The NEXT NORMAL for different economic sectors

Tourism

Before the crisis, inner parts of big cities like Lisbon and Porto lost more and more their function as living spaces. These areas became money machines, thus places where you just sell products and services to tourists (e.g., Airbnb accommodation) and wealthy people (expensive shopping streets), or you use merely for exhibition and museums.

The result is that these city centers transformed themselves into a kind of theme park which is simulating an urban experience, but don’t has people living there. Maybe the Covid-19-crises slowed down this tendency. Office buildings in city centers may be reconfigured due to less demand of office space.

Tourists travel also more to less dense regions, like the interior, to avoid hyperdense areas like city centers.

Tourism operators will digitalize more: With AI they can offer the services of artificial smart assistants which guide the tourists in a very personalized manner throughout their stay. The assistant works like a permanent personal travel agency. They take on a wide range of tasks: tour-guide, translator, navigator, accommodation bookings, ticket purchase, check-in’s etc. This doesn’t mean though that the assistant decides everything about the trip. If there is a change, he automatically adapts all parameters, like the GPS in a car.
Example: Localixo (https://localixo.com/en/pro/)

Tourism customer services are improving: We all know that the airlines made the booking of flights a matter of gambling. Prices jump up and down from one day to the other. The American startup Hopper (https://www.hopper.com/) is extremely successful in providing the customer a service to disarm the airline pricing game. During 10 years, Hoppers IT-Engineers have studied the algorithms that the airlines are using in order to discover the patterns of the price change mechanisms. They now can warn the customers if the day for booking is not good and indicate the best moment for the booking. Their slogan “Never overpay for travel again” is a clear message of their service, an offer which cannot be refused.

Hospitaliy Services

Estimations say that up to 50% of the restaurants may go bankrupt. The restaurant and hotel owners are currently trying to find new ways of making business. Here some trends:

New hotel concepts

The monolithic vision of a hotel serving only for accommodation, without being able to have mixed uses, is outdated. Hotels can be an agent of change. They can serve, at this stage, for other market needs - whether for long-term leasing or for offices. So the accommodation units get generally more elastic.

The concept of “staycations”: Instead of travelling around in a country, tourists will travel less but will stay longer. The hotel organizes everything to entertain the customer according to his interests.

Overall, the crisis also caused a switch of choices, which means a benefit of some of the operators: the domestic tourism has a strong upwards trend, with all bathing and rural destinations increasing their weight, unlike large cities.

Menus with ingredients from sustainable agriculture

Customers nowadays want to know more about the origin of the ingredients. They don’t want to choose only what they eat, but also from who produces the ingredients. Be honest, show everything with full transparency, and gain competitiveness by being clearer and more transparent that your competitors.

After WW2, the question was: How can we produce more and cheaper meat? Today the question is: Is meat good for me? And when I decide to eat meat: Where does it come from? How the animals were fed? > The production must be transparent and convincing.

Restaurants decline increasingly the cost of food storing and processing. Intelligent delivery systems, based on new tech solution, and transparent and trackable food transformation processes make restaurant suppliers more competitive.

New food distribution models

Food sales change location. Single POS’s, like a restaurant, are losing competitiveness. Food delivery services based on tech solutions make the scaling possible for hospitality service. Even premium food is now ordered to be delivered by delivery service. In the future, physically existing restaurants will only survive when they provide more than good food, for instance socializing with a certain target group (seeing and to be seen), or outstanding and astonishing customer experiences.

