Tourism Finally Opening Up
[music] Will, Tony, Sébastien, great to see you. Welcome. Before we get started, I'd like to remind everyone in the audience to get your phones out. We will be pooling you, we would also love you to send in your questions and I'll try to get to as many of them as I can. A year ago we talked about travel and tourism at this forum, Sébastien and I had a great chat. Will, I want to begin by asking you, when we spoke last year the conversation revolved around recovery.
After that, we've had some revenge travel. Are we in the rebound phase now, or how would you describe where we are at now? I think we're definitely in a rebound, but I think more importantly we haven't seen China come back yet. We won't see that probably till the third and fourth quarter of this year. I think that's going to take any softening of revenge travel is going to be covered by the Chinese.
In Thailand, for the first quarter, we were down 85% over 2019 for the Chinese travelers. We are really waiting for-- We're waiting for that third and fourth quarter and we expect it to get back close to the 2019 numbers. Great. I want to spend some time talking about China in a minute, but before that, Tony, one question about your business before we get into the broader sector. Now, AirAsia really made its huge name for itself as a regional budget carrier, but in the last year, people have been confused.
You've launched a super app which offers a range of services, hotels, ride-sharing. What is AirAsia today? -Actually we renamed ourselves Capital A. -Yes. Something called COVID screwed up our plans. [laughs] When I started the airline 21 years ago we had two planes and we grew to 250 planes, and then COVID came and so we couldn't fly. We had 21,000 staff. I took a leaf out of the digital guys, re-skilled a lot of our staff, built a super app, built a logistics business, went and started a bank using airline data.
That kept us going till now travel open and Will was my agony. We both comforted each other, wrote thousands of letters to many governments to say open up. Will would write it in 25 pages. I'd just say two words, please open.
It turned out okay we're going to come out stronger from it. One of the benefits of COVID was it forces you to rethink. Airlines have incredible data, and so we were able to diversify into now four different companies. Sébastien, when we talked last year on this stage, you talked about a new trend. You said- -That was a different hotel. -Different Hotel, but this forum. Welcome to the most extraordinary hotel in the world.
-Which you happen to own? -Which we-- no. No, no, not own it. I'm happy to be the curator. I'm only the manager here. When we talked at this forum last year, you talked about a new trend and you said, "We are going to see travelers combine business trips with leisure."
You called it a bleasure. How has bleasure played out and is it working for you? Yes, it's been working very well. The one thing which is interesting between the pre-COVID and the post-COVID is the change mix. For a long, long time, probably not for Will, but for most of the big large chain, we were 62 third business, one-third leisure. Now I can tell you that mix probably going to be reversing itself. We are already 55% leisure, 45% business.
Leisure is far bigger than pre-COVID, far stronger, far better, far more rewarding in terms of authenticity experience than what comes along with this. Business is still not back to the level of 2019. It probably will likely going to be back, but I think now leisure is going to be there for long, long time. The problem is you have so many people now working remotely, they leave on Wednesday night from their home, usually twice a month. They go less than three hours away by car, by train, by plane if they want to go but it's mostly car and train.
They come back on Tuesday morning. That means that on Thursday and Friday and Monday, they work remotely. How do you assess how much of that is leisure? How much of that is business? We don't know anymore, but those customers are repeat customers.
They go close to home, they go domestically. That's a market we never had before. My Sunday night was the dead night for the last 40 years because I was waiting for the business traveler to come on Sunday night, on Monday. My leisure travelers were leaving on Sunday afternoon. It's a total shift in terms of us responding to a new clientele, -but it makes it fun. -Makes it fun. Tony, let's talk about flight capacity.
Now, during COVID, you had to ground your approximately 250 strong fleet. Now I know you're waiting to get some of them airworthy again before they can fly. You're also leasing new planes.
Is there enough demand to get all these planes back in the sky? Yes, I think so. I suppose it's going to be an answer I say anyway, but Southeast Asia is probably the last of all the regions along with China. We're probably about a year behind, Europe and America, maybe in the Middle East and India. We've now got about 170 of our planes back. We have about 40, 50 more to go, so by about August we'll have them all back.
I think that's where most Southeast Asian airlines will have. We're seeing the forward bookings because we're selling for those flights already, are very, very strong. Echo what Sébastien said, leisure is very strong, and I think maybe there's an element. What we are seeing is people will spend first on travel before anything else. The discretionary spend, and the credit card companies are telling us that as well. That leisure has become and travel has become the number one item spent.
Obviously, as a low-cost carrier, we're seeing a lot of short trips. We're a beneficiary. We are now in a strange position where on one minute we were fighting for survival, then restarting 200 planes, which is a massive job. I felt like I was playing snakes and ladders.
You go up to the square 97 and you have to go all the way down and that snake pushes you to three. Now we're desperate for capacity. To bring more people to their hotels so that they can make more money- -We approve. -- and the charges.
You approve, you need more flights, right? -Exactly. -I also want to talk about the cost. These days you talk to anybody who's planning a trip and everyone's complaining about, the price of tickets and the price of hotels. There is a cost of living crisis in many parts of the world. Sébastien, let me come to you. Have you had to reprice room rates as a result of that? We did but there's a lot of things to be said here.
Number one, you talked about it, Tony. We have been through two years of hell. It has been difficult. It has been impactful for a lot of people in the world when it comes to travel and hospitality with no job, with no pay, with no future.
Here we are, we're back-- we are actually back to normal. It's quicker than we'd expected. Prices has been today for Accor, Accor midscale, economy, and midscale hotel 10% to 12% higher than to 2019, but that includes inflation. For the luxury, it's a bit more than a third, so 33% to 35% You have the benefit of passing the inflation to the end customers, airline cost it depends on a lot of airlines, but I guess it's been probably 18% 20% higher than pre-19. You go to Corsica some airline in France from Paris to Corsica, it costs you $600 for one hour flight.
Makes no sense. What I'm saying to you is I think if you look backward, we did not price the room in a good way four years ago. We have been too shy for too long on offering a service and a room and an experience at the wrong price. We've been daring post-pandemic because we had to get back the millions of dollars we lost through two and a half years. We're not taking advantage of people.
I think when people travel today, they have a different experience. For one reason is for 40 years we've been trying to kidnap the clients within the hotel for them to stay for breakfast, lunch, dinner, to get the most out of them. We finally realize we have to do exactly the opposite.
Free open the doors, be the curator, be the guy, and make sure they have the best ever authentic experience outside of your walls. By definition, if you are the guide and the curator, people will accept that again, they pay the right price because you're doing something extra. They will remember the visit, the brand, and that destination. It's a different model. -Totally different model, yes. -Will, you wrote a letter, an open letter to the Prime Minister of Thailand a few months ago, in which you asked, could hotels charge $8 extra to international tourists coming up? Again, as a way to make up for the gap, the international tourists you lost during the pandemic.
Now, that's been met with a divided response. Not all hotel operators are in favor of that. Where do things stand now? I think we've seen a fast enough recovery that the pressure of that is a bit off. We've seen room rates rise more quickly.
That was primarily aimed at some of the smaller hotels that are having a great deal of difficulty getting the rates up because they're at the mercy of the travel aggregators, and not able to meet wage Wills and with higher utility costs. Every crisis that I've ever faced was like a walk in the park compared to COVID. I think this was by far the most serious one.
I think those of us or anybody who was using low-interest rates, low labor costs, and low energy prices to make their model work, it ain't going to work anymore. Those days are over. I think we've all got to face this new reality, and that's going to reflect in airline fares, hotel rates, and everything that we're running into.
Even in the hotel industry where we tend to pay a higher wage than outside, we're still seeing difficulties getting people. Again, the younger people don't want to work the full hours, the five or six day a week. In the fast food industry, you've got a lot of pressure on wage costs, which isn't as dangerous in the hotel sector because of the higher wages. Definitely, labor costs are going to be a very serious effect going forward. What about the impact on a budget carrier prices given that you've had to ground fleet, people aren't spending as much? I echo what Sébastien said that prices are too low.
Now, in the airline business, you had a lot of government-owned airlines who weren't interested in making money and so that was artificially putting prices down. That capacity has gone out and more sensible, rational economic behavior is happening. I've always said the prices are a bit low. If you look at travel inflation versus other products, we are way behind the curve.
I think you're getting a sensible price. I think as I said on Bloomberg yesterday, an airline we probably got to where we should be. I think the pricing is right. For us, we want to stimulate demand as well. We're not fixated by high prices. We want to stimulate the travel, and we do that in two ways.
