffing models can better match available labor with peaks and troughs in daily or even hourly demand. Hotels can also redesign roles so that fewer people are needed to perform the same number of tasks. This may involve combining similar roles, or cross-training employees so they can switch roles. The redesigned roles could potentially improve employee satisfaction by allowing employees to explore new career paths in hotel operations. Combined roles can develop interdisciplinary skills, such as supporting housekeeper training and proficiency in certain maintenance areas, or supporting front desk assistants in developing management skills.

If management or ownership is shared across hotels, you can configure roles to cover the site network instead of individual hotels. By applying a combination of these methods, hotels can reduce the number of staff hours required to keep operations running to the same standards.

All in all, operational alignment combined with increased use of technology could provide the industry with a way to overcome staffing challenges and provide customers with the seamless digitally enhanced experience they expect in other aspects of their daily lives.