When COVID arrived in early 2020, tourism was one of the hardest-hit economic sectors. Customers disappeared overnight, dramatically impacting trade for thousands of hotels and restaurants.
However, just as suddenly, as restrictions eased, many Australian holiday destinations saw a surge in bookings. International borders were closed, and consequently, a domestic vacation was the only option.
On top of this, the on-again and off-again nature of lockdowns meant there were times when people couldn’t leave their state or even their suburb. The knock-on effect when it came to holiday bookings was people dared not plan too far ