For more than a year now the global travel and tourism industry has ceased to function with borders closed and people mostly confined to their homes. Things are only starting to get back to normal, which means that the sector is still trying to work out the ramifications of more than a year with effectively no business.
This isn’t just a problem for hospitality. It touches all areas of the sector. Airlines, especially those with significant international operations, have perhaps had it tougher than most others in the sector.
Ahead of his appearance at IHIF we interviewed KLM CEO Pieter Elbers to find out where things stand.
Hospitality Insights: 2020 and the start of 2021 have been a tough time for travel and hospitality companies. What has kept you positive for the future of the sector during this time?
Pieter Elbers: 2020 proved how a year can feel short, yet long at the same time. The year was short because it was not too long ago in October 2019 that KLM, as the first airline, celebrated its 100th year anniversary. Who would have thought that only a few months after our centenary we would be in the grip of a global pandemic? A crisis that would affect the world, our industry and our company so drastically.
At the same time, the year felt long, very long. It seemed as if the world stood still. As we look at the images of the last year, we saw empty departure halls, parked aircraft, empty offices and a closed engine shop. No one has ever experienced this before and sometimes it all looks and feels surreal. In total, roughly 6,000 colleagues (1 out of 6) have left KLM.
2021 did not start the way we had hoped and expected. A new wave of Covid-19 hit Europe and several variants of concern emerged. These lead several governments to put travel restrictions in place, which hit the aviation industry hard.
The fact that our customers are eager to travel is a hopeful sign. The Dutch Prime Minister gave a press conference in the Netherlands in May where the government announced the easing of restrictions. Even during that press conference, we saw the bookings go up. The demand is there.
Hospitality Insights: What is your company’s main area of focus to drive recovery in 2021?
Elbers: We see that the VFR and Leisure segments are the most resilient. People want to visit their friend and family and our customers want to go on a well-deserved holiday. KLM recently announced several additional leisure destinations for the winter of 2021. These new destinations are Orlando, Mombasa, Phuket, Cancun, Barbados and Port of Spain.
Hospitality Insights: Which regions do you expect will lead recovery for travel in 2021 and beyond?
Elbers: We have seen that the domestic markets in the U.S. and China recovered already. This is because there are hardly any travel restrictions within countries. For us at KLM, we see the demand for travel in Europe picking up. This is going faster than the demand for our intercontinental network. It is crazy to imagine that 1,5 years after Covid-19 emerged there are still severe travel restrictions on some of our biggest markets. Think of the U.S., China, South Africa, India and Brazil.
Hospitality Insights: Has the Covid crisis had an impact on the segments your company is looking to expand into?
Elbers: During the Covid-19 crisis, we have decided to be very selective in our investments. One investment we are implementing is the introduction of Premium Comfort. A new cabin in between Economy and Business Class. This is an attractive proposition for the SME-segment. Within Business motive travel, we do see that the SME-segment is the most resilient.
Hospitality Insights: The leisure segment is hailed to be driving travel’s recovery. What are the keys to succeed in this market?
Elbers: The destinations that we offer are a key driver getting customers to KLM. As mentioned, we are adding more leisure destinations to our network. Another important aspect is that our customers are looking for reassurance on health & safety. In addition, they are looking for flexibility. In terms of health and safety, KLM maintains the highest standard, for which we were recently awarded the APEX Diamond Award. In terms of flexibility, we have the “Book with Confidence” policy: flexible fare conditions that ensure free changes and refunds.
Hospitality Insights: The corporate segment is expected to come back later than leisure. How are you managing the recovery for this segment?
Elbers: Within the corporate segment, there are several sub-segments. Each with their own demand dynamics. Engineers, seamen, diplomats and SME’s are coming back more quickly than the large corporate accounts.
In addition, with the introduction of Premium Comfort we add an interesting proposition for the more price sensitive business traveller.
Hospitality Insights: Have the ESG requirements from customers and partners changed in the past year? What new initiatives have you put in place to improve sustainability and inclusion in particular? What are you looking forward to with regards to your participation to IHIF?
Elbers: Not only have the requirements changed from customers and partners, but also from our committed employee base. We are working on several grass roots initiatives with regards to sustainability. In October, we celebrate our 102nd year anniversary. At that time, we will be able to make further concrete announcements.
I am also curious to hear what initiatives are coming from the hospitality industry. Both of our industries have similarities. It is interesting to learn from one another.
The International Hospitality Investment Forum (IHIF) is the hospitality industry's most influential investment event, taking place in Berlin, Germany on 1-3 September 2021. Pieter Elbers will join Hilton CEO Chris Nassetta for a one-on-one discussion entitled 'Talk of the Titans - Sharing Visions for Future Success' on Thursday 2nd September at 10:20