You just heard Isaac and the Soul Company. Good to have you here. Ladies and gentlemen, I've got three very important messages to you now by takeoff. Number one, we have a tremendous lineup for this afternoon with experts on the virus, economy, the brain, the hotel business, and the Pandox situation in this turmoil we have today in the world. That was number one.
Number two, the QR code. Did you notice that that's there on the screen or you just saw it? Do not miss to scan the QR code, because if you do, you can take part of our poll and answer questions about your future behavior. That's going to be really interesting to see, and we will deliver results by the end of the event. Number three, there is a person behind all this who actually is celebrating the 25th Hotel Market Day. That's the CEO of Pandox, or I rather call him the center back of Pandox. Welcome up, Mr. Anders Nissen.
Thank you.
I've got one single question for you now, and there will be more later. What's your expectations of this day?
Well, first, I need to welcome everybody to Pandox 25th Market Day. I will say, I am super proud. Listen to this. We have more than 1,200 participants today out in the air and from more than 30 different countries. It can't be better. I say to everyone, don't leave too early, because at the end of this session, our Chairman, Mr. Ringnes, he will give you a special greetings. Don't miss that. Over to you, Jan.
Thank you, Anders. Thank you. I bet there's something crazy going on with this greeting he's referring to. Now, time to start off with our first guest on stage. To be quite accurate, she is a Professor of Epidemiology, of Molecular Epidemiology at Uppsala University. She's also a very respected scientist for her knowledge, but also for her integrity. Let's take a look.
I love being a scientist because I feel that I can contribute to the society and hopefully make the world a little bit better.
Welcome, Tove Fall. You've done so many things in life, but I bet this is the first Hotel Market Day you're doing, right?
Yes, you are correct.
You are welcome.
Thank you.
You are welcome to that.
Thank you.
Excellent to have you here. Tove, I want you to make a short comment on exactly the present situation with the COVID-19 now.
Yeah. COVID-19, there's a very difficult situation in many countries across the world, especially in the EU and North America right now. I'm glad to see that many countries in EU have now succeeded in turning the wave a little bit downwards. Not so much in Sweden, unfortunately, but—
Are you sure that's not only a temporary sign of something?
I'm sure it is a temporary sign because it's the effect of having more restrictions.
Sure.
But also, like in Slovakia now, there's some promising results from their mass testing, which could be a way forward.
Yeah.
But I think we just need to survive this winter and find better solutions to come. But right now, we just have to take care of each other, take care of the healthcare personnel, and just take our responsibility to do everything we can to get this virus spread down.
The Swedish government, they've finally taken more legal action instead of only trusting trust, so to speak. What's your opinion about that?
I think the Swedish government has seen the latest numbers, seeing our hospitals filling up, and they feel they need to do something. It is a bit late, but I hope it also will have some effect.
You are in charge of two huge scientific projects about this, and the first one is the COVID Symptom project with an app that you also launched. Can you tell us a little about what is it all about?
Yeah. This spring, I was frustrated. I wrote a debate article. We have to get on with testing. We have to learn where is the virus spreading in Sweden right now. But we did not. I felt, okay, what can I do? Well, we can at least collect symptoms because we know from influenza and other epidemics that surveillance of symptoms can actually help us to understand more about the spread. I was thinking, how can we do that? How can I, as a single scientist, do it?
I reached out to a group in the U.K. who had already launched an app, asked them, "Can we introduce it in Sweden?" They told me, "Well, your colleague in Lund is already doing that." I sent him an email, and I do not think it was more than a minute before they call me up and like, "Do you want to join the study?" That is what collaboration is about. We can help each other and make everything more efficient.
Uppsala University and Lund University, inspired by King's College, launched this project.
Yes, we launched it in Sweden.
We have this little video clip with Professor Paul Franks.
Yes.
Which is from the launching by the end of April.
Will we take a quick look at that? Only a few seconds if we can—
Sure
—put it on the screen. I hope so. There it is.
We have literally just launched the COVID Symptom Tracker App in Sweden, and what we need now is for everybody to go to the App Store or Google Play and download the app and start using it immediately. We need lots and lots of people in Sweden to do that to make this a success. It is an app that you can download through the App Store and Google Play. Once you have got the app on your phone, it takes a few minutes to set it up with some information about who you are as an individual. Then on a daily basis, we just ask that you go in and spend about a minute every day updating the app for any new signs, symptoms, and risk factors that you might have accumulated across the next day.
Yeah. That was it. I tell you, I am a good boy. I am taking part.
Fantastic.
But to be a little critical, Tove, I don't think you got that breakthrough that you hoped for.
No, we have—
How's that?
Yeah. We have 200,000 participants today. Not all are active. It provides us a lot of information. We can do a lot of research. But what we now lack is the opportunity or possibility to make the information more granular. So we have maps.
What does that mean?
It means that now we can look at large areas and say, the trend is increasing or decreasing. If we had more participants, we could zoom in and really tell the health authorities there is an outbreak ongoing in this city or in this part of the city. I was disappointed that we did not get more attention and support from the health authorities because in the U.K. they have the same app, and there they have got a big grant, and they also have a lot of important people saying, "Please join the app. The data is important for us." As a participant—
Let us say you could gather 1 million or 1.5 million of the Swedes. You would find out much more.
Yeah, we would learn so much. Exactly.
Okay.
What we are looking at now is both to find hotspots, but we also found how many days you have symptoms, how many people get long COVID. What if you are pregnant? Do you have other symptoms? If you have diabetes, what will happen with you then? This builds up a huge database, but we are not better than the data we have. The more data we have, the better studies we can do.
How is that the Swedish Public Health Agency really did not support this battle of facts?
I do not know. I do not know. Because I think that the information is always valuable, and then, of course, if the information is a bit unsure, you can look at it a little bit less sure. But information to me is always good, and then you have to value it for what it is.
We have viewers now from all over the world. We have from Russia, Canada, the Philippines all over. Is this method applicable all over? Could you do the app for the world?
Yes, I think so. The virus is the same across the world, and the symptoms you get are very similar. I think it would be helpful. I have talked to people at WHO and the European CDC and they are very interested in this type of surveillance. It is also so good that now when testing systems are cracking in some parts of Sweden, they will stop testing the community. Our app is still ongoing because the testing data will not be comparable across regions or times. The app is covering all of Sweden. In our data from Uppsala, in my second big project that we will talk about.
Yeah, we are coming to that. Yeah.
Yeah. We can see there that the testing is decreased in areas that are far from the testing stations. The app, in Sweden, of course, everyone has a smartphone, and they have internet.
Sure.
We have a much better coverage in terms of distance from cities.
You mentioned the second project that is called CRUSH COVID-19.
Yes.
What is it all about?
It is another collaboration project. There is a medical doctor in Region Uppsala who is also the medical chief officer at the testing unit, and he called me and said in the summer, "Please, Tove, I have to do something. We have to have a strategy for the testing this winter. How can we find the hotspots?
If you don't know, we're talking about the fourth largest city in Sweden.
Yeah.
Uppsala. Yes.
What he wanted was a collaboration where we would feed in the COVID Symptom Study data to inform them where they should send out mobile test units. I am happy to say that yesterday the first mobile test units were sent out in Uppsala and was fully booked in the small city of Alunda because we had noticed that there were signs of increased transmission there. This is a wonderful example on how the health authorities can work together with academia, and we can learn from them, and they can learn from us. I think the collaboration is key when doing especially working like this.
I guess the focus is to get more findings from areas that are socially not that strong. Is that right?
Yeah, but we didn't know that at that time point.
Okay.
When we are looking to the data from the testing in Uppsala, we can see that there's a lot of women that get tested, there's more younger people than older people, and it's less migrant people in the areas that are socioeconomically disadvantaged. In some way, we have failed to reach out with information to all the groups in the society. This is especially important because we also see that the mortality in COVID-19 are higher in those areas. What we find is now that we have to find ways of looking at the blank spot on the map and knowing if they have an outbreak or not. Because if we miss that outbreak, it's very unfortunate. We will not see it until three or four weeks later when people start dying there or going to hospital, and that's too late.
