Changing the Mindset: Travel and Sustainability

CHANGING THE MINDSET: TRAVEL AND SUSTAINABILITY

October 2018 INTRODUCTION BIG CHANGES ARE COMING APPETITE FOR CHANGE TECHNOLOGY AS A GAME-CHANGER INTRODUCTION Scope

▪ This spotlight report on “Changing the Mindset” is part of Euromonitor Disclaimer International’s global content for its Passport Travel research. Data are given in Much of the information in this briefing is of a statistical nature and, US dollars in constant terms at fixed 2018 exchange rates and given in constant while every attempt has been made terms at fixed exchange rates for the forecast period. to ensure accuracy and reliability, Euromonitor International cannot be held responsible for omissions or errors. Tourism flows Figures in tables and analyses are calculated from unrounded data and may not sum. Analyses found in the briefings may not totally reflect the companies’ opinions, reader discretion is advised.

Lodging With near unanimity, the time for taking action to mitigate climate challenges is now, with an official roadmap of Travel Sustainable Development Goals to 2030 and the importance of collective environmental Travel modes stewardship. Consumer attitudes are also shifting in the right direction, with the majority of consumers seeking to have a positive impact on the environment. Travel brands are not resting on their laurels, Online travel and deploying technology to instigate behavioural change intermediaries and rewarding sustainable actions.

Perfect storm A perfect storm has been unleashed. The impacts of tourism (good and bad) are ever more under scrutiny at every level, as the challenge of achieving sustainable, low- impact growth at a local and global level comes into sharp relief. Enough is enough The challenges for destinations is knowing when they have reached the optimum level of carrying capacity, especially where it concerns capacity management and the need to ensure the right balance of visitors and residents. Plugging the gaps The 2030 Sustainable Development Goals provide the necessary roadmap for businesses, governments and consumers. A major push will also be required to ensure the right type of data is collated and used to measure tourism impacts. Why wait? Air travel is one of the biggest contributors to the travel industry’s carbon emissions, particularly long haul flights. However, electric aircraft are only expected by 2025, and the use of alternative fuels will take longer to integrate. Game-changing Travel brands and start-ups are taking things into their own hands, deploying technology technology to address problems such as over-tourism by providing alternative choices and encouraging visitors to explore further and deeper, beyond the tourist routes. A force for good With apps starting from as little as USD5,000, brands are rewarding good behaviour (whether for healthy, ethical or sustainable actions), optimising machine learning and algorithms to spur real change in consumer behaviour. Not a silver bullet… There is no silver bullet that will fix the world’s climate challenges, and it will require fundamental changes in consumer behaviour, government policy and company actions to deliver on the ambitious goals set out and avert climate chaos.

© Euromonitor International TRAVEL: CHANGING THE MINDSET: TRAVEL AND SUSTAINABILITY PASSPORT 4 INTRODUCTION BIG CHANGES ARE COMING APPETITE FOR CHANGE TECHNOLOGY AS A GAME-CHANGER BIG CHANGES ARE COMING Travel in 2030: no longer a case of growth at any cost

▪ With the 2030 Sustainable Development Goals in place, and the majority of the world signed up to the Paris Climate Agreement, with the exception of the US, the roadmap has been laid out how to reduce carbon emissions. ▪ A new report published in Nature Climate Change indicates that tourism is highly resource-intensive, accounting for 8% of the world’s carbon emissions, when taking into account transport, lodging, food and shopping. Air transport currently sits outside the Paris accord, but is a major emitter. ▪ One worst-case scenario that the travel industry faces is that governments and regulators clamp down on high energy consumption activities, such as travel. ▪ It is difficult to predict what the impact on demand would be under these circumstances; however, there are precedents that we can refer to where consumer products/services have witnessed heavy regulation and taxation, and finally bans imposed. The tobacco industry is an example of heavy regulation and the shift in consumer attitudes to smoking. ▪ Another current area where the tide is changing quickly is regarding consumers’ attitudes to plastics and food waste.

▪ Sustainable tourism experts such as Susanne Becken believe that the travel industry is witnessing a perfect storm, and that we are at a crossroads in terms of future direction – and most importantly, how to ensure that tourism has a minimal impact. There are also now calls by the Intergovernmental Panel for Climate Change for global warming to be limited to 1.5% rather than 2.0% of pre-industrial levels. ▪ As the world inches ever closer to irreparable climate disaster, the travel industry will need to take a sharper look at the multiple players and business models within its ecosystem, and decide where to rein back or push forward on development and find adaptive measures to ensure traveller behaviour changes.

▪ There is growing awareness across the spectrum – 2030 Agenda for Sustainable Development entrepreneurs, brands, DMOs, governments and consumers – that a climate change catastrophe is a real and credible threat (despite some high-profile climate change deniers such as President Trump). ▪ The challenge is that there is no one-size-fits-all solution. Changes are required across multiple facets of society – energy and resource usage, retrofitting existing buildings and infrastructure and investing in green/clean technology such as biofuels and electric vehicles. ▪ The issue is further complicated by the need for consumer lifestyles to adapt to this stark future reality, where all coral reefs could die and the polar caps could see substantial melting as a result of global warming by 2100, compounded by extreme weather events. ▪ The 17 Sustainable Development Goals that 195 countries signed up to following the Paris Climate Agreement outline the best way forward to ensure a world fit for future generations, that is equal, inclusive and fair. Despite the US pulling out of the Paris agreement, heavyweights such as China, Japan and Germany are supporting the process.

▪ Recent research by PATA and Tourism Economics reveals that thanks to developing a digital ecosystem for travel and tourism, there was a subsequent uplift in arrivals of 5% over 2013-2018. ▪ Digitalisation drives efficiencies, whether through automation, e-visas, biometrics or digital interactions with travel brands, before, during and after the trip. Many travel brands and destinations have focused on providing a seamless, streamlined travel experience, pushing the experiential element of the trip to the fore by pushing operations to the back-end and out of sight. Correlation of Airline Sales and Internet Access Per Household

9.7% Internet users CAGR 2008-2018

6.7% Resident trips CAGR 2008-2018

▪ Behavioural economics is being used to help nudge Approach to Nudge Theory for Sustainable consumers into more sustainable behaviour. An Behaviour interesting report by the Nordic Council of Ministers on “Nudging and Pro-Environmental Behaviour” Define • What is the problem? provides insight into what nudge actions can be used when legal or economic means cannot be applied. Diagnose • How are we going to fix it? ▪ According to the report, providing real-time information about energy usage, changing the Design • Design the solution physical environment so that it is conducive to green behaviour, providing the green option as the default • Test and learn, until it is ready Test option, and the most important factor, allowing peer to scale comparison, help change social norms. Source: Euromonitor from United Nations Environment Programme ▪ Consumers respond well to convenient, easy solutions where there is not too much choice. ▪ Some key technology that can be implemented to reduce energy and waste are devices such as smart meters, electric vehicles, electric aeroplanes (as being tested by easyJet in Europe), carbon calculators, carbon offsetting for flights, the introduction of low-energy transport and mobility solutions such as bike-sharing. ▪ As with any new strategies to influence consumer behaviour, it is a case of test and learn before scaling up.

▪ As the bedrock of tourism data, the UNWTO ▪ Former UNWTO Secretary General Taleb Rifai launched a Statistical Framework for Measuring called for “an integrated base for the three Sustainable Tourism (MST) in the Philippines, with dimensions of sustainable tourism – economic, 80 countries signing up. It builds on the strengths social and environmental – and a common of the existing framework, the Tourism Satellite language for measurement that is standardised Accounting System (TSA), that is heavily skewed across destinations, countries and regions”. towards reporting supply and demand metrics. ▪ It will also be important to capture tourism’s ▪ Building on the TSA, sustainable tourism metrics linkages to the environment and biodiversity. will incorporate environmental/social and economic measurements. Most importantly, the TSA will be linked to the System of Environmental-Economic Accounting to help bridge these two existing global standards. ▪ The Manila Call for Action is a great starting point, and it is imperative that other countries sign up and commit to monitoring the impact of tourism and ensure consistency of data collation. ▪ Four key areas will be considered – water, energy, greenhouse gas emissions and solid waste. ▪ The final framework is due to be launched in 2020, and will be instrumental in the travel and tourism industry’s ability to deliver tangible positive change.