One, 60% of our routes are routes that no one ever did before, and that's one of the stimulating by avoiding hubs. Two is keeping prices down. I think we're in a good place now, and I do believe demand is getting stronger and stronger. Let's poll the audience. If I can get you all to get your phones out and we have a poll question. We want to know what you prioritize these days when you're booking a trip.
What's the first thing you look at or you consider? Is it price? Is it convenience of either where the hotel is located or flight timings? Sustainability, the environmental footprint of your trip, or just the experience? Have a think about that. Meantime, I'm going to ask you all, what would you pick? Will, what would you pick? I think most people would-- today they say that 74% of the travelers will travel and spend more if they believe they're doing it sustainably. I think there's certainly a huge acknowledgment of what's happening in the world today in climate and the warming of the oceans and everything.
I think everyone is becoming much more concerned than they've ever been before. Many of the hotels and the airlines have recognized this much earlier than other industries and have been focused on it. I'm not sure whether people would pick sustainably over price, but we'll see. Tony. 100% price. Everyone here should only fly on AirAsia.
Of course. Sébastien. I put experience far before. If you're below 35 years old, we've made a big survey in 40 countries, 69% of them are saying is number three, sustainability. That is the first criteria of choice for somebody below 35. In terms of why do you travel too more? I'm putting leisure here, not business. Most of the time, people want to come back richer, different, having learned, discovered.
They want to share. 50% on the content of social media is travel related. If you travel because you just want to discover another culture, another gastronomy, another side, I wish the answer is experience. -Let's see what the answer is. -Let's see what everyone picks here. Let's see if we can get a quick look at the poll results to see what people have picked.
There you go. These are my people out there. These are your people, price.
Gosh. That is bad. -Experience wasn't far behind. -I think environment- -They're all over 35, you see that's the problem. That's true. I think environment is obviously an issue. If you look at the airline business, carbon emissions are 2% actually of what's happening.
Everyone's talking about sustainable aviation fuel, but it's not really real at the moment. There's no supply, the cost is 10 times. I think there has to be real solutions. A lot of it from the airline business is down to what the aircraft manufacturers and engine manufacturers can do.
I think its way off for us. Sustainable also just to allow what we're seeing is not just environmental. It's not destroying a beach. It's not destroying the environment. I think there people are much more conscious, and local governments and respecting local culture, et cetera. We've been focusing not so much the environment side where it's really out of our control.
In terms of providing sustainable tourism and keeping cultures intact and educating our public of what's sensitive and what's not and how you should look after the environment that you're going to have a holiday in. Tony, the EU wants airlines to start paying for carbon dioxide emissions, obviously as a financial incentive to reduce carbon dioxide emissions. Is that fair, and if you were asked to pay it, would you? I think there are bigger industries that should be focused on more.
To be honest, it's easy to pick on the airline industry. I saw in Sébastien's country they want to stop flights for short destinations. I think that's madness, to be honest, and very French.
Not our government, sir. I think it's tough. I think what we would like to do is have a voluntary carbon tax.
I think regulators should look at industries that are really emitting the huge amounts of carbon and not just pick on the industries that are in the public domain. I think a good way to start-- I think what airlines can do and what hotels can do is education and educating people and giving them a choice of whether they want to contribute. I think legislating and forcing people when there isn't a total solution, I think is tough on the actual industry. Now, I can't check into a hotel and not find a little sign which says, if you don't mind, if you don't need your linen changed every day, or you don't need your towels changed, let us know. Of course, that is a way to try and reduce the environmental impact. The skeptic in me wonders, is this just greenwashing? Is it, Will? Yes, I think a fair amount of it is.
A lot of hotels think that's the only thing they need to do to help the environment. I think there's a lot more that has to be done. Especially with the culture, with the areas that you work in, whether you're helping the community, whether you're doing something for the community. I think you can do so much more when we talk sustainably, and that's what I think we're referring to. What should we do and what are you doing? I think you should look at what the companies are doing.
I think both Accor, our own company and others have got a very substantial - we're in the Dow Jones Sustainability Index, we're in the FTSE4Good Index. Look at what they're really doing and it's not necessarily not changing the linen for three days. I think there's more important things that can be done and you can measure that much more accurately. Sébastien, would you like to weigh in? I'll tell you, ESG is super large.
You probably have 30 different topic items within ESG. I'll give you the two who drives me. One by far is to acknowledge that a third of the world population has today no access to drinkable water.