You mean more early warnings—
Exactly
—this way.
What we are working with now is combining data from sewage, you know that the virus—
Yeah
—that comes out in the toilet, and we can measure that in the sewage system. We look at where do people call the health nurses hotline from 1177, where did the ambulance go? And we can combine all this data with the COVID Symptom Tracker app and the testing data—
Yeah.
—to get a real time map of where the outbreak is happening, and also what happens when we have a school break or we have new restrictions, what happens, and does it affect different areas in a different way?
You have been repeatedly saying that we must do much more testing and tracking.
Why has Sweden failed that way in these matters?
I think there are—
We are really bad internationally.
There is no single answer. I think right now people are arguing whose fault is it. Is it the government? Is it the Public Health Agency, is it the regions? I cannot answer that question, but I do know that—
It is a shame.
It is a shame, and it is a surprise to me because in my view, Sweden is high tech. We have all the logistics, we have all the labs, the PCR machines, all that is already in place. We have a lot of people also that wants to contribute. That is the feeling I get. As soon as I ask someone, "Please, can you help me with this?" or, "Can you help me with that?" People want to contribute to society and get us out of this crisis. I think we would have needed some more collaboration between different industry, academia, and the state to solve this crisis.
Do you see that it is working better already now or?
We have improved a lot.
Yeah.
But now the demand is huge, so the regions can't meet the demand because there's so many sick people that want to test. But it's much better than in the spring.
Okay.
But now there's also these new inventions. So there's different kinds of tests. One test where you can find the genes of the virus, that's a PCR test. But there's also another test where you find the proteins of the virus, which is much simpler, and those tests are coming now, and that's also something that will be very interesting, and my prediction is that they will be used a lot. Maybe also you can have them, everyone that visits the hotel, if you have a nurse taking the samples, you have the results in 15 minutes, for example. So those needs to be further validated, but I'm quite sure they will come strongly within a very short time.
And you mentioned hotels. This is a hotel event.
Yes.
What should they do? This is a severely struck business sector. Do you have any recipes what to do?
Of course, everyone has been thinking a lot how to have a corona safe environment, but I think that we could use the hotels for many purposes. Why not repurpose them so that healthcare personnel can use the hotel, the few hours they get off, not to go home and transmit disease to their families? There are also recommendations that if we have one person that is sick in the family you should separate them. Why don't the rest of the family go to a hotel that is paid by tax money? Maybe there are those kind of things. Then for the future, I would say there's strong evidence now that this is a seasonal virus, meaning that it will go down to the summer. Maybe we can also organize ourselves having more activities, social activities during the summer half year—
Yep.
—compared to the winter.
Okay, Tove Fall. Time's running.
I have a few more bullet points, but I will save them because you will come back again when we summarize the three first conversations.
Yeah.
We have here to talk a little more.
I save that. I have only one more now, because I do not think all our viewers know what a Dutch Kooiker is, and I want you to explain that. What is a Dutch Kooiker?
It is a super cute dog. They are very active, intelligent, and the perfect size, so you can take them on your sailboat under the arm like this. We have a dog called Vega, three years old, and she brings a lot of happiness to our family and a lot of exercise to us. She is wonderful. It is a big dog in a small costume.
Just for the moment, thank you, Tove Fall. Time to introduce the next guest. The fact is that she is the Chief Economist of the Bank Nordea. I'd say she is perhaps Sweden's most respected macroeconomist of all. I'll tell you that she's in the media almost every day, press, television, radio, because all the media are in desperate need for a person who can explain what's going on in the economic world, and she really can. Let's take a look.
It was a dramatic downturn during the spring. I think it's wise to be humble. It's a virus, and we don't control it yet. There are also opportunities. Do you want to hear more about them? Please listen in to the seminar.
Please welcome Annika Winsth. Good to have you here, Annika.
Thank you. Nice to be here.
Welcome. Was it right, you are in the media every day to explain things?
Oh, I do not think nearly, but very often, actually.
Yeah. Very close to. I have asked you to bring a couple of slides where you point out indicators that are really interesting. So you can show them, and you can make comments on them, and I will not interrupt you for a couple of minutes. Then I will come back and interrupt you with a follow-up question to them, and a couple of other things. Is that okay?
Yeah. Perfect. Thanks a lot.
The word is yours.
The slides.
They are coming up.
They are there. Excellent. As I said, I think it is wise to be humble. It is still a virus, and we do not control it yet, but there are a lot of opportunities. Especially the vaccine we hear about the last week and days. If that is true, it is really, really fantastic, and the best thing we can give the recovery. As I understand it, there are opportunities to manage to vaccine the risk groups during the first half of this year. If that is true, it is really, really fantastic. There are also other opportunities, and if you look at the graph here, you can see China. China is now back on trend, and both manufacturing and service sector is actually above the level before the crisis. China is, of course, a very important engine to the economy.
If you look at the right-hand graph, you can see the world trade in advanced countries. Depending on China, when they started to open up, the world trade come back after a plummeting spring, and then we can see that it is close to the same level as before the crisis. That is, of course, very important for small open countries like Sweden, but also for Germany, and Germany is the engine for the rest of Europe, for example. That means that if you look at the right-hand graph, you can see the Swedish export is also back at the same level as before the crisis. Actually, the industrial production as well, already in August.
So there are a lot of benefits from this world trade. The best thing at the moment is that China is now growing, and most forecasts believe that they will have a growth around 2% this year. So during the spring, nearly the whole world closed down at the same time. Now we have problem in China. In Europe, of course, and we are closing down, but China is still there, and that is very important. The second thing is—
We still need the slide. Yeah.
If you change the slide, yeah.
Yeah.
The reason behind that, what is that then? Yes, of course, massive stimulus package from politicians and also from central bankers. On the left hand, you can see the balance sheet from the major central banks. As you can see, if you look at 2008, it looks like a blip in the curve compared to nowadays. During the financial crisis, we thought they were spending or printing a lot of money. But as you can see, there are massive stimulus this time. Behind those massive stimulus, that means that we press down the interest rates. You can see those in the right-hand graph. Low interest rates, that means that we have increase in asset. Equities, for example, asset inflation, but we also have stimulus to the economy. If you are in your markets, you are depending on the rates.
I think it is wise to think about will they now start to increase when we have a vaccine next year, when the recovery start to take on? Will the interest rate come up then? Yes, I think there is a risk that they will do that. If you look at the U.S., for example, you can see that the rates have been around 2%. It is not that far away. So if they increase to 2%, I think Fed can allow them to do that, then it is nearly double the level today. That is wise to have that in your mind. Will ECB do that?
No, I do not think so because we have a high debt level in a lot of countries in Europe. Sweden, then the central bank here, yeah, I think somewhere between. I think we are now in an area where people start to think about recovery. The virus is still there, but in Q2, we will start to see a more explosive comeback, and that means that there are also risk that the interest rates will come up. I stop there.
You sound very optimistic in this critical situation. Now we average stupid people who do not understand things the way you do. We have been thinking, are there no limits to how much money we can come up with to support people and companies in a situation like this? Now you say in the sub-headline, long-term treasuries might have bottomed out. That makes me almost panicking.
It depends which country you are, but if you are thinking about the U.S., I think they can handle it. I think they believe that the growth will be higher than the debt, and that means that the debt compared to the growth will then decrease over a long time period. And they are lucky because they are using the dollar, so they are not that dependent on other currencies. If you look at Greece, small countries in Europe, for example, they have such a high debt level, much more problematic. If you are thinking about Sweden, I think we can handle it. I am not that worried about that. I thought that the debt level should increase to above 50%, the Maastricht criteria, but we will not during this crisis. We still have strong debt level in Sweden.
Yeah
We can afford it. And we need to handle this situation. We need the stimulus. We need to send out those package.
You macroeconomists, you usually talk a lot about unemployment. What is the situation there? Is not it dangerous?
No, I also have a couple of slides there, so if you please put them on.
