In the last 20 years, the travel and transportation industry has endured a lot of turbulence – the decline in air travel after 9-11, the 2002 SARS outbreak that crippled Asian tourism, and consumer belt-tightening during the 2008 global financial crisis. Each event had an immediate impact but underlying travel demand was relatively stable.
It is not hyperbolic to say that the travel and tourism industry lost its wings in 2020. With COVID, business and leisure travel ground to a halt, revenues crashed down 40% from the previous year. Overall, the World Travel & Tourism Council (WTTC) said the industry lost $4.5 trillion in 2020 due to COVID-19. Now, however, with wide-spread vaccination occurring in some parts of the world, the travel industry is returning slowly and companies are considering what comes next.
That’s why we sat down with IBM expert, Chris Rospenda. This is part one of that conversation. He’s always played with airplanes or trucks, starting his own trucking company when he was just 19 years old. Chris has also worked as an FAA examiner and for systems’ operations for American Airlines, before landing at IBM as Connected Operations, IBM Cloud and Cognitive Applications. For the last eight years, he’s been on the Maximo side working with asset management, performance management and configuration.
Q: Your customers have had a challenging year. How have they handled this; what were the impacts?
They’ve maintained. Many of them have been able to maintain their presence, especially in the first six to eight months of this pandemic when they didn’t know how long it was going to last. You know, the analogy I use is that it’s like six people on a lifeboat with two gallons of water. You’ve got to make everything last as long as you can because you don’t know when you’re going to see land. But they maintained and hunkered down and didn’t spend anything, so now they’re coming out of it, and they’re seeing a little more movement in the economy as more people get vaccinated.
I just saw in USA Today that companies can’t find enough people to hire. We’ve got industrial customers that are saying, I need technicians. I have apprentice positions open. People must have the aptitude for it, clearly, and they have to pass the background and drug tests, but there are positions open and travel and transportation companies want to get back to work.
The other side is that office space has become less and less important while integrated tools have become more important. Tools like IBM Maximo have become more important because people are not at the office pulling out a paper printout of what has been going on. People are in different counties all over the country and they need their own access to information, the latest and greatest information. And Maximo is a great single version of the truth.
Q. What technology have they used to overcome the challenge? You said Maximo is a great single version of the truth and it sounds like your clients are using more of the suite than they were before, is that right?
I’ll put it into the 50/50 bucket: during the first 50% of the pandemic organizations were hunkered down making sure they were using what they had. Now, during the second half, they have options to move forward. They’re not jumping into the water yet, but they’re toeing the water and looking to see, maybe I can do things better because I don’t need everybody in the office because they can look at the same dashboard that I have on my screen.
They realize they can adapt some of the health and predictive technologies that they didn’t use before and provide the same information to one screen, back to that single version of the truth we were talking about earlier.
Q. What’s next for your clients from a technology or business perspective? Can you say some more about both technology and how you think these travel and transportation businesses are going to grow as the economy opens up?
Customers that I’ve talked are saying (on the technology side), I don’t need all these applications on premises unless I’m a bank or financial services company and, even then, I can trust a secure cloud or a hybrid cloud.
I see them doing more without the brick-and-mortar data centers. Ten years ago, we saw a shift where companies began moving away from data centers. That was after the Y2K issue, when they realized the world wasn’t going to melt down. They wondered why they needed to have that much of an investment in a 100,000 square foot warehouse holding nothing but servers that needed to be maintained and replaced every two or three years — that just becomes a feeding frenzy for an IT organization
The business side of companies — the C-suite — are now saying, I think we can get more nimble. If you think of the recession in 2008, the eventual leapfrog out of it was the ability to expand rapidly through somebody else’s infrastructure. I think we’re going to see that again. Companies, in essence, just turn a switch and pay a little more to get more bits and bytes. With a cloud or hybrid-cloud model they can expand and retract when needed. There are difficulties with this, too, of course — I’m not saying it’s that easy. But it’s a lot easier than trying to get rid of a 100,000 square foot data center.
This is just my humble opinion here, but there are companies that are hungry. And they are looking for that market share, and that market share is coming slowly now. Leisure is going to be the first wave that returns to the travel, transportation and hospitality businesses.
A look at the cruise industry
For instance, the cruise industry is just bursting at the seams and it’s more our own US regulation that is holding that back. I’m not saying that safety is not important — it’s clearly paramount for everything to work. But the cruise industry is trying to get those ships loaded up again, and people are ready enjoy the cruise experience. People are willing to carry vaccine passports, practice social distance protocols on the ships. I believe that in the next six to eight months you’re going to see cruises starting to come back especially in some of the non-U.S. areas like the Southeastern Korea, the Caribbean, the Turks Caicos, Barbados. On the Pacific side, I think there’s going to be a lot of interest in Alaska because it is less populated.
The other part of this equation, though, is mergers and acquisitions. I really think you’re going to see some hungry companies saying, I’ve got this cash that I’ve been holding, I’ve got some federal bailout money. I can spend 40 billion in cash and 20 billion in stock and go after that competitor. I think you’ll see two or three airlines and two or three trucking companies consolidating in the next couple of years because the ones that survived kept their cash. The ones that just maintained are coming along on a shoestring, so I think they’re going to be susceptible to acquisitions and consolidations.
A look at light rail
The other thing I see is that as much as we would like to believe that we could put light rail infrastructure in quickly, in the US we just can’t. Nobody is going to give up five acres of their property to put rail tracks in especially when airfares are not super expensive right now. To go from Reno to LA it is just as easy to jump on an airplane as it is to get on a rail car, build the tracks, and go forward. They’re learning that in the Northeast. It is very difficult to accomplish.
You might see some light rail infrastructure build out in the Southeast United States – Raleigh, Charlotte, Greensboro, South Carolina. Some of those are open areas and those economies, those municipalities are booming. Airbus just spent a lot of money in South Carolina. Boeing has got a big helicopter facility in South Carolina. There’s a new Mercedes-Benz plant in North Carolina. Because of that, you might see some light rail infrastructure going in there because the land is open. I think there are some opportunities there.
Watch for part two of our conversation with Chris.
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