© Euromonitor International TRAVEL: CHANGING THE MINDSET: TRAVEL AND SUSTAINABILITY PASSPORT 11 INTRODUCTION BIG CHANGES ARE COMING APPETITE FOR CHANGE TECHNOLOGY AS A GAME-CHANGER APPETITE FOR CHANGE Ethical living is identified as a key megatrend shaping behaviour

▪ The ethical living movement is more progressive in emerging markets, where a higher than global average ratio of consumers seek out ways to make positive decisions about what they buy Regulat- and look for a solution to the negative impact ion consumerism is having on the world. ▪ Awareness, availability and affordability drive consumers’ interest in ethical living. However, consumers still rank features such as efficacy and value as the main driving force behind their purchases. People Ethical NGO ▪ At national and international level, the regulatory power Living pressure environment is tightening up. Companies are also taking environmental concerns more seriously. Green strategies are no longer just the preserve of niche companies with a specialist environmentalist positioning. Mainstream players are also greening up their act. Corporate ▪ Among consumers, green issues are no longer change a niche, only of interest to a specific demographic, and are becoming the norm.

▪ Globally, 60% of consumers stated that they were worried about climate change in 2017; however, 64% try to have a positive impact on their environment through their everyday behaviour. Clearly, we are living through a period where actions now matter more than words.

© Euromonitor International TRAVEL: CHANGING THE MINDSET: TRAVEL AND SUSTAINABILITY PASSPORT 14 INTRODUCTION BIG CHANGES ARE COMING APPETITE FOR CHANGE TECHNOLOGY AS A GAME-CHANGER TECHNOLOGY AS A GAME-CHANGER Geotourist: the act of visitor dispersal

▪ Geotourist is an award-winning GPS-based travel app for audio tours curated by experts, providing a personal tour guide in- destination on demand. ▪ On the supply side, it offers a universal portal for tours and provides destinations and venues with insights from the app to help understand where visitors go and understand footfall around a city. ▪ This level of insight on visitor behaviour in destinations is vital for destination management and to avoid the scourge of “over- tourism”, where the visitor/resident balance tips off-balance. ▪ Geotourist has created over 2,000 tours worldwide. It was instrumental in helping the four councils which are part of the 1066 destination management company in England to disperse visitors to less-well known areas and share the economic benefits. ▪ The app has developed into a management tool, where curated content is created and influences visitors, creating a radius effect to help push out visitors beyond the core hubs, helping in the act of visitor dispersal – critical for sustainable development.

▪ The business model is working well for city tourism, and Shaon Talukder’s team is now working at a country level. Partner organisations looking to offer country-wide audio tours on the app include those in the US, Australia, Scotland, Indonesia (Bali) and Singapore. They are also working with Saudi Arabia to offer pilgrims to Mecca an audio guide in their own language. ▪ Given that Geotourist unifies information and multiple destinations are available, this ensures the DMOs are not impacted by consumer app fatigue. The key content pillars are architecture, art, history and culinary, whereas shopping is seen as being too commercial; keeping the focus on enriching the traveller’s experience. ▪ Working with events and festivals also ensures that the audio tour can live-on after the event is over, as exemplified with the Sydney Architecture Festival. ▪ Long-term, the company is keen to operate on WeChat, and it already provides tours in Mandarin. It is also developing a revenue-generating model with partners, as well as content providers.