We can check the unemployment. Okay.
The left hand actually have the employment, and as an economist, I think the employment is much more interested because we can help companies to survive, but if they do not employ people in the future, then we have problem. If you look at the left-hand graph, you can see that employment has already started in Sweden. The forecast is in the gray area, i t is Nordea's forecast, and we have been less negative than other forecasters. But actually, the real numbers, they are better than we are saying. So companies are increasing their employment today, and that is, of course, depending on what has happened in world trade, in China, in other countries as well. Then if you look at the right hand, then you can see the unemployment. I can still hear people talking about this crisis, the corona crisis, as worse as the financial crisis.
As you can see in the graph, already around midsummer, unemployment started to level out in Sweden and actually has fallen 13 weeks since the top. So we are going in the right direction. Then, of course, there are companies like in the hotel, restaurants, culture, sports, they still need stimulus. They still need help, and especially as long we have restriction. I think it is remarkable to do not spend money on those, as long as you have those restrictions. But that is a small part of GDP in Sweden. If you are thinking about those areas, it is around 3% of GDP.
It is growing.
It is growing, but 3% of GDP, if you take employment, 5%. If you are talking about the export sector, it is close to 50. This is very important to help those companies to survive, of course, because we want culture, sports, restaurants in the future as well. A lot of the Swedish economy has bumping back, and that is much more depending on the world trade.
I guess some parts of what you say are applicable on the rest of Europe also.
Yes, it is. Europe is actually worse out this time. They have higher debt level in Europe, so they do not have as much money as we have to spend. They are also more in problem, actually, if you are thinking about the virus. The press is tougher there at the moment.
Annika, will there be permanent changes in our economy due to this crisis?
Yes, I think—
Long-term permanent.
Yeah, I think so. I think—
In what way?
Especially in real estate, because I think people in the future, they do not want to go to the office five days a week, maybe four. But when they are in the office, they need to meet each other to talk with each other in big areas. But they also need to have the possibility to have Teams meetings, Zoom meeting. I am sitting with more than 100 people in the same room. If all of us have Team meeting and Zoom meeting at the same time, I think it is not that good, actually. I think we need to have some more areas where we can be. Are we going to travel in the same way as we did before? No, but I think we will travel. But then we will do it safe. When we are going privately with our families, then we will have safe holidays.
We need to do these changes. But in Sweden, and in smaller countries, of course, we are traveling to meet our customers. But we will not do it in the same way as before. We need to do structural changes. But it is very important to remember that we have done those structural changes during long, long periods. It is very easy to tell people which job we will lose, but it is much more tricky to tell which new job we will find out there in the future.
It may sound a bit like a paradox that you are sitting here and sound rather optimistic, and we are going through one of the worst crisis the world has experienced through decades. Are we actually approaching a society now where the well-offs are getting more well-off, and the bad-offs are getting even more bad off? Are we creating a divide?
We have already done that before, and I think that was the reason behind people voting left and right-wing. They feel that the growth increased a lot, but I'm not included in that. People feel that's a problem. When we have stimulus economy as we have done today, lots of money out there, that increased assets prices. So equities, houses, and so on. So we who are insiders, we are lucky. We are wealthier after this crisis, and those who are outsider, they are not. It's even more tricky for them to step in in those markets. Yes, that's a problem, and I think we need to talk about that much more, after the crisis. But we have already started that dividence before this pandemic.
Annika, you will also return to stage in a while again. I just don't know if I can trust my research that you don't have a dog, do you?
Yes, I have a dog, of course.
You have a dog?
Of course, I have a dog.
Yeah? Because I thought you should have because you are a country girl originally.
I am a country girl.
What kind of dog do you have?
I have a Norfolk Terrier.
Norfolk Terrier. Okay.
It's also a small terrier and a big head. Taking a lot of space.
You will understand why I ask these crazy questions later on. Thank you very much, Annika Winsth.
Thank you.
For our third guest, he's not on stage, he's online. He's in Stockholm, but online on a link to us. His title is Professor of Cognitive Neurophysiology. Easier to say is that he's one of Europe's, maybe the world's, leading experts on the human brain. That's the way people know about him. Let's take a look.
My topic area is around how people communicate and how our brains are constructed in order to support social interactions. One of the most fascinating things you can do. The absolute challenge of being at the end of what we know is really what makes this very interesting.
Hello, Martin. Trying to call you.
Hello, hey there.
Yeah.
How are you?
Great. How are you?
I am doing very well. I am sitting here secluded, for lots of reasons, but mainly for the reasons of the contagion.
And what's that strange background you use on your computer?
Well, since I'm all alone, I thought I'd put up a rally of a lot of people behind me.
You know, crowds.
All the politicians.
Crowds are not permitted.
Well, this is a pre-COVID crowd.
I see. Martin, everybody's talking about how we should take responsibility. Then it ends up that responsibility is keep the distance and wash your hands. Is there anything else I or we can do to help avoid an even more deepened crisis?
Well, that sort of taking responsibility is actually investing in the social norms by telling others also to take responsibility. That is something that's very well-known in societies that are culturally homogenous, and the Nordic region has been very culturally homogenous and had a great sense of trust in authorities, a great sense of trust in one another. Hence, if you're of Swedish cultural heritage, so to speak, it's very easy to relate to the fact that the government says, "Well, please behave," and people will behave to 80%, 90%. We have also had a change in the social mix-up of Sweden becoming far more mixed heritage, and a lot of people have immigrated to Sweden with less of trust in the public, with less of the trust in the public domain, and the politicians, etc. We have seen that with an effect.
Part of the social stratification of the damage that this pandemic has caused, part of that is that the Swedish model for how people behave in a voluntary way, has not reached because of cultural and language reasons to all parts of society. In that sense, we have been rather successful, but not with the people that are far away from the cultural norm that this type of policies rest on.
Your science, Martin, is mainly about how people behave, how people act, and why. Take an example now. Everybody talks about that part of the workforce that can be working from home. They have gone home now, and they are sitting at home working. What does that do with us, with our way of functioning, with our way of thinking?
Most of the people that are mobile in their work environment have a good social situation in a sense that they have a job, they have somewhere to go home to, and they probably belong to the non-manual workforce, which means that, for most of those people, it is inconvenient, but it is bearable. We notice that people with less of a social network around them, we notice far more reported psychological difficulties in terms of loneliness, stress, sleep disturbance, and also the sense that there is no difference between work and playtime, so to speak.
But in most cases, that works out all right. This work at home has another thing with it, and that is that the people that cannot work at home, they can actually travel in a safer way, for instance, with public transportation. In a sense, it is good for everybody if this is done, at least in the short to medium term.
But Martin, doesn't it change the way the companies actually function when you have to—
Certainly—
Check up everybody sitting at home.
The push towards being able to control what's actually created in a company, for instance. The push to control that, meaning that you have automatic follow-up systems, etc, and automaticity of different forms of administration, the removal of paper trails, etc. All of that is speeded up by this strain on the internal processes that you have in companies. So what had happened with automatization and digitization already before the pandemic is now accelerated. So part of the risk for social inequity, etc, in the workforce is actually, I would predict, will be accelerated to quite an extent with this pandemic.
Should managers change their thinking in one way or another when they have to run organizations working like this?
It is interesting. I've only seen a small study on it. I haven't seen any major studies on it.
What does it say?
It's interesting that there is an age divide, i.e., elder managers tend to see this situation as a temporary thing, and soon we're going back to normal. Whereas young managers tend to see this as the new normal, and we have to find ways in order to supply the workforce with the type of freedom that you have when you can work wherever, whenever. So there is a difference, and the prediction is that traditional companies will, to a far larger extent, move back to pre-COVID work patterns, whereas young companies probably will be far slower in moving back towards, I would say, the self-contained office type of workforce.
This is a highly interesting trend, of course, if you're right, probably. Martin, there's a lot of talk about fear. What happens in our brains when we walk around and are afraid of a virus?
There is actually good data demonstrating that people report that they are far more on the alert every day. One of the regions in the brain called the amygdala actually has an increased alert level, and it has now been shown in a preprint. It will probably come out as a full study very soon to show that people, the alert system in the brain has, for reasons of plasticity, grown just a little bit, but it has increased in size, indicating that we use our alert system far more in situations of uncertainty and the periods of fear like we see in this type of pandemic.
Martin, you have also taken part in the debate, which Tove Fall referred to, about the Swedish ability to test enough people and track the infection. What is your take on that? Why did we fail?
To me, I tried to make the point about the difference of what a good organization does to people. People can work very hard in a bad organization, and they will achieve very little. Whereas if you work in a good organization, you will actually achieve a lot. My argument was that the Swedish regional structure, much like it is done in Spain and in several other countries, but in Sweden in particular, we have too many regions that were supposed to self-organize around a common problem. If you choose simple logistic problems in 24 different ways in an acute situation, obviously it is going to take time. So it took almost six months before more than 60% of the country was up to speed in testing.
Now when we are in this aggravated situation, where we have more contagions on the loose, and we are outpacing now the testing capacity, the ability to even increase that is now taxed to the capacity. It is embarrassing. We are a sparsely populated country. We have said that we are going to use money to really see what we can do for it. We know that testing, testing, as Dr. Fauci says, is the most promising way of really trying to limit the spread.
Yeah. Returning a little to what you said in the beginning of our talk. You touched upon the difference between trust and the legal force. Now we see a change in Sweden here. Do you still believe that we can go through this crisis with very little legal force?
I still think that the Swedish policy is dominated by the social trust part and less on the legal changes. I think it would be a mistake to leave the old pattern. The reason being is that there are a number of studies out in the world where you show that if once you leave the social trust, if I am entrusted with the or there's put demand on me to behave in a certain way, I'll do that. But if there is a law around it becomes also. The most prominent experiment in that area was in a daycare center where parents were late. Then the daycare head put out a fine of $10 for every hour that the parents were late.
They still were late, and then they complain about, "Well, you're late again." "Well, sure I'm late, but here's your $10." Meaning that if you take away the social connects in the behavior and you monetize it in this sense and do it with either legal ways or other ways, you lose also the ability for me to tell somebody else, because now it's the police that should tell somebody else. There is a real societal value in the trust component, I would say.
Martin, when we prepared this conversation, we talked a little about hotels. I took up the issue because you are probably an extremely frequent hotel guest. How do you think they're doing in this business?
Was that so?
Are they doing a good job?
Hotels are doing a very good job. I am not the worst. We call the worst in my university, we call them PIT, professors in transit. They never stop. I am not that bad. But seriously, the hotels are doing very well. Seamless check-in, seamless check-out. I know what I can expect. It is clean everywhere. I can get good food, and I can sleep well in a nice bed. And that type of 100% prediction that I have around my hotel visits, I have been traveling for 30 years, I think once, there has been an issue around it. It is an enormously effective industry in that sense. And it is all manual.
The last mile is all manual. It is all about cleaning. It is all about organization. It is all about processes that work. It is all about not as highly trained people as you would see, for instance, in healthcare. But you see people that are specifically trained and doing a really good job. I admire that type of human organization in a complex industry with that kind of precision.
In the second half of this event, we are going to pick up on a few things you mentioned here. Martin, do you have a dog?
We had a dog.
What kind was it?
That was a Jack Russell. He was known because he barked a lot, and he seemed aggressive, but he wasn't aggressive.
Okay.
He was just like me.
Okay. Martin, did you listen to Annika and Tove, the conversations we had?
Absolutely.
Yeah. We have them here again now on stage just to sum up a little of what we have been talking about. Martin, did you pick up anything special from what these two ladies said?
Yeah, I think Annika's comment on the economic growth was very interesting because I have a prediction that the things that were working are very quickly coming back. But the new projects, the really new stuff is very difficult to create without the on-site collaboration that you have with travel. My thinking is that, sure, right now it is going okay, but I am not as optimistic for next year's April as Annika's is.
Would you comment on that, Annika?
Yes. I would say that I'm worried about Q4 and Q1 because it's cold period, and during that time, we have not vaccinated risk groups, and we still have restrictions in Europe, in Sweden, and in a lot of other countries, I guess. We don't need to vaccine all the people because as soon as we take those restrictions away, we will start to behave as normal as we can. We saw that during the spring and during the summer, and I guess we will see that this time as well. We now know that next autumn will be much better than this. Hopefully, we have vaccine a lot of people during that time. I think from a financial perspective, they will start to run as soon as they hear about those vaccines. The economy will start to turn around in the second quarter.
Tove, what did you come to think of when you listen to Annika and Martin?
I think this theme of inequality is very important to look at. My perspective is that we have vulnerable groups in the society, and those are much harder hit by the pandemic. Those are the groups that go out and have the service professions that can't work from home. So they have suffered much more of the disease in terms of loss of relatives, family members. Also we have to look at these chronic consequences of this new disease that we don't know so much about yet. Also how, because we know that these groups have more chronic disease, and now they didn't get the healthcare they needed.
So there's been a lot of planned healthcare that have been delayed. I think we will have some issues with a lot more sick leave next year than we had before the pandemic. I found both talks very interesting, especially this recovery part, how resilient the society is and how we can get back after crisis is very positive.
Annika, reflections on the two others?
Yes, I am thinking what happened in the brain of people who are afraid for their economic situation. Unemployed people and people who had to close down their companies and so on. It is really, really scaring for a lot of people. I think there is a risk that we will see a higher debt level, and we will also see the people taking their life or they are really depressive after this. I think, therefore, it is very, very important to help those people to survive this period. If you have restriction again, I think it is very important to help people to think that, yes, during this period I will receive help.
In Sweden, we are much more lucky to do that because we can afford it. If you take the U.S., for example, I guess a lot of people are really stressed there over their economic situation, as when you are unemployed there you have no money coming in at all.
Well, last question is to all three of you. Martin, are you still there?
Absolutely.
That's fine. One of the most frequent questions in this era we live in is when will everything be normal again? What's your take on that, Martin?
Normal is just a statistical expression.
Okay.
Right now it's normal to be the way I am, to be distant and to try and do my best in my place. Back to the normality we had before the pandemic will be very quick, I would think, with the exceptions of a few industries. I think the bar industry is going to have a little tick. The cultural scene will have a little tick down, and they will be slower to recover. I think our industry is going to have a difficult time for a little longer time. I think it's going to be some time before we're up to complete par also, unfortunately, when it comes to hotel industry. Apart from that, I think the normality is going to be very quick. I think the other ones are going to recover as well. I am sure.
Annika, how do you react to my question?
Yeah.
When is everything normal again?
I don't think everything is going back to what you think was normal before this crisis.
I think so.
Everything is going back to normal?
Yeah.
I think things will change. Something will change. But I think that people will feel that everything is going in the normal direction the second half of next year. I hope that next Christmas, then we are feeling that we are living normal.
That is next year also.
Yeah.
Yeah. Do you agree, Tove?
I haven't seen the safety data from the vaccines yet. That's what everyone is waiting for. It just don't need to be effective, it also needs to be safe. We also need to see how many are willing to take the vaccine. But I think a combination of widespread vaccination and rapid tests that are accessible at home, so you can just take some saliva and see if you're positive or not, that can open up the society next year. I'm also hopeful for next winter will be so much better than this one.
I draw the conclusion that not only our viewers, but also Martin, Tove, and Annika learnt something from this conversation. Did you?
Yeah, sure.
Great.
Thanks.
Thank you very much indeed for taking part in the Hotel Market Day, Martin, Tove Fall, Annika Winsth. Thank you very much.
Thank you.
Okay, a little reminder, friends. Don't forget to scan the QR code and take part in our poll so we can get these interesting answers to deliver by the end of the event. Now, I want to share a little story with you if it's okay. Because once upon a time, way back decades ago, I had the opportunity to work as a trainee at AP Dow Jones The Wall Street Journal. And there I received this very brief lesson from one of their writing gurus on how you should attract readers, draw readers' attention in the best way ever to an article. The recipe was simple. Just include a dog in the first paragraph, and they will read it. I think in a way, Pandox lives up to this spirit, this atmosphere of dogs.
