The Rise of Circular Tourism

Dec 20, 2023

Originally published in MIT Technology Review Arabic 


In the pre-covid period, tourism was still held as a foundational and hallmark area for national economic development. Travel and Tourismaccounted for 10.4% of global GDP in 2019, and is a key contributor within economic, social, and environmental spheres. Its benefits are also evident when considering employment generation - having accounted for 10.6% of jobs and 1 in 4 new jobs globally in 2019, and the subsequent strengthening of local culture and communities. The sector’s magnitude also brings with it irrefutable downsides. It alone is responsible for roughly 8% of the world’s carbon emissions. It contributes to the depletion of natural resources, waste production, and the sometimes significant destruction of natural ecosystems. 


A notable example of the latter was the shut down of Maya Bay, Thailand - made famous by the 2000 film The Beach - from 2018 to 2021 to allow its ecosystem to recover from the significant damage to coral reefs and beach areas by constant tourist activities. An unintended consequence of popularity, one shared by sites named UNESCO world heritage areas, for instance in the degradation of Machu Picchu. The sector’s positives makes it one to promote for general economic well-being, yet its drawbacks call for considerable consideration to improve its ecological footprint, while maintaining and perhaps enhancing its economic prowess. 


The circular economy aims to redefine growth through transitioning away from a traditional take-make-waste linear model. It is based around the prevention of negative ecological factors such as waste and pollution, increasing the utility of products and materials, and regenerating natural systems. Beyond ecological benefits, an economic transition to circularity would additionally lead to a leaner and more adaptable economy, that is inclusive and protective of those within it. Infusing circular elements within travel and tourism would not only allow the sector to redefine its negative contributions to communities and general ecology, but also improve the innovation, supply chain, resilience, and overall bottom line for organisations operating within it. 


It is perhaps most important to focus on circularity’s potential towards improving resilience, especially following COVID’s devastating impact on the sector. The sector’s GDP declined by a whopping 49.1% from 2019 to 2020, versus an overall economic change of -3.7%, and saw the loss of approximately 62 million jobs worldwide. Asset-heavy areas within the sector especially suffered a more extensive loss. Airlines saw a 60% reduction in global passenger traffic in 2020, with a USD 372 billion loss of gross revenues, and have yet to fully recover. Organisations within this sector, whether asset-heavy or asset-light, can benefit from circular principles to build their resilience. 


The good news for organisations considering a circular shift is that circular elements have already been tried and tested within the sector with great benefit. They are most evident in the reduction of owned assets and/or increases in asset-sharing to optimise utility, especially for asset-heavy organisations. Some hotel chains - such as Hilton - have undertaken a transition towards becoming more asset-light, which not only cut CAPEX, but later better positioned them to face COVID’s impact by reducing the need to offset large capital costs to ensure survival. 


These internal and operational focuses are bringing out the parallel push for tourism sector digitalization. Novel approaches, processes and startups are well known within the sector, with the EU and the UNWTO’s smart tourisminitiatives providing lighthouses for progress. Promises of deep tech transformations in the sector have as yet provided little systematic benefit, with virtual reality, augmented reality, and AI still remaining large buzzwords. But this is perhaps due to the reality that the most transformative opportunities remain out of sight and out of mind for the consumer experience. It's not about automated, robotic hotels, but in the use of AI assisted scheduling to improve how a whole ecosystem of related actors can exchange and share materials, pursue predictive maintenance, optimise logistics, improve supplier negotiation, and related areas. The sharing economy side of the digital and smart push is one of the more unique areas where digital and circularity have aligned in the past.


Going asset-light pushing for shared assets, or even products as a service at the B2B level, can also be complemented by more operational initiatives. Technologies such as process mining, machine learning, and Robotic Process Automation can be utilised to identify process deficiencies and waste to better optimise operations. Benefits would be seen not only in time, effort, and cost reduction, but also in increased accuracy and compliance, as well as the reduction of server, electricity, and printing costs. This allows for lower-cost, speedier and more accurate service delivery, that may subsequently lead to increased margins. Several airlines have undertaken such efforts, with initiatives including the use of machine learning to optimise catering on-board based on historical passenger preferences to reduce production cost and food waste. 


To best avoid a Maya Bay situation, the framing of destinations needs to evolve from ‘commodities’ that can be consumed and exploited, to that of ‘assets’ that should be protected and optimised for the long term benefit of all actors. Additionally, a WTTC reporthighlighted that 69% of travellers were interested in visiting lesser-known destinations, and 72% were hoping to support local communities. Towards this purpose, product offerings have pulled away from so-called ‘checklist tourism’ - standard cookie-cutter itineraries that include the same well-known hotels, the same tourist sites, and so on - to promoting personalised itineraries that reduce the strain on busy tourist sites and showcase secondary destinations that could further empower local communities and improve customer experience. 


To prepare for a more circular transition beyond the stated case studies, organisations can focus on three interrelated areas: procurement, operations, and customer service. Circular procurement practices would mandate the integration of sustainable principles and KPIs into contracts, and the identification of opportunities for asset-share partnerships to utilise elements of the ‘sharing economy’. Tapping into the sharing economy allows the utilisation of initiatives such as home-sharing or home-exchange (with Airbnb as a notable provider) and community-based tourism (such as home-stays or meals with locals), that would - as an added bonus - further boost local communities.


Operationally, organisations should focus on process optimisation to reduce waste, defects, and deficiencies in the back-end following improvements in procurement, and to further enable customer-facing service delivery. This requires the complete orchestration of people, processes, and technologies towards leaner operations, enhanced innovation and people empowerment, and digital integration towards efficient and desired service delivery. 


Finally, circular service delivery would make use of optimised operations to provide personalised and eco-conscious offerings to customers. Front-end employees should be empowered to propose personalised innovative services and itineraries to optimise company assets, reduce the strain on natural ecosystems, and enhance the quality of customer service. Personalisation can additionally support the build-up of an on-demand ancillary pipeline. For example, travel providers could give customers the option of hiring private transfers, shared transfers, or public transportation (the providers of whom could be organisational partners) instead of a standard private transfer service that the customer may not need, that may add to the organisation’s logistical strain and OPEX, and that may further aggravate the company’s ecological damage.  


A smart tourism sector and a circular tourismsector go hand in hand. As countries look to develop new economic advantages in the post-covid era, working on strategies that combine smart and circular remains one of the most promising areas for experimentation. Organizations are already pushing ahead, now industry networks and macro actors need to help shape the regulatory and macroeconomic environment to drive investment towards transforming the tourism sector to be a driving force for sustainable, green growth.


Hi there. My name is Hiba, and I am the Content specialist of this blog. I recently stepped into this role, and I hope you get a lot of pieces of information from my articles.