Mark Rosselot
March 23, 2010
CO300 Section 4
Sarah Ryan
The Importance of Crisis Management in the Tourism Industry
Abstract:
This article discusses the importance of crisis management as it pertains to the tourism industries across the globe. It will explain why crises can be so devastating and what crisis management is and does for the industry. It explores, informs, and argues that regions or countries need quality research and framework for crisis management practices, techniques and emergency implementations to have the most effective, efficient and successful tourism industries. This type of situational management is arguably the most essential factor in the success of the industry and businesses within. This success is achieved through knowledge-based, organizational frameworks for crisis management. The article discusses the effects of crises such as political upheavals, war and terrorism. In part, it focuses on the case of the terrorist attacks of 9/11/01, the effects on the UK tourism market and analyzes the methods behind the crisis management at the time. The article emphasizes the need for cooperative action during crises and also, throughout the aftermath and into the future.
Keywords: Crisis management, crises, emergency management, tourism industry, tourism operators.
Why is the tourism industry so vulnerable to crises?
Crisis management, organizational continuity and disaster recovery planning and preparation are exceptionally important to the competence of individual tourism operators and moreover, entire destinations (RacherlaHu, 2009). From a seemingly small incident, such as a fall in a hotel lobby, to large scale disasters like that of the terrorist attacks in Mumbai in November 2008, tourism providers are particularly susceptible to “unwarranted financial liabilities” (2009). Contrary to internal events, which can be easily monitored and analyzed by managers, external shocks are out of managerial control and provide a much greater degree of risk and uncertainty (Evans & Elphick, 2005). Crises have particularly damaging effects on the tourism industry because they are usually obscure and have unpredictable outcomes, have no known predictability of occurrence, and offer very little time for stakeholders to respond (Dutton, 1986). The chaotic nature of crises can be extremely difficult to predict, prevent and manage (Ritchie, 2004). Both natural and human-induced, can damage even the best prepared businesses. Their effect on the service industries is becoming increasingly harmful to critical infrastructures like communication, supply and distribution chains, for instance (Lee & Harrald, 1999). Crises also have the capability of being very complex in nature, and therefore require a very in-depth, clear collaboration of natural and human systems (Richardson, 1994). According to Racherla and Hu (2009), such complexity requires immense levels of coordination, resources, concentration and managerial responsibility. In turn, complex systems for management in a crisis situation are extremely necessary for successful overcoming of crisis-related, tourism adversities.
What is crisis management and what makes it so essential to the industry?
Crisis management is defined by Pearson and Clair (1998) as the “systematic attempt by an organization and its stakeholders to manage or prevent crises from occurring, such that key stakeholders believe the success outcomes outweigh the failure outcomes.” The idea of crisis management is to not only be prepared, but also to react quickly and effectively to a crisis before it can have its most damaging effects on both small businesses and the industry as a whole. Although it is often difficult, the ability to plan, prevent and measure the effects of crises or disasters is an important component to any tourism sector, both public and private. Evans and Elphick (2005) agree that crises should be a center of concern in any tourism operation.
In addition, a definite increase in the connectivity and interdependence of industries throughout the world itself allows for even small-scale crises to have an undeniable impact in other parts of the world (Ritchie, 2004). Ritchie explains that globally-considered events such as the Gulf War in 1991 and the Iraq War that followed in 2003 are both clear examples of the dramatic effect that crises, such as wars, can potentially have on travel and tourism throughout other parts of the world (2004).
Moreover, external events that occur within the travel and tourism industry have a prominent affect on other closely related or dependent industries, such as airlines for example. After the September 11, 2001 terrorist attacks, airline travel across the united states declined by 20%, speeding up the harmful effects of an already suffering industry at the time. In two days, the airlines lost $100 million in sales revenues (Goodrich, 2002). The UK also saw the adverse effects of fearful customers who no longer wanted to fly and costs were cut accordingly (Evans & Elphick, 2005). Additional resources were also spent to attempt to correct the damage to the airline industry. Airport security was greatly increased as new security, surveillance and baggage check precautions were implemented (Goodrich, 2002). This occurrence provides clear insight into how adversely a major external shock can affect the tourism industry, dependent industries, and even outward into other agencies. These are the instances in which emergency management of crisis situations becomes essentially important.
