If one thinks back to 2019, the debate surrounding the future of London was over Brexit and whether its status as the leading financial centre in the world would be be eroded. Today it faces a far sterner test and one which may only just be beginning.
The Prime Minister this week is reported to be urging the wealthiest countries in the world to invest and support the vaccination programmes across the world. There is a real ambition to try to get global economies moving once again by the end of 2022. However, many are concerned that we may see further lockdowns as winter returns in the UK and argue that “lockdowns” may become a regular reality over the next decade which means that many companies will need to continue to adjust their operational approaches until 2030 and should prepare to operate off 60-70% pre-pandemic levels.
Is this too pessimistic? Most forecasts believe that travel will have recovered by 2025/26. It is certainly believed that leisure travel will recover fully but the problem is whether business travel will recover as strongly alongside? Many believe that business travel will lag behind and that there will be a natural decline in the region of 20% as so many have learnt to operate via digital comms and without the need to travel. A 20% fall, if correct, would have a major impact as the revenues generated by international business has a disproportionate impact as it brings in greater relative revenues for the 5-star hotel operations and for leading restaurants.
After the 2008 financial crash, it took 5 years for business travel to recover. It is not too far-fetched to see that it may take 7-8 years post-pandemic. Add in the increased drive by many companies towards reducing travel as they seek to improve their environmental credentials and one can see that business travel may never ever reach the same heights again.
Add in the fact that many also forecast a 30% fall of employees returning to offices for 5 days a week, then one easily see the challenge which London, maybe most especially, faces over the next 5-10 years. London productivity equates to a significant percentage of the UK’s GDP, so a major problem does face the City, one which will need innovative thinking.
It is argued that, in future years, many will talk about pre-pandemic and post-pandemic just as previously talked about the pre-war and post-war years. We arguably face a ten-year cycle of change. Cities will be innovating and adapting and this will impact on hospitality which lies right at the forefront of the battle and models will need to change.
Over the last year, many have been argued that pre-Covid models were not sustainable for the future and that operators would need to adjust to 60% levels of business. There is a logical argument to this if one agrees with the above. If true, it is logical that the industry will invest greater levels in technological solutions with new service robots playing a role as well as smart technology.
Advocates for this argue that operators will be able to reduce labour cost in their models quite dramatically but the counterargument is that could further widen existing divides: between low, and middle versus high-skilled workers, between digital companies and the rest, and also between advanced and emerging markets. Advanced economies with more technology investment and higher-skilled workers are likely to benefit most.
There are many pressure points to be faced. The one truth is that the challenges still to come could well be as difficult as the challenges faced over the last 18 months.