Let's have a look. There were the dogs, and you will perhaps meet them again. I think it's time to stimulate our brains a little, take a little thinking break, pause a little, and to get some more energy. The best recipe for that is to listen for a couple of minutes. Don't go away. Just listen a couple of minutes to Isaac and the Soul Company.
Isaac and the Soul Company, thank you very much indeed. Now we have some more energy again. Welcome to the second block of this event, and now we're going fully on satellite. I try to call on Aldert Schaaphok, and he's in Amsterdam. I hope to see him on the screen very soon here now. Hello, Aldert.
Good afternoon, everyone.
Good afternoon. Hello. Now, you're listening to and talking, listening to the Vice President of Pandox, responsible for international operations. The reason we have Aldert here online now is that we should talk a little about the dominating trends in the hotel industry right now. I think Aldert has picked six of them. So let's start off, Aldert, with the first one, which we call hygiene and safety. It's obvious that the situation we're in now has increased the claims for hygiene and safety in the hotel business a lot. What's your take on that?
Yes, exactly. As you say, hygiene, cleanliness, and safety is at the forefront of everything we do all the time. All hotels have been audited and certified by independent agencies, and all team members have been trained and follow strict protocols. Also, the international brands, they all have launched their own brand specific certification. Think, for instance, CleanStay from Hilton. As Martin said about this 100% predictability, it is important that we inform our guests through the entire booking process and confirmation process that they are informed what we are doing, and to assure them that they will be staying in a clean and safe hotel.
Also, we have launched new cleaning technology like nano cleaning technology. We use new products like ozone water. What is also new that you see guests that are staying one or two nights, they do not have the need or the desire anymore for daily cleaning. That is something I think will stay that guests choose when and what they would like to have cleaned or changed. That is something that maybe later on will also be taken out of the room price and be like an à la carte menu.
I tell you, I tried many times to say, "You do not have to clean my room today," but they really want to do it anyway.
That is something that is part of DNA of a hotel. But like at home, you also do not change your bathroom linen every other day or reorganize your room on a daily basis. That will change, I think. That is also good for the environment, of course.
Now, Aldert, the second trend is that more and more people use the word contactless. Maybe a sign of the times we live in. But contactless, what does that mean to you as a hotel expert?
Yeah. In itself, it's, of course, strange talking about hospitality and contactless.
Yes, it is.
It seems these two don't go together. But I think it is more about eliminating unnecessary administrative interactions between guests and employees or team members. With today's digitalization technology at hand, there's no more need to wait at the reception desk and fill out forms. You can go directly from your booking. You do your online check-in via an app while you're in the cab. You get a confirmation with the room number and digital key, and you go straight up to the room. There's no more need to interact.
I think in the long term, it will change that the people working at the reception will change from an administrative employee more to a host, where they are there to help you, to assist you, to answer questions about the city and more than anything else. And I think all these digital interactions need to be simple, and simplicity becomes a hygiene factor, I think.
Aldert, if we name the third trend a little more general. New digital solutions, how do you interpret that?
Of course, in the hotel industry, like Martin also said, it is a very manual industry. We lack behind when it comes to introducing digital solutions, and that has now been accelerating at high speed. Where not only it is used to offer digital solutions, but also to gather data that allows you personalized communication and personalized services. It also is a fact that with these digital solution, traditional receptions will for sure disappear in mainstream hotels. We will see also in room more touchless and voice controlled solutions like Google Home or Alexa.
And we will see a personalization in these digital interaction. It means if you have a digital menu and you know that your customer that is looking at your menu is a vegan, then you don't need to try to sell them steak tartare burgers. So it will be tailor-made based on a profile of a guest. And in the end, we will reduce useless administrative tasks that keep us busy still today.
Aldert, talking about steaks and burgers. Food and beverage, what will the trends be there?
Yeah, I think we will see also there the effect of contactless in a way that we will see less rich buffets, but more portion control solutions. Also, we will see the digital introduction that you order through a QR code. You pay via a digital app via the same QR code. You will also see that through what we call geofencing and beacon technology, we are able to serve in the restaurant exactly where guests are sitting based on the location of the mobile phone. We see, I think, less choice, less waste and more quality over quantity. I think a new trend right now is what we call ghost kitchens or cloud kitchens. These are restaurants without a physical restaurant, only kitchen, and only based on delivery. Maybe we can start introducing something like that in our hotels.
But still, when I listen to you, Aldert, I hesitate a little about the fifth trend I was going to ask you about, which is sustainability. Because all these pre-portioned stuff you make now, that's not very sustainable, is it?
No. There is potentially a conflict. Of course, you can maybe use reusable materials. But one thing is clear that when you talk about sustainability, I think people are much more aware now than they were that basically, the planet doesn't need us. The planet and nature were better off without our activity. We will see that this increased awareness might lead to a stronger focus on sustainability. I think shorter supply chains will become more important.
Also as an act of solidarity, what we see today, that we try to support more and more local economy with an emphasis on local and seasonal sourcing. You will also see a strong development that vegan and vegetarian will become super mainstream, more than before. I think we will see a trend where we are more busy with preservation of resources than consumption. Less choices, less waste, and more focus on preservation.
Aldert, do you think that the hotel business can be really trustworthy in connection with the term sustainability? You think so?
I think, in the short term and the mid-term, this is our key focus. There is no way around having a true sustainability agenda. If anything has learned this crisis, is that we need to look better after our local economy.
We talked about five trends now. Let's talk about number six, which is something we call local experiences. What is that?
Yeah. We expect that for the coming month, we are all fighting for the same limited number of guests. It is clear that in order to outperform our competitors and to stand out from the gray masses, I think we have to connect our guests more with the local experience and local community than we've ever done before. This means that just a nice room and a good bed and a good shower will definitely, in a market where there's oversupply, that will not do the trick. The only way forward is to link our guests very strongly with the local community, and to put the locality of the hotel more in the forefront than I think we have done so far.
Would you say if you look at the list here with the six trends we talked about, is there one or two that are much more important than the others?
It's difficult to say. It's all about a balance. But for our industry, I think digitalization and sustainability are the two most important elements moving forward, more than anything else.
That's what I expected you to say, Aldert. Thank you very much for your trend check here in the hotel.
Thank you.
Thank you very much, Aldert Schaaphok from Amsterdam. Thank you. We will keep on talking about the hotel business. We will dive into the subject of demand and distribution and brands. We are still doing this only online. I hope to be able to connect now with Vasilis Europoulos in Brussels. There you are, Vasilis. Hello.
Hello, everyone.
Hello. I have learned that you are Head of RMC. Before this day, I did not know what you mean with RMC, but I think it is the Revenue Management Center of Pandox, right?
That is all about revenue management, absolutely.
Yeah. Now, I will let you take over the show now because I know that you have a very interesting guest based in London to talk with. I leave 9, 10 minutes to you now and see what happens. It is going to be very interesting. Vasilis, go on.
Thank you. We welcome today Robin Rossmann, who is in London. Hello, Robin.
Hello, Vasilis. How are you? Hello, everyone.
Very good. Nice to talk to you again.
You too. Fantastic. I am excited to participate in the Pandox. It is the first time I have done it, but I have heard about it for many years. Thank you for inviting me along.
Well, there's no better person to speak about where do we stand from a hotel performance and what can we expect for the future. I would have 1,000 questions to ask you, but we'll just concentrate on three ones and possibly one bonus at the end. Shall we do it?
Sounds great.
Okay. Perfect. We've been a couple of months in this now.
Seven, eight.
Where do we stand so far? Seven. Where do we stand so far in this sort of crisis, and what have we learned from the beginning to the summer and moving on into, let's say, autumn?