Example: The effects of September 11, 2001 on UK tourism operators.
Tourism managers could never have predicted that the events of 9/11/01 would occur, but when they did, there was an immense impact on tourism operators in the United Kingdom. Immediately after the attacks, four of the largest tour operators in the UK were already cutting capacity for the summer of 2002 (Holmes, 2001). Travel Weekly and Travel Trade Gazette reported significant losses to these four tour operators. Nearly 3,000 jobs were lost across all four operators. Each company cut costs and capacity and a large number of shares were lost (Holmes, 2001). However, despite the initial appearance of a systematic failure for these tour operators following the 9/11 crisis, each company actually responded in a quick and efficient form of crisis management. Cutting costs and capacities were, in actuality, the main strategy for each company to cope with the downfall in business caused by the terrorist attacks. They implemented strategies of offering deals and lower prices for long periods of time or over holiday weekends and centered their focus on more internal matters (Holmes, 2001). Although the effects of September 11, 2001 seemed to have a detrimental effect on the success of these tourism operators, the effective crisis management systems prevented the damage from growing to an overwhelming state.
How does an efficient framework for crisis management work?
According to Holmes (2001), several crisis management models have been developed by various authors across the past three decades. These models put various emphases on concepts such as the economic, psychological, sociological and challenging effects of crisis occurrence as starting points to develop an overall plan for coping with external shocks. Of course, all of these areas are important to crisis management, but a more specific, strategic framework is necessary. Below are several essential parts to an effective and efficient, knowledge-based model for crisis management as they pertain to the anatomy of a crisis or disaster. Keep in mind the complexity of crisis situations and the necessity for flexible evaluation, analysis and modification of strategy throughout the crisis management process. These strategies have been outlined by Brent Ritchie in his 2004 article, Chaos, Crises, and Disasters: A Strategic Approach to Crisis Management in the Tourism Industry.
- Crisis Prevention and Planning
- Risk Analysis - Assess the risk of crises situations. Analyze the environment in which businesses are being operated and the potential for crises.
- Planning - Develop plans for crisis scenarios by implementing emergency and contingency plans.
*These strategies are implemented before a crisis or disaster has occurred or in prepartation for a crisis or disaster.
- Strategic Implementation
- Evaluation of Strategy and Control - Formulate and evaluate strategic alternatives. make decisions quickly and determine control overthe crisis situation.
- Communication and Control - Establish communicationcontrol. Determine short-term and long-term communication strategies.Use communication to recover from a crisis.
- Management of Resources - Assessresources and financial funding. Instill leadership styles and employee empowerment.
- Collaboration of Stakeholders - Collaborate with internal and external stakeholders. This can involve the relationship between employees, managers and shareholders to that of tourists, government agencies and media.
*These strategies are implemented during a crisis situation in regards to short-term action. Collaborating among stakeholders additionally deals with the long-term recovery of a crisis or disaster.
- Resolution and Evaluation
- Resolve and restore normal business funtcions. Develop strategies for reinvestmentand resourcing, andevaluate howthe crisis or diaster has changed the business and the way it operates.
- Lessons and Feedback - Assess the efficiency of crisis management strategies and reevaluate planning strategies.
*These strategies are implemented throughout the aftermath stages of a crisis. They involve returning business operations to a normal or improved state.
It is important for operators in this industry to understand that they must adapt to this model under their particular circumstances (Evans & Elphick, 2005). Flexible planning and preparedness are essential to crisis management.
Conclusion
Crises or disasters cannot usually be completely predicted or prevented, but the way in which businesses in the tourism industry cope with intense situations is constantly improving. Continued research and feedback of management strategy is critical to gaining more insight into crises occurrences. With a more in-depth understanding of crisis situations and a well-developed framework as a starting point for dealing with these occurrences, the travel and tourism industry will have a greater potential for success and the threat of external shocks will decrease.
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