That is unbearable. Of course, hospitality industry use a hell of a lot of water, and probably too much of it, whether it is in the kitchen, whether it is on cleaning the linens. We need to get better on one thing, don't construct a hotel when there is no drinkable water next door because you're taking scarcity, you're actually making even more difficult for a lot of local populations. The first thing for me is, please, let's reduce the water consumption. Linens is one of it. Any luxury person in the room when you go back to your home at night, you don't have your linens being changed every day.
Why are we doing it for somebody spending two days? We should be asking that person, "Would you please authorize us to keep the same linen for two days? Today's optional. We asking that person. The second thing, which is as critical as drinkable water is what are we doing as a social elevator for the billions of people without a job, underprivileged, non-educated? I'm telling you, I did not know that number until last week. I'm still speechless Accor I've got the numbers because we had the general assembly last week.
The last 12 months group like Accor we hired 123,000 people. I know half of those never had a job before, never had a training before, were not educated before. Part of the hospitality industry, what we have to tackle, do we make the world better tomorrow by basically giving a job, by giving basically suppliers a chance to sell what they had to supply craftsmanship. Our industry is not only alive, but it's a fabulous industry and there's another number, which is striking. 25% of the job in next 10 years will be created in the travel and hospital industry.
This is a human capital industry, let's embrace it. There's nothing better in that hotel where you have 1200 people, 82 different nationalities. I guarantee you probably 85% of those 1200 people never put a foot in Qatar before, but we've been bringing them over here and many of them enjoyed every single day. That's what we meant to do. Can we please help the local community to go to a different level? Human capital industry, travel and tourism, yes, it is, but at the same time we're are seeing AI and digitization playing a much bigger role across your industries.
Tell me about how you are using AI build to improve efficiency. The booking systems now today depends so much on AI and chatbots and what have you. If you haven't been overcoming your digitization problems quickly, you're going to be left way behind, and we're seeing that happen very rapidly. At the same time, sometimes when you run into a problem, then it's really tedious when your chatbot isn't giving you the right answer and you can't reach a human. That's right. Today, I think again,
when we look at those under 35 and over 35, you're going to find people that want luxury but still don't want that personal contact. Then you're going to find other people that are in the older category that want that personal contact. You're going to find both. The smart operators in smart hotels are going to be able to find how they can use both, but digitization in terms of trying to make our people more effective is very critical. Tony, how do you see this balance between using AI to improve efficiency but retaining the personal touch? I think eventually AI will replace- -Humans -Eventually. I think certainly a lot in the customer service area.
I think right now you just have to have a mix of both to handle-- we carry 90 million people. To have a call center to deal with that it's just not feasible, and you're generally waiting ages online. A lot of it can be done self-service and we've been through a nightmare with refunds, et cetera. AI is definitely going to help. It's going to make the customer more in control and have quicker decisions.
We're big, big believers. Also in the operation sides in terms of scheduling, in terms of predictive maintenance, you will have a much more reliable airline through operational excellence by the use of AI. Just can't be done by humans.
It's an exciting period. Every industrial revolution people have predicted the end of jobs, but it always gets better. I'm a big believer in it and I think people will just get richer from it and have a better quality of life. We're big supporters of it. Remember the need of languages, our booking agents work in about 26 languages, and trying to do that with human capacity is very difficult. The fact that you can communicate in your own language at a call center around the world, even if it's AI, sometimes for many people that's a much more effective system.
Oh, for sure. Especially speaking in your own language, making a booking. -Exactly. -Sébastien? I actually have a different scheme. Will is right.
Anything before, after the stay, AI is an enhancer and a remarkable tool. During your stay 24 hours, 72 hours, I do not want to have any AI. None of you wants to be served by a robot. You don't want to be welcomed by a robot, or if you do, don't come with me.
No, seriously, it's just we are in a human capital. If you want people to find a job, if you want people to actually go further in their life, don't tell them they're going to be replaced by a robot. You're going to have so many people unemployed-- for god's sake. Our hospitality industry is men and women, and if you have to wait and don't understand one another for 10 minutes, it's part of our job.
You have unforeseen events three, five times a day in a hotel, and it's actually resolved by a man and a woman. I do not want to have any AI during your stay, period. [applause] -Some airlines, the staff are robots. -We're out of time. -I could go on, but we are out of time. Thank you so much for joining us. Yes, I'm one of those people who likes to be welcomed by a human when I check into a hotel.
-Join the club. -Thank you. Join the club. Right. Thank you so much. [music]