Tour operators must have a solid understanding of risk management in the tourist industry. Since crises frequently happen when least expected, it is crucial to have a Risk Management Plan in place that outlines what should be done in such a situation.
To ensure that all players in the tourism industry are aware of what is involved, the plan’s development should adhere to a clear methodology. Mitigation, Preparedness, Response, and Recovery are regarded as the crucial four steps in the crisis management process.
Organizations address ongoing crises through the planned process of risk management. A crisis is characterized as a period of hardship or danger and is typically characterized by the need to make difficult or demanding decisions. Organizations can adjust more readily to deal with a crisis if they have a strategy in place that details the crisis management procedure.
A variety of interconnected industries make up the dynamic environment in which the tourist business operates. It is therefore continually changing and especially susceptible to unanticipated disasters. There are many other types of crises, such as the 2020 worldwide coronavirus pandemic, earthquakes, floods, political upheaval, and terrorist strikes.
The tourist industry, destinations, and tour operators who operate in the sector are all seriously threatened by such hazards and disasters. There have been a number of significant crises in recent years, notably the Easter Day bombings in Sri Lanka in 2019 and widespread political turmoil in Ethiopia the same year, both of which had a significant effect on the travel and tourist sector.
Crises can have a detrimental long-term effect on a destination’s image as well as the number of visitors. The key to minimizing the detrimental effects of a crisis on your tourism business is to prepare for one, understand how to manage risk when one arises and deal with the problems that result from unforeseen events.
However, there are grounds for optimism. The tourism sector has proven to be resilient in the past, and there is ample evidence that travelers are eager to visit the afflicted areas once the tragedy has passed. Destinations and operators who have planned ahead and executed the finest crisis management techniques will be in the best position to weather the crisis and reopen their doors to travelers as soon as possible.
Before a crisis: Have a Risk Management Process in place
Preparing for an unforeseen crisis is an essential element of business planning, and you should not wait for a crisis to happen to put a plan in place, so you are prepared if a crisis does happen.
Read Also: Revenue Management in the Tourism Industry
Preparing for risk or crisis situations is commonly referred to as a Risk Management Process. A Risk Management Process aims to reduce the uncertainties of actions taken during a crisis. It is important to have this in place in advance so that your organization is well prepared for unexpected events that may happen in the future.
A thorough inventory and analysis of possible risk scenarios is essential so that you fully understand the risks to your tourism business. Looking ahead and being well prepared may help to minimize losses and put you in a great position to take advantage of any opportunities that may arise.
- Establish the context
This step refers to establishing the policies, systems, procedures, and relationships with stakeholders that are pertinent to your organization, which requires you to have a solid understanding of your own business in areas including key business activities, economic constraints, and organizational strengths, weakness, opportunities and threats (SWOT). Conducting a SWOT analysis of your business is a useful business tool, and the specific focus on ‘threats’ will help to outline the potential problems the Risk Management Process might have to address.
- Identify the risks
No two crises are the same, and some destinations will be more susceptible to particular crises than others. You should carry out a risk analysis, drawing up a list of crises that might happen based on those that have occurred in your region/country in the past and may happen again. Include any events that could be a possibility, based on your own knowledge of your destination and other factors.
- Natural disasters – these include earthquakes, volcanic eruptions, tsunamis and floods, hurricanes and other extreme weather disasters. The Boxing Day Tsunami in 2004, which devastated numerous coastal communities in Asia and killed more than 230,000 people, and Hurricane Maria, which devasted several islands in the Caribbean in 2017, are two examples of natural disasters.
- Political issues – political unrest is common in developing countries, and they often have an impact on tourism. Ethiopia and Nicaragua both experienced political unrest in 2019, which caused other countries to issue travel advisories to their nationals that, in these examples, are still active.
- Terrorism – some countries/regions suffer more from terrorist attacks than others. Notable examples include bombings in Sri Lanka and Thailand that deliberately targeted tourists. The 2019 Easter Day bombings in Sri Lanka killed more than 250 people. Thailand has suffered from several terrorist attacks targeted at tourists, including one at a shrine in central Bangkok, which resulted in the deaths of 20 people.
- Health-related incidents – pandemics and epidemics are the most likely crises. Along with COVID-19, the Ebola epidemic between 2014 and 2016, which affected several West African countries, is a major example in this category. The Ebola epidemic impacted tourism elsewhere in Africa, in countries many thousands of miles away, owing to the misconception that ‘Ebola is in Africa, so Africa has Ebola’. In 2014, the Kenya Tourism Federation reported that tourism arrivals had fallen by an estimated 15-20%, and in Tanzania, hotel bookings were reported to have dropped by up to 40%.
- Economic crises – financial crises often have a significant effect on the tourism industry, such as the Global Economic Crisis in 2008/9, which lead to a 4% drop in international tourist arrivals. However, by 2010, tourism had rebounded strongly. The impact of COVID-19 is likely to lead to a further global economic crisis.
Analyse and evaluate risks
Analyzing risks involves determining the likelihood of a crisis occurring and their possible consequences, from insignificant to catastrophic. Understanding which possible crisis would have the most negative impact will enable you to decide on the priority course of action.