Eight different models for food delivery (cf. GDI):

1. Classical restaurant with own food delivery service as an additional service.

2. Cloud kitchen: Central Hub which delivers pre-cooked food to smaller subsidiaries, where the final cooking and delivery preparation is carried out very quickly.
Example: Domino’s (https://www.dominospizza.pt/)

3. Ghost kitchen: Delivery only. No physical restaurant. Orders are placed on an online menu from where they go to the nearest kitchen. Many kitchens are based in peripheral locations around the cities (lower leasing rates than in the city center).
Example: Green summit group (https://www.youtube.com/watch?v=u6kKvF1GzKI)

4. Virtual restaurant: The virtual restaurant (with an own brand) offers a menu on a digital platform by having partnerships with physically existing restaurants. The restaurant cooks both for its own clientele and for the virtual restaurant. When a digital order goes in, the respective restaurant cooks the dish and the digital platform organizes the delivery.
Examples: Le Poké Station (https://www.lepokestation.com/en ), Sushi Ya (http://www.sushiya.pt/)

5. Aggregator with no driver fleet: Menus are on an app, the digital platform organizes the coordination and delivery with independent drivers which have their own vehicle. For restaurants this is an easy way to generate additional revenue.
Example: UberEats, Eat.ch (platform with >3.000 partner restaurants in Switzerland)

6. Consolidator: Drop-off-points of delivery > No last mile delivery to people’s home.
Example: Yun Ban Bao (http://www.ybb.plus/)

7. Aggregator with own driver fleet: Menus are on an app, the digital platform organizes the coordination and delivery with own drivers.
Examples: Just Eat (https://www.justeattakeaway.com/) ; Deliveroo (https://deliveroo.co.uk/).

8. Dark kitchen: Existing restaurants/restaurant brands lease kitchen spaces at strategically well-placed locations. The digital platform provides the menu app for the orders, coordinates the payment process and organizes the delivery.
Examples: DoorDash (https://www.doordash.com/en-US), Postmates (https://postmates.com/)

Conclusion: Generally, food delivery concepts and volume will increase in the future. This is a development that will not be reversed after the Covid-19 crisis. However, it doesn’t mean that the classical restaurant is dead. But they are strongly challenged, so they have to find innovative concepts in order to stand out of the mass.
The new food delivery service options are an opportunity for hospitality services to generate revenue with a lower cost structure. The operators should well analyze the available options in order to decide which model they want to invest in.

Event organization

Virtual or hybrid technologies decouple people from time and place. Here lies the potential for event organizers, cultural workers and employers to create new opportunities for encounters such as hologram concerts or virtual reality parties in addition to physical experiences. In the future, one cannot only decide where we will meet, but also how.

In the medium term, 4 alternative scenarios for holding events are conceivable (cf. GDI):

  1. Closed small groups (centralized). Example: Exclusive club-events for selected people. Open-Air concerts or cinemas for small groups.
  2. Pop-up events: The spectators are at the same venue, the artists not. Also possible as decentralized small events making part of a common big event.
  3. Ghost events. Example: A sport team or an orchestra plays in the same location with the physical presence of the performers. The event is transmitted in 3D quality to the individual locations of the spectators to create a very real experience.
  4. Together-Alone (decentralized): Total virtual events, individually experienced at home. All links between artist/producers and spectators are only digital.

The use of these models depends on whether the producers and participants of an event gather centrally or connect with one another in a decentralized manner.

  • Shop till you drop”, “Spend till the end”, “Buy till you die” (cit. David Bosshart, GDI), slogans of the consumption culture of the last decades. They are part of the past.
  • Currently, big supermarkets and shopping malls all over the world are closing. Checkout examples on: Deadmall (http://www.deadmalls.com/) which receives the visitor with “Welcome to Retail History”. See also the photos of how many of our shopping malls may look like in 10-20 years: https://allthatsinteresting.com/abandoned-malls#1

Distribution and Retail

  • The keywords for future retail are: easy, fast, convenient.
  • The remaining stores are heavily innovating with AI: More and more robots and synthetic avatars are also used for retail.
  • Self-service check-out shop system, making payment without cashier points.
    Example: Standard.ai, https://standard.ai/
  • Online-shopping is exploding due to the pandemic (“Amazon-effect”). The forecasted growth of e-commerce of the next 5 years happened in 2020 in 3 months. People learned to appreciate the convenience of home delivery, especially new customer segments like elderly persons.
  • With e-commerce comes also re-commerce. This means a growing trade of used items, with the purpose to reuse them.
  • Despite the marked increase in online shopping, the neighborhood grocery store with regional products, from identifiable producers and identifiable fields of production, will probably also be winners of the pandemic. Subsequently, local and regional producers with direct distribution will also profit from this trend – back to the roots.
  • Regarding the food sector, there is a deglobalization