Thank you, Vasilis. I think firstly, and most importantly, one thing, sorry, we have learnt, is that no matter how hard I try, and I do try hard, my jokes don't get any better. We've been doing a number of regular updates, webinars on hotel performance across the world in Europe, and it's been fascinating to track how this pandemic has impact our industry. I say fascinating not in the sense that it's been fun, but I think it has been important to do that and to share what's going on. We do try and make it a bit light-hearted. I'm not sure I've got any better in that, but there you go. In terms of what we've learned from the pandemic, I guess I'd summarize it in the following three things, and I've shared some of these recently.
Number one, I think we can all agree that COVID is definitely a horror movie for humanity and certainly for our industry. I think the first thing is horror movies usually have sequels. I think we've seen as we've headed back into the winter for Europe, in particular, we are having a sequel of the horror movie of the drop in performance and the closures and lockdowns that we saw in March and April. Second thing that we've learnt is that they're predictable. Horror movies are usually predictable, and perhaps in hindsight, these lockdowns, this decline in performance, hindsight is 2020. If you look at it now, it was fairly obvious. We haven't found a cure. It's a virus. It came back in the winter. We thought that might happen, but we hoped that it wouldn't.
We hoped that with social distancing measures, people washing their hands, that as things reopened, we could continue life without there being this threat of hospitals being overrun. That hasn't happened, and so we are back into a period of really depressed performance across Europe. That being said, the last thing I think we've learnt, and these are sort of recent observations, is that just like in a horror movie, it is possible to survive. You just have to follow some basic rules, and they are never go to sleep. Never, ever go to sleep. Keep your eyes open. Make sure you're looking around you, and be ready to run fast. When I look at the performance of the industry and hotels across the industry, as we've gone through and come out of these lockdowns, particularly in Europe, those three things are true.
Number one, don't go to sleep. Don't close your hotel. It might seem like a good idea to close your hotel to save money, to save cost. But what we saw coming out of the pandemic is those hotels that remained open through lockdowns outperformed their competitors at a revenue level by about 20 percentage points at occupancy. Just think about the cost of missing out on that. And it makes sense, right? It's all about loyalty. It's all about those guests that are traveling through the pandemic will still be there when things reopen. And if you're closed, you lose valuable staff, and you lose the connection with those customers.
So number one, don't go to sleep. Number two, keep your eyes open. What I mean by that is you have to look at what's going on in the market. You have to look at what other hotels and competing hotels are doing. We've never seen a bigger range in the level of performance of hotels in a market. Usually, you look at a market, and most hotels trade within a maximum 20%-30% variance on occupancy, right? So the top hotel is doing 100%, the worst hotel is doing 70%. In the pandemic, it's a 70-80 percentage point margin. So the top hotels are doing 80%, 90%.
That is very interesting.
And the bottom hotels are doing 10%, 20%, 30%.
Who are the winners and who are the losers here?
The winners and the losers, it does depend. A lot of it is down to the hotel type you are, your location, how big a hotel you are. We found that smaller hotels have done far better than bigger hotels. It comes down to if you are extended stay versus short stay. It also comes down if you stayed open or not. That was another big driver.
A big part of it is, and this one is where it is really difficult to pin it down to something tangible is, and I speak more from not just my STR experience, but my advisory experience with Deloitte, it comes down to the team running the hotel. How hungry they are, how motivated they are, how much they really care about the performance of that hotel. That is the real hidden thing, which is you will never find easily on a spreadsheet, but it is so important. A good general manager, a good revenue manager can make or break the performance of a hotel.
Right.
The last thing we learned is that an important thing to survive is you have got to be ready to run fast. You have got to be ready to react because things can change like that. You need to have someone on top of it.
That is what I am taking. Do not go to sleep, do not close, stay open, stay hungry.
Yep, absolutely.
If we switch a little bit on the traveler side, you did a traveler panel interviewing regular travelers or maybe not regular travelers, and you ask them, "Hey, are you going to travel in the future?" What was the result of it? Is there some positivity in there?
So again, there's three major takeaways. And they were firstly, and I'm afraid to say this, size does count. Something that's always worried me personally. But size does count, in the sense that when we asked about the types of accommodation that they were looking to stay at, their interest in staying in short-term rental, in self-catering, in small hotels actually has gone up versus what it would have previously been.
Their interest in staying in branded hotels is about the same. That hasn't changed. Independent hotels are back a bit, about 10%. And camping and hostels are back about 30% and 70%. So there you go. For all those people that used to want to go camping, apparently they are less now. So that was the one. The second is, when we looked at what influenced their decision to book accommodation, the key takeaway there is cleanliness is a given.
If you think that going out there and spending your time marketing the fact that you're COVID safe is going to ultimately drive or change a consumer's perception, I think that's wrong. Most people, 78% said location, 47% said price and value for money, and only less than one in five said that adherence to social distancing and perceptions of cleanliness were important. And to me, that doesn't say that they don't think it's important. I think it is. They think it's a given. So that was the second one, and then final one in terms of intention to travel, are they going to travel more or less? I think the key takeaway here is, it depends on where.
Something we've been saying for a while and something that's been true of the pandemic so far is it's domestic travel that has held things together, and it's obviously international that's disappeared completely. As we look into the future, we ask them, where are you going to travel in the next two years? There were 75% said they were as likely or more likely to travel domestically, and only 25% said they would travel less domestically. So domestic will remain resilient and strong and in many cases actually grow. But internationally, that's where there's still perceived weakness. 55% of people said they were less likely to travel internationally over the next two years.
Makes sense. Yeah. Domestic will be the driver. Absolutely. You are absolutely right. We had some very good news from different companies last week, this week, that vaccines are starting to get developed. There is light at the end of the tunnel. How does that affect recovery? How should we think about it? In the previous discussions, the previous panelists talked about, "Hey, we are optimistic about semester two." How do you think about all that? Would you agree? Would you see it also in that way?
I certainly hope semester two, but I think it is less important to make a call on the exact timing and more important to know what triggers to watch for. Clearly, having a vaccine that works was a very important positive sign, and now having two that we understand will work is particularly important. The question is, what are the triggers as it pertains to those and other vaccines that will enable recovery? The way I think about it is the reverse of how things impacted our industry on the way down, is that we saw there were two triggers.
There was first, companies started pulling and stopping employees from traveling because of health and safety concerns. Secondly, governments stopped entire populations traveling because of the risk of hospitals being overrun. Those were the two triggers on the way down, and I think that when we have line of sight that those two triggers can be mitigated, we will see the reverse of that coming out of this.
Probably in that reverse order, that when governments have been able to sufficiently immunize the vulnerable portion of the population, it is so important that it is the vulnerable that get immunized first, both from a humanitarian perspective and from an economic perspective. Because as soon as we know that hospitals are not going to be overrun, governments are going to be more able to take risks around reopening economies. We need economies to reopen for travel to reopen. Secondly, I think it is going to be many years before COVID is beyond us in a global sense. It is just too catchy. It is too catchy.
It is going to be too difficult to immunize everybody at the same time. It will be with us for a long time, and that brings us to business and international travel, which will really probably only be able to meaningfully recover when we are able to have private vaccinations or have government paid vaccinations, which can be captured within a travel passport or something like that, so that Australia, the Middle East, China, these countries that have blocked their borders, will be able to reopen. Because they will not want to reopen until they are 100% sure that the people traveling there are not going to create a new wave of infections.
Got it.
I think those are the two things. The big trigger is—
Just being wary of time, Robin.
Yeah.
Basically what you're saying is, watch for these signs in reverse.
Yeah.
What caused it and watch them in reverse, and that will sort of give us some indication. Perfect.
Absolutely.
Thank you very much. I have one last question we can ask you very quickly. That is my bonus question, which is a good segue to the next conversation. What do you see as effects, let's say, on different hotel brands and distribution landscape, OTAs? Is there one takeaway we can take out of there?
I could answer that, Vasilis, but why don't you? Clearly, you're close to it. What's your view on that?
I would say, and I hope you agree, that today there's many more options. You can choose as a hotel owner, let's say, to consolidate, for instance, with different brands. You can choose to consolidate with the technology side, which is the different OTAs. We have much more options, I think.