▪ My Green Butler empowers consumers to use ▪ Urbanwaste is a mobile app created for tourists as fewer resources in lodging outlets in Australia by well as residents, designed to promote users’ good being upfront about the need to reduce resources. behaviour regarding waste, to have a positive ▪ Its track record speaks for itself, as it has managed impact on waste management and follow cities’ to save 35% electricity, 21% water and 20% gas. litter policies. Using smart technology such as smart meters it monitored 15,000 guests’ energy consumption during their stay. ▪ Strut is an app that encourages users to uncover ▪ What is more Christopher Warren of ICRT the world one map tile at a time, and seek Australia said that, “80% of guests were happy to alternative routes in their daily lives as well as be more engaged and involved”. when on the road. The experience is gamified ▪ Users are rewarded for using less electricity, gas through the use of leader boards and being able to and water with personalised activities and services. share with family. For example, Sheraton Dubai rewards users for taking shorter or fewer showers by offering them lotions. It is important to note that the outlets tend to be at the high-end, where consumers are more willing to pay more.

▪ Ant Financial, a subsidiary of Alibaba, launched the Ant Forest project in August 2016 as a special feature on Alipay, its payments ecosystem. ▪ It encourages green consumer behaviour by providing a personalised carbon footprint to users, offering alternatives to reduce their footprint, and providing rewards for carbon savings. The reward comes in the form of a virtual tree, which once fully grown, is planted as a real tree by Ant Financial in a desert in Inner Mongolia. ▪ By March 2018, the app had 300 million users, which is over a fifth of the Chinese population; reducing their collective carbon footprint by over 8,000 tonnes per day. Over 13 million real trees have been planted, which is a major achievement. ▪ The scheme educates users about their carbon output and effect on the natural environment, as well as encouraging changes in consumer behaviour. With China set to experience 200 million outbound trips, as well as 8 billion domestic trips a year, minimising their impact on the environment will be critical.

▪ Yoshinoya, a fast food chain, launched a mobile app with a feature that syncs with a smartphone’s step-counting technology. ▪ Users are rewarded with daily discounts if their step-count goals are met, in addition to engaging with consumers beyond the store, during the after- stage of their customer journey. ▪ Technology is at the forefront of this behavioural shift towards healthy living, with devices, digital platforms and science evolution facilitating health tracking, diagnosis, general health awareness and personalised prevention concepts, which support the newly-forming self-care model and approach by consumers. ▪ There are numerous healthy lifestyle apps available for download, in addition to the quantified self-care devices such as Garmin and Fitbit. However, the Yoshinoya example illustrates that even a brand which operates in the fast food category, albeit with quality food with a conscience, can encourage healthy behaviour and active lifestyles, going beyond offering healthy food on its menu.

Fitbit accounted for almost a third of the global activity wearables market in retail volume terms in 2016

Image source: Fitbit and 2K Sports

Fitbit’s consumer base is traditionally fitness Gamers of NBA 2K17 who have clocked at least enthusiasts or health-conscious consumers. To 10,000 steps in a day with their Fitbit device are expand its potential customer base, Fitbit has rewarded with in-game rewards that will boost their embarked on a partnership with the NBA to attract performance on the court. gamers.

© Euromonitor International TRAVEL: CHANGING THE MINDSET: TRAVEL AND SUSTAINABILITY PASSPORT 21 FOR FURTHER INSIGHT PLEASE CONTACT Caroline Bremner Head of Travel [email protected] @carolinebremner RELATED ANALYSIS Market Overview for Intermediaries – October 2018 Ctrip Standing on the Shoulder of Giants – August 2018 Mega Trends – Experience More in the Moment – June 2018 Mega Trends – Experience More in Asia Pacific – June 2018 Travel Quarterly Statement – Q2 2018 – June 2018 Mega Trends – Experience More Digital Toolkit – March 2018 Travel Quarterly Statement – Q1 2018 – March 2018 Google – The Ultimate Disruptor in Travel? – February 2018 Smart Destinations to Tackle Over-Tourism – January 2018 Work Reinvented: Future Business Travellers – January 2018 Mega Trends – Experience More Across the Customer Journey – November 2017 Experience more...

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