The tourism sector has been hard hit by the pandemic and the next few months will inevitably bring challenges and transformation.

As with any major crisis in any sector, the key to a successful, rapid and sustainable recovery is the industry’s or business’s ability to seize new opportunities.

• Assess repercussions
• Analyze positioning
• Identify main challenges
• Choose a tailored solution

Asses repercussions

Before delving into the heart of the matter, let’s look at a few statistics to measure the repercussions of the pandemic on Quebec tourism and to show the importance of taking action:

• 400,000 people laid off, including the restaurant sector;
• $2.6B in lost revenue due to the absence of foreign travellers in 2020;
• $1B in lost hotel rental income in Montréal and Québec City;
• 9.8% occupancy in downtown Montréal hotels in July 2020 compared to 83.5% in July 2019.

Transportation, events, conventions and restaurants were the most affected, with the impact being greater in urban areas.

Nevertheless, some sectors fared a little better: for example, campgrounds, where the average occupancy rate increased by 10.1% during the 2020 summer season, and sectors with a focus on outdoor activities, like agri-tourism, golf, hunting, fishing, and large parks.

Analyze positioning

To better understand the positioning of tourism businesses in the crisis and their internal capacity to recover, we have developed a two-axis analysis matrix:

1. Entity’s key abilities;
2. Entity’s key environment-related factors.

1- The five key business abilities to emerge from the crisis are:

• Financial and organizational health;
• Management team and board of directors;
• Relationship with business partners;
• Digital capability;
• Development vision.

2- The three key environment-related factors that define the crisis and the recovery are:

• Urban or rural location;
• Group or individual consumption;
• Clientele from outside or inside Quebec; younger or older clientele.

Analyzing these conditions determines the organization’s position in terms of its ability to recover and the type of strategy to be implemented.

Identify main challenges

Two areas will be put to the test:

Human and operational resources

1- Offsetting the workforce shortage

The industry is facing a severe workforce shortage. The sector’s vulnerability is causing many employees to change careers and consequently, businesses are losing expertise. As a result, they will have to turn to a range of new solutions for recruiting and retaining workers.

Internally, pooling functions should not be overlooked. The versatility of roles within the organization is a must to get through this crisis period, as is mobilizing the team.

2- Accelerating digital transformation to improve productivity

The tourism sector was lagging behind in terms of digital transformation. The pandemic has exposed the need for organizations to accelerate this transformation in order to adapt to users’ new needs and improve their productivity.

Financial component

As for the financial aspect, the financial assistance measures introduced since the beginning of the crisis have made it possible for many businesses to survive. There have been fewer closures than initially estimated.

However, it has been a long pandemic that has significantly impacted organization’s finances. Discussions with bankers, investors and business partners make it possible for entities to find new options to keep their business afloat.

Choose a tailored solution

Having stabilized and kept the business afloat over the past year, management must now chart a new course for recovery. There are several options:

• Diversify and foster the growth of new or traditional activities;
• Refocus activities on the essentials and restore profitability;
• Transform or reinvent the business;
• Or even sell, to get the maximum value for the business.

No matter what direction organizations take, they will need a healthy dose of courage and conviction. Efficient management will be critical. You will need to be agile, creative and equip themselves with the necessary tools and skills to help the organization adapt to the new reality.

This unprecedented crisis will trigger significant changes in the tourism sector, and while some businesses may not recover, others will emerge stronger. There are real opportunities to be discovered or even triggered between now and the full re-launch of operations. One thing is certain, the industry will evolve more sustainably and will recover its vitality in the years to come.

Our tourism, recreation and culture team is committed to the success of organizations and keeps abreast of evolving issues in this sector. Our experts are there to guide and support you in analyzing your needs, accessing available financial measures and providing relevant solutions for your business.

The Grant Thornton International IFRS team has published the 2021 version of its IFRS Example Interim Consolidated Financial Statements.

The IFRS Example interim consolidated financial statements 2021 have been reviewed and updated to reflect changes in IAS 34 Interim Financial Reporting and in other IFRS that are effective for the year ending December 31, 2021 and that have been issued prior to April 30, 2021.

In addition, given that the global COVID-19 pandemic continues to impact many reporting entities that exist, the 2021 interim version provides comments on information that might be relevant to disclose around the COVID-19 in the interim financial statements.

Many mid-market companies are redeveloping their international ambitions after having scaled back during the pandemic.

As shown in the latest figures from Grant Thornton’s research, conducted between October and December 2020, more companies are deciding to shift their focus towards international markets in their post-pandemic strategic plan. This global trend is important as it highlights game-changing opportunities internationally for all mid-market companies and Canadian businesses are seizing up this occasion in the market to grow.

Changes in the market leads to a boost in entrepreneurialism

Before the pandemic, many compagnies across Canada were active internationally and growing their market worldwide as part of a pre-existing plan. However, the recent economic and market changes have opened doors for many more Canadian compagnies to speed up their plans as a direct result of COVID-19. In fact, the latest figures from Grant Thornton’s latest research reveals that 20% say that they only started to increase their focus on international markets since the outbreak of the pandemic.

Additionally, significantly more Canadian mid-market companies (24% in H2 2020 vs 15% in H1 2020) are now expecting to increase their ratio of employees focussed on international markets in the next 12 months. This renewed appetite among the mid-market, even as the pandemic lingers, perhaps best demonstrates the sort of entrepreneurialism we have here in Canada.

Abundant sales opportunities are drawing companies abroad

The re-embracing of international sales is likely to be very significant in positioning the mid-market for growth during and beyond the pandemic and is a reminder of a key characteristic of our businesses. This shows how they are able to see the trends and opportunities in the marketplace and then adapt quickly to take advantage of them.

Below we show how COVID-19 has impacted those increasing their international sales focus. Competitive changes are a key theme here, with 48% mentioning the opportunity to form new international relationships due to the departure or failure of competitors. Another 39% mention the lower levels of competition in international markets, underscoring the competitive disruptions and shake-out from COVID-19.

COVID-19 factors contributing towards international focus according to entrepreneurs:

• Opportunity to form new international relationships from the recent departure/failure of competitors: 47.5% of businesses;
• Lower levels of competition in international markets due to COVID-19: 39.3% of businesses;
• It has become easier to take products or services internationally: 37.7% of businesses;
• Stimulation of international demand due to COVID-19: 32.8% of businesses;
• Internationalisation of your supply chain making overseas markets more accessibles: 29.5% of businesses;
• Sales disruption in your domestic markets from COVID-19: 26.2% of businesses;
• Beneficial government stimulus programs in international markets due to COVID-19: 24.6% of businesses;
• None of the above: 6.6% of businesses.

The other major incentive is customer demand, with 33% seeing stimulation of international demand due to COVID-19 and 25% mentioning the positive benefits of government stimulus programs. With positive indications on both the customer and competitor side, it’s easy to see why another 38% say it is now easier to take products and services international. Although other factors like the rise of digital communication will also be at work here.

A once in a generation opportunity to grow internationally

All of this data points to what we think is a once in a generation opportunity to grow business internationally, and one that all mid-market leaders should be aware of. As in any gold rush, it pays to think before joining the rush. Our leaders stress the importance of being strategic in your decision-making. We encourage businesses to identify where they will have the most impact. Furthermore, the importance of looking beyond the immediate and thinking about the medium and long-term goals, with clear priorities and action plans that are also backed up by scenario planning, to support resilience.

For those companies wanting to exploit these opportunities will need to be both growth ready as well as agile. Our team of experts, along with our international solution offer can help you conquer new frontiers.