New delivery services

  • For many retailers the hot question is currently: Should we build our own delivery system, or shall we partner with an existing one? To be competitive, it is necessary to have “an army” of delivery drivers on the ground. In big cities, delivery services often contract students in part-time. However, the organization of the physical delivery is crucial. Only to have a perfect digital order platform is not sufficient.
  • There are many delivery models and companies popping up. Cf. the “8 models of food delivery”. Probably, this fierce competition will lead to the outcome: “The winner takes it all”. The company which manages to be the quickest, with the best service, reliability and financial sustainability will absorb sooner or later all the others. So either you grow quickly or you die.
  • In the next decade, new “last mile” home delivery automation systems (with self-checks) will pop up. Drone and autonomous car delivery systems will take more time to be mature and secure.

Energy

On the road to NET ZERO

An immediate impact of the pandemic was a break in the energy demand. Even on the mid-long term, due to more energy efficient technologies and systems, it is estimated that the energy demand will grow slower.

Example: Creapaper https://www.creapaper.de/en/, producing paper with grass instead of wood, saving 90% of energy.

The currently ongoing energy transition is based on 3 pillars.

    1. De-carbonization
    2. Digitalization
    3. Decentralization

1. De-carbonization

We are moving away from a carbon/fossil-based society towards a hydrogen society. Electricity is a mid-term solution (1-2 decades) between them, to fill the gap and to smoothen the transition. But electricity has issues with high energy needs for production and storing. Therefore, on a long term, the only sustainable solution is hydrogen.
The transition will take place in all areas of our life: households, industry, mobility (particularly cars and airplanes).

Big companies like Shell, BP and Galp are already in the energy transition. They acknowledge the new reality and they are shifting their resources from oil and gas to green energies. The pandemic has accelerated this change.

The hydrogen technology was launched already in the 90ies. Though, after a first hype with inflated expectations it suffered a setback at the beginning of this century. But in the past 5 years the technology has improved a lot, this time with more realistic expectations. We are currently on the “slope of enlightenment” regarding hydrogen technology. It is expected to reach a more robust plateau in about 2030, on which more stable products can be developed.

Summarized, the reduction of carbon emission is currently pursued with 3 main approaches:

  • Better energy efficiency
  • Replace the carbon emitting equipment with renewable energy solutions. The biggest challenge remains the storing of the energy.
  • Capture and removing carbon emissions from the atmosphere with carbon-taking technology.
    Examples: The “Direct Air Capture Technology (DAC) from Carbon Engineering (Canada), https://carbonengineering.com/; Climeworks (Switzerland), https://climeworks.com/

The fact that some States still heavily subsidize fossil fuels is simply inacceptable. This does not only slow down the ongoing energy transition but weakens on the long run the competitiveness of their own economy. The energy transition cannot be stopped anymore, so they would better invest this money to prepare the future.

2. Digitalization

 Although existing equipment may be improved in terms of energy efficiency, considering the global energy demand, digitalization with new tech-solutions is indispensable for a rapid energy transition.

Poor countries must be included in the digitalization, because for them this is also a chance for a fast development of more equality of opportunity, access to information and ultimately democratic systems.

3. Decentralization

New, local and low-cost energy generating equipment reduces the grid dependency of the population (micro-generation). This is lowering the household costs, but is also an opportunity to improve the life of communities which haven’t even access to a grid.

Conclusion: Overall, the measures for an energy transition to protect the environment and to stop the climate change were accelerated by the Covid-19-crises. They will need trillions of dollars of investment. That means it will only happen if there is a private economical perspective in it, with the incentive that the investment will pay back. States may support the energy transition, by assuming costs and creating incentives, but they are not capable to bear the whole burden. Only private investment will enable and speed up the urgently needed energy transition.