I think that's right. I think you've either got to consolidate with a brand or you've got to consolidate with a tech platform. Because scale will matter increasingly as we come out of this.
Thank you very much, Robin.
Thanks, Vasilis.
Thanks a lot to Vasilis in Brussels and Robin Rossmann in London. Thank you for a very interesting analysis. Now I think it is time to check if we have any results from our poll, the questions in the poll. I do think we have. What has the pandemic made you miss the most? Yes, it is traveling, number one. Meeting friends and relatives, and events such as matches and concerts. I would have voted events, I think. Next question. When the pandemic is over, I will work from home more than before, just as much, less than before. Speaks for itself. Let us check the third one. I would travel just as much as before the pandemic. 171. That is pretty interesting, is not it? It proves that I am right, back to normal, is not it? Hmm, I do not know. Interesting results. That was our poll.
Now I think it is time to make a new introduction of new people on stage. This time it is about a man who really, in my view, identifies this Hotel Market Day very much. An experienced academic, a master of excellence, has moderated quite a few of these HMDs. Also a Senior Advisor for Pandox. He will talk to the CEO of Pandox, but let us take a look here.
The hotel sector is today exposed to several changes after the COVID crisis. One thing is for sure, the hotel sector will never return to the previous position exactly. Now we will talk about two things. One is demand changes. Secondly, we will talk about how business models will change. Welcome Bengt Bodin together with Anders Nissen.
Well, Anders, here we are.
Here we are, Bengt.
To talk about—
Nice to be back.
Yeah. To talk about market changes and also the very important topic of business model.
Yes.
Could you, as an introduction, give an overview of the business models that are in the hotel sector?
Yeah. We normally talk about four business models in our industry. One is the lease model, of course. We have the management contract. We always include the franchise and the independent model. Let me explain. A lease is when an operator signs with an owner of a hotel and operates the hotel and pays a lease to the owner. A management contract means that someone manages the hotel on behalf of the owner, and the owner pays the management company fees or the other way around.
A franchise agreement normally means that an owner decides to operate the hotels itself and needs a brand on a property, and signs up with well-known brands for getting distribution and sales support. The last one, again, the independent model means that an owner decides to operate itself but wants to create his own brand. So these are the four. By the way, Pandox is one of the few companies in Europe who will use all four. So we have quite an overlook.
What about the market trends? What are the most important market trends that you think will affect the business models?
Yeah. One for sure, what has happened now, and it was interesting to listen to Robin and Vasilis said before, is that, as we speak, the domestic business is going much better than the international. That is nothing new in a crisis time, but this time is even more. On the top of this, it is individual leisure who is the driver.
Before it was partly international, it was a lot of business travelers. Now it is more dominated strongly by domestic business and about leisure. That will, of course, have an impact in the business models. Probably we will see that the regional brand or local brand will be stronger. We probably will see it probably open the door for independent hotels, I would say. I think it can come with a modernization of current management contract. Something need to do a thing about it. A new version of franchise, yes. They have to also be developed for lease agreements. Quite big change will happen if this continue, this trend by more domestic. If you allow me, I will continue there.
Yeah.
I think there is reason to say it will continue. The reason is that is too strong way why it should continue. One is that people continue to travel but want to travel shorter, safer, and simpler. That drive to domestic. The second one is, of course, the ongoing trend with sustainability will also drive people maybe to go more shorter trips. That will be something who will be more of domestic trends than we had seen before.
If the low situation for international traveling will be there for at least a few years, how will that affect the different parts of the hotel industry, like the brands, for instance?
Yeah. Just to comment that first, that there will be more of domestic is not necessarily negative for the industry. Let me explain that one. Because I believe that markets or countries that already have a very strong local or domestic consumptions like Germany, U.K., and partly France, Spain, and partly Nordic, that would definitely mean, as I see it, more trips. Shorter trips and more trips.
That will even push demand higher for the industry. I think that is positive. Then, of course, we need international as well later on for having also the rate on the top. But it is important to know that the largest segment in our industry is domestic. It stands for, in Germany, it is eight of 10 people who stay in a hotel or German people, very similar everywhere. That again, that the domestic is the driver, I find that very attractive for the industry.
Is that good or bad for the big brands?
Well, for the big brands, they need to be much better than to come to a segment which has more local drivers, and we have not seen that yet. Even if the brands in general, at the beginning, have a stronger brand than independent. I think that will change when people learn that contactless or cleanless is something that is easy to copy, and then the other maybe will be coming after.
Could we dive a little bit deeper into the question how the market changes will affect the various business models that we identified?
Mm-hmm. If we start with a management contract, which has historically been a platform for global brands of two reasons. The first is that they have a strong position to international travelers, and the second one, they are at least a historical skill for operate hotels. If you now see a situation where there will be less international travelers, of course, they will lose a bit in power. If you then combine that with that most of the big brand has chosen an asset-light strategy, more focused on branding and distribution and less on operations, that mean that they are maybe not the perfect partner for many passive owners.
I believe that some owners will on today looking at it, or we're looking at it and say, "Of course, we want to continue to have a management contract, but maybe easier for us to go to this third-party player," as we call them. New generational company who is definitely not global. They are very local, they're very good in management. They know exactly every corner in the city. This generation of company, we see that trend in U.S. and partly in U.K. already happening, that they are very good at be a strong partner for a big hotel property. A big property company who has one of few hotels, so they don't have their own expertise. That is interesting for this new player. They look at the market a little bit differently. They very often choose a multi-brand strategies.
That could open for, I would say, independent hotels. We see that already on this trend, that those company, those who have a premium independent profile, they are now having a strong weekend traffic, or at least up to the last restrictions. One example is Grand Hôtel in Stockholm, which has outperformed all international brands and all other brands over weekends because they have positioned itself as a very strong destination for this segment called Staycation. Which is basically a high prime individual leisure who normally travel international, now are staying in their home countries. In Sweden, they go to Stockholm or they go to other these sort of strong independent hotels will have a little bit extra profile and ask for extra service.
If we specifically go back to the business model which you mentioned, which ones will grow and become more frequent and which one we lose?
If you look at from the brand side, I think they will go more over for franchise.
I think they are very good at that, so they maybe can be that more natural position for them. But to be successful there, I think they need to modernize the franchise agreement as it is today. More killer element for distributions and a little bit different profile for this loyalty program. Today is about you have one free night. I think it is more important to get more of, they have this, but I think they need even more of this with sustainability and CSR, that you can earn points. I think, as I said, these third-party players, they are good at what they are doing. I believe that those who is, for the lease side, that also need to be modernized, I believe. That have to be more focused on industrial questions. So more revenue-based leases will be there, less fixed lease.
But to get that happen, then I think there is two things that need to be on the table. The first one, that owners really need to understand hotel business better, understand how it created value out from hotel property. That is number one. But also very important that the operator, to stimulate this owner to get from fixed to variable, they also need to come up with substantial minimum levels and good guarantees, and have maybe more transparent way of looking at the owners—
Yeah
—for get that happen. That is the few of the player of the winner.
Two follow-up question. One is, I got the feeling from what you say that there is some development work concerning the business model that needs to be done.
Yeah.
Who will take the lead in this development process?
That is the owners. That is the owner who need to do that, because they are the one you need to. If you look at hotel, it is maybe 80%-85% of the investment coming from the owner's side.
How stupid that end, you can hear it, but had been dominated by brand who don't invest anything else.
That will, of course, change. That problem has been for a long time, but I mean that this COVID-19 could accelerate that and really have a balance between risk and reward.
Yeah.
That is something I believe the owner need to do. For the rest, brands, they are smart people and they understand that they need also to change and go with the flow for the new trends. I will see that they coming up with new things, maybe less brands, but they will be more focused on maybe also creating domestic brands. Because if you see where they are domestic brand, people always say that, "Yeah, but Hilton and Marriott, they are good. They are much, they are strong in U.S." Yeah, there they are domestic brands.
