COVID-19 Scenarios for DMO Consideration and Strategy




COVID-19 is like no other impact we have ever seen in the tourism industry because of not only the health impact in and of itself but the impact on the economy.


Several months ago, this country was cruising along with perhaps the lowest unemployment rate and the most robust economy in modern history, eight weeks later, there are sixteen million people unemployed.


This turn of events is devastating to the tourism industry and destination marketing organizations (DMO’s) are grappling for any sense of how this situation turns out and when that might be. In the meantime, many have cut back programs, laid off staff, and are in survival mode with their organization’s future viability in question. As reported daily in the media by health professionals, you fix the economy by fixing the pandemic, but how long and how will that happen?


The economic impact on tourism has been significant. In a recent McKinsey and Company Global Sentiment Study, a look at sentiment from the United states bares thought-provoking insights and its implications to the national economy and, by extension, the tourism industry. Most striking is the notion American optimism continues to decline that the United States will recover in 2-3 months.



As can be seen above, U. S. Consumers more and more have turned pessimistic the crisis will return to normal in a short time frame. With that in mind, the economic impact on the U.S. economy continues to be severe. Unlike more traditional recessions in which consumers cut back on discretionary spending, they may put off repairing the car or buying the new washing machine until after a recession. The tourism and travel segment has seen, even in a recession some level of spending now, sees virtually no expenditure.


In the same consumer sentiment study consumer indicate they have cut back:


  • 44% indicate uncertainty about the economy was preventing them from making purchases they would otherwise make


  • 52% indicate they are cutting back on their speeding


  • Fully 58% indicate they have to be very careful about how they spend their money


The results of this consumer spending behavior have been devastating to the tourism industry.




As can be seen, 82% of those surveyed indicated they would reduce spending on Hotel/Resort stay. The very lifeblood of the tourism industry and the primary source of funding for Destination marketing Organizations.


What does this mean for tourism?

The focal point for tourism is identifying when does the pandemic come under control? How long will that take? To assess that SMG Consulting has identified a variety of different scenario for DMO’s to consider.


What is scenario planning? SMG Consulting has developed a successful approach to use scenario planning in place of traditional top-down strategic planning in the tourism industry to provide a better sense of potential strategy outcomes.


For scenario planning in the tourism industry, it’s essential to understand that effective scenario planning balances the knowledge that is known about the current COVID-19 situation to understand the knowledge or information that is not known regarding future impacts.

Specifically, scenario planning for the tourism industry is identifying a specific set of uncertainties, different “realities” of what might happen in the future to the industry in your destination.

The driving forces in the COVID-19 situation includes how fast the virus is spreading and how effective are the federal and state policy responses are to the pandemic.


In considering these potential scenarios, McKinsey & Company has developed a framework to consider possible scenario outcomes that can be adapted to the tourism industry.



As can be seen from the matrix above, the preferred scenarios for the U.S. Economy in general, and the tourism industry specifically are the asterisked scenarios. They are, in fact, based on the effectiveness of Federal and State policy which will impact the recovery timeline.


For the DMO the shorter the timeline the more likely the organizational survivability. It appears that those states like California that were out in front of the pandemic will be more inclined to have favorable control and outcomes as opposed to the states that reacted slowly or not at all. The same might be said for those states that are much more rural and less populated, though at this time its not conclusive they will avoid what has happened to other more populated states.


The implications for tourism are complex. Tourism in all states is based on three segments: within state visitation, domestic visitation but outside of your state and international visitation.




In those states that have implemented rigorous, effective policies and have successfully brought the pandemic under control, there may be a viable tourism strategy that effectively targets in-state visitation. The assumption being those within the state are less likely to spread the virus and might return to some level of normalcy first. Domestic visitation but outside of your state needs to be also considered. Still, that turn around is dependent upon recovery of the entire country, which may be on a different timeline than your home state. The key is looking at improvement in a phased process.


The bigger question is, can a Destination Marketing Organization (DMO) survive to realize one of these scenarios. Tourism funding is highly dependent upon hotel occupancy, which consumers indicated was the primary activity they intended to cut back on.


What we don’t know.

In any recovery scenario, there are things we simply don’t know yet.


· What is the pace of recovery? Even under the best-case scenario where there have been effective policies that have enabled effective control of the virus, how long will that be? One indication may be to look at other countries, including China, Italy, etc. to see what that timeline is. DMO’s should look at their cash flow under different timelines.


· Once the pandemic is under control what about economic conditions? Once the pandemic is brought under control there is still the underlying devastation of the economy. Even is the pandemic were solved today it could several years for optimum economic conditions to be realized for tourism to grow demand.


· What are the legacy behaviors? What will legacy behaviors be and will they have a long-lasting change in the tourism industry? That’s hard to say, but one could imagine that safety and hygiene will become more critical as consumers select destinations to consider. DMO’s and the industry as a whole will have to factor these issues into messaging with their local industry.

· What is the right messaging and timing? One could imagine DMO’s within a state all focusing on similar feeder markets with similar “Hi! We are back in business” messaging. Imagine destinations all focusing on the same in-state feeder market at the same time spending all their scarce marketing dollars competiting for a smaller share of a feeder market.


What can Destination Marketing Organizations do?

1. Survival. The longer this crisis goes on, the primary and only strategy is organizational survival. DMO’s must continue to act in a survival mode doing whatever they can to get through this situation.


2. Federal and State Policy to control the Virus. Understand Federal and state policies as an indicator of controlling the pandemic. Consider which policies will improve the economy and consider what’s happening on the ground in the context of each of the scenarios that have been presented.


3. Look outside the tourism industry for information. Redesign your information strategy to include important sources of information outside the industry. Broaden your perspective. Often times an industry talks to itself and develops an inside out view of the world. DMO’s need and outside in perspective. Resist industry cheerleading opposed to hard cold facts.


4. Be smart. Be a smart DMO and use this moment to think one step ahead and not look backward. Resist the temptation just to dig out the files and see what was done after 9-11 or after the 2008/09 recession.


But instead, approach what comes next with a clean slate. What comes next will be very different from what was going on six weeks ago.


The smart DMO is trying to understand what changes are likely to happen as a result of the crisis, what can be learned? What will the sociocultural, economic, technology, and competitive landscape look like, and they are already redesigning their organization in terms of programs, messaging, and staffing? It’s hard to see it now, but the smart organizations will emerge better. Take advantage to restructure your organization for what comes next.


5. Think in scenarios. More and more resist thinking about one preferred outcome, rather think in terms of multiple scenarios. Ask you self “what if” questions like if full recovery is within six months, twelve months, eighteen months, twenty-four months or longer. What will you organization look like under different scenarios?

This challenge is unlike anything the industry has faced, approach it with a new perspective, new ideas and see it as a new opportunity. Otherwise it can be paralyzing and doing nothing is the worst case scenario.


About SMG Consulting SMG Consulting, located in South Lake Tahoe, is a strategy consulting firm specializes in the tourism and recreation industry. For more information www.smgonline.net