- Treat risks
There are a number of accepted strategies that you can adopt to manage risk:
- Avoid the risk – which involves not proceeding with an activity likely to be risky. For instance, if a tour operates in an area prone to flooding or landslides at a particular time of year, the tour could be automatically discontinued at this time, or could be re-routed.
- Reduce the risk – if a risk cannot be eliminated completely, steps should be taken to reduce the risk by implementing initiatives such as suitable safety standards, providing suitable equipment, ensuring buildings are constructed to withstand earthquakes, and implementing adequate health and safety procedures.
- Transfer the risk – usually to a third party such as an insurance company. At the very minimum, your business should have public liability and professional liability cover. European tour operators generally require their suppliers to have adequate liability insurance in place before they will do business with you. See the tip below for more information.
- Retain the risk – this typically refers to accepting that minor risks do happen infrequently in the course of business and being able to manage them in the most appropriate way.
Managing risk is a crucial factor for adventure tourism operators, as they must ensure the safety of their customers, who may participate in high-risk activities. In addition to extensive liability insurance coverage, many European tour operators comply with international adventure tourism standards to provide their travelers with reassurance.
- Communicate and Consult
Being visible and keeping in touch with your stakeholders is one of the most important factors of risk management, and it must be done on a continuous basis in all stages, before, during and after a crisis. Stakeholders include staff, customers and suppliers and key messages to all of them pertaining to risk must be:
- Honest – do not make statements that you do not know to be true or make promises you cannot keep.
- Factual – state the facts as you know them and do not embellish them. If you are too positive, people may not believe you.
- Reliable – keep in touch on a regular basis, even if it is just to say ‘there is no news yet’. People like to know that you are continuously monitoring the situation.
- Reassuring – keep the tone of your communication measured and calm and try not to sound flustered or panicked. Avoid the use of inflammatory words such as ‘catastrophe’ or ‘devastating’ and if you do use them, make sure they are used in the right context.
Know who your stakeholders are
Draw up a list of your stakeholders to get a clear overview, so you can ensure they are included in all correspondence you issue. Consider the following groups of stakeholders when drawing up your list:
- Government agencies – Ministry of Tourism, Customs, Immigration, Foreign Affairs, Health Agencies, Legal, Ministry of Transport, Environmental Agencies, Security Agencies, Disaster Management
- Tourist Boards – national and local visitor centers
- Airlines and transport organizations
- Hotels and other accommodation associations
- Tour operator associations and travel agencies
- Tourism associations
Use your website and social media to keep in touch
Your website is often the first place that stakeholders will visit to get information. You should revisit your website regularly and publish the most recent information about the impact a crisis is having on your destination/region. You can also use your social media channels to post updates and communicate directly with your customers.
It is really important to date your website communications so that users can be sure they are receiving the most up-to-date information. If you are updating a current release, make sure you include the word ‘Updated’ at the top of the release alongside the new date.
- Monitor and review
Crises are often fast-moving; situations tend to be highly changeable and can be volatile. This means that current processes, plans or procedures that you have in place to deal with a crisis should be regularly reviewed and updated. Your plan should be flexible and dynamic so that you can adapt easily to the changing situation when a crisis happens. To do this, you should review your organization’s plan regularly, at least annually, during periods when there is no risk.
- Training and testing
Once you have formulated your Risk Management Plan, you must train your staff and test the plan. During a crisis, staff may need to adopt different roles than the ones they are familiar with, which could be stressful. Make sure to be clear about what you expect from them, to ensure that if the plan needs to be activated, they are clear about what they will be doing. Investigate what training courses in risk management might be available in your destination or elsewhere, such as ATTA’s Safety and Risk Management for Adventure Travel Tour Operators
You should ensure that your plan is ready to go when required and has undergone scenario testing in advance, so that any weaknesses are exposed and can be addressed. Keep updating and reviewing your plan as required.
During the crisis: Follow these four steps
When a business is facing a crisis, the first thing to do is to fully comprehend the problem and the potential effects it may have on your organization. This is an ongoing process because one of the traits of a crisis is that it is always changing, and consequently, so will the effects on your company.
The current COVID-19 situation is an illustration of a worldwide crisis that has had a significant impact on national economies as a result of global business disruption. This involves employment loss, revenue decline, a lack of business, and future uncertainty for your sector.
Compare that with an earthquake or a mudslide or a tsunami, which tend to be localized events and do not affect the rest of the world. While the immediate effect on your business might be similar to that of a crisis of global proportions, the way you strategize to react to it will be drastically different.
There are four main steps or stages you go through during a crisis. This four-step interrelated process is one of the easiest to understand and clearest to follow:
- Mitigation – immediate actions just as the crisis hits, to save your business.
- Preparedness – to prepare your organization to face the current crisis and focus on working on the next two steps.
- Response – to respond to the crisis and to utilize all the available resources to tackle and implement an effective response
- Recovery – The road to recovery to prepare and work on the strategies to get back to normal and beyond.
Various risks may have an impact on the growth of the tourism industry. Natural disasters and catastrophes, terrorism, conflicts, economic crises, and diseases are the main ones. These events may affect tourism in a variety of ways, with varying durations, outcomes, and spatial influences.