But in Europe, they are global brands. So in Sweden, for example, there's very few of these flags up here. And if they not continue be more interested of talking to owner and give them other models, that will not happen that more flag come up. So they have to be more focused on being also a domestic player.
So Anders, to sum up, one point from you?
One point from me?
Yeah.
One point is for me that this COVID-19, every bad good things also coming even with bad things. So I will say the development of hotel company will accelerate because of this. You will see new players coming up. And I think for the Pandox side, this what's happened now is give us a chance of really grow the business even further.
From my point of view, I said in the introduction that the hotel sector will never come back to where it was. What I meant, that my experience is after a long life in business and the academic world, that when dramatic changes happen, one thing is for sure, that if there is a fall in demand, for instance, that will not be solved by a simple downsizing by all parties so that they get half the size or whatever. No. What will happen definitely, I can assure you, is that the business model and the organization of the value chain will be necessary to do.
Yeah.
That is what we actually have been talking about.
That is super important that you say about value chain.
Yeah.
Because I think specialization is gone. You need to have a model that you are active in the full value chain. If you are there, then you can pick up opportunities, and I think that's a key driver.
Thank you.
Thank you very much.
Ladies and gentlemen, I am only sure of one single thing. I bet you have missed the dogs. Take a look now. Time to have a brief discussion about Pandox position and strategy. Please welcome the CFO of Pandox, Liia Nõu. Welcome, Liia, joining Anders. We have to make some things clear now, approaching the end of the seminar. I just mentioned the first question. What is actually Pandox present position, Liia?
Well, the short answer is that we are both confident and strong. The slightly longer answer is that we have a very clear and solid business model, as Anders explained. It has been proven. We have been around for 25 years. We have gone through a lot of different crises. Now we are facing the mother of the crisis. But there are a couple of facts that makes me confident.
We have a very talented, experienced organization, resilient. We work a lot with, like Vasilis, we have our own Professor Turner, who is the head of business intelligence. We try to take a lot of decisions based on facts versus fear and uncertainty as much as possible. We have 85% of our business comes from turnover-based rents from our tenants. So we share both upside and risk, but we have a minimum guarantee level. Even in the worst of times, we are cash flow neutral or even positive.
Still, Anders, it is a very tough situation, isn't it?
It is a tough situation, of course, and that has changed a lot, but it is also that this would happen now was something maybe need to be happen because we saw at the beginning of this year that a lot of new capital come into the market that were picking up new hotels a little bit everywhere. Now that has gone. I think the platform for the industry is much better. A lot of opportunity investor is not there anymore. Many crazy new hotels will not coming out. I am rather more optimistic now than I were in January. How funny it is could have from your side.
Liia, it must be a pretty challenging situation to have a strategy when you meet circumstances you have never been close to before. What is your strategy?
Well, we do have, as I said, in our toolbox, we have the capability of running our operations. We have these three phases. We have the three focus areas. We have respond, restart, and reinvent. Respond, that is what we have been doing 24/7 for the major part of 2020. We have been trying to alleviate all the different crisis and things around the turmoil from the pandemic. We also have the capability, as I said, if we have a tenant that would be in a trouble, we are actually able to take over the business.
We do not want that, but we will and we will, of course. We have done it before in order to secure our assets. We are working very much with We have 11 great banks that actually have proven to great leadership during this time. We have close to $5.5 billion in liquid funds and credit facilities, which enables us to be even a little bit more optimistic and starting looking at possibilities as well.
You want to add anything there, Anders, to the strategy issue?
No. What Liia said, very strong financial position in these days, and that combined with the business model of having both knowledge in property and hotels, and together with also a lot of leases where minimum level give us a very strong position for the next level. That is what we more and more start looking at now.
As you've heard through some questions all the way through the event, I seem to urge that everything will be back to normal again, but people oppose me. That's good. Will there be permanent changes to Pandox's business idea after this, Liia?
There will be one permanent change. We'll definitely have more dogs in the office.
Okay. That's important, yes.
That's important. Also, of course, what we heard from Aldert, and last year at Hotel Market Day, where we talked about sustainability, we talked about digitalization, etc. These things started obviously prior to pandemic, but they have accelerated, and of course, there will be footprints from that.
Other permanent changes that will happen?
No. I think Aldert was into this, too. More digitalization and more focus on sustainability. That is the two things, and that of course combined with what you see now with more domestic business, which happen as we speak, and that will also be something that I believe will continue for such a long time.
I talked a little with Martin Ingvar about management during these strange times we live in. Are you changing your leadership in the company, Liia, due to this?
Hopefully not changing, but it is even more important to be, as always, but even more so now, being visible, being out, being active. I think Pandox is a great organization because we are agile. We do not have so much prestige. We act very quickly, and especially in these times when one thing was on Monday, without prestige, you need to change your decision on Friday, and try to, as much as possible, base that on facts, not fear, not uncertainty. But to look at opportunities.
The reason I ask the question, Anders, is that when you have such big crowds of people working for you, there may be lots of people who actually feel depressed, go downwards due to the numbers you see and all that. Have you changed your management style?
Well, of course, we have been a little bit more visible in terms of web meetings since before.
Yeah.
For the rest, it is more or less the same. I would say that is three strong drivers for Pandox leadership. The first one is constantly grow the company. Every day try to find something that we can do better as a sport team, and you know that, Jan, what that means, that you try to go to the training every evening and try to improve yourself. The second one is what Liia had been into before, intelligence.
Have the capacity of understanding, put numbers together, do the analysis, so you have advantages to other. And the third one, and now I am coming to the most important, to have fun. And really have fun, go to the job with a smile in the morning. That leadership are super important. How open, as Liia said, low prestige, low key, that sort of attitude where I think maybe we have the small advantage to be in Scandinavian.
Yeah.
That we have that little from Mother Nature. I believe that is highly appreciated. We do that normal, but it is highly appreciated. I think these three drivers will continue, and that will continue to help us to the next level.
Final question to you two, hand on heart. Have you learned anything today, Liia?
A lot.
Have you picked anything interesting that you will think about afterwards?
Absolutely.
Yeah? Like what? Like an example.
From Martin Ingvar around how the brains and how we work. I think that's the absolutely-
What do you think, Anders?
Well, it's like music. You be humble when you're sitting and listen to all these very knowledgeable people, and that what I always take with me when I meet these people I've been working with at Hotel Market Day. You always can improve yourself, and if you have that appetite, things normally go well.
We say thank you, Liia Nõu and Anders Nissen.
Thank you.
Thank you very much.
Once again, Isaac and The Soul Company pushes some energy into us. We are not done yet. Soon, but there is a little left, and I am absolutely sure you will be interested in finding out if the dogs have fun right up to the end. Let us take a look. In just a couple of minutes, there will be a rather unconventional farewell greeting to you from the Chairman of the Board of Pandox. Before that, I just want to add that there will be a chance to pick up a report from the day later on. You will get info about that, a sort of summary of what happened today, so just wait for that.
I also want to say that if you wonder how this event was made possible, not only due to Pandox and the idea from 1996, it was produced by the event manager, Sofie Brusell from Oh My Agency, together with all the colleagues from the technical staff at Parapix, if you are interested in that. So very soon now, time for the finishing little movie, and after that, you will, of course, be entertained by Isaac and The Soul Company, whom we thank a lot already now for the good music and good songs. So thank you from me. I say goodbye to you, and let us listen to Christian Ringnes, the Chairman of the Board of Pandox.
As the chairman of Pandox, it is a big pleasure for me to wish you good day. The day's theme may seem a bit somber. You could call it corona, you could call it COVID-19, you could call it SARS-CoV-2. A loved child has many names. It is almost like we are playing a game of chess these days, where the good, represented by us all, Pandox and the people, fight the bad, which is the corona. As the bold but humble Chairman of Pandox, I will now show you how victory will come in 2021, despite a very, very tough fight in 2020. Have a look. Sir. And now, our kings and queens, the guests of Pandox Hotel can again sleep safely and well in our hotels. They will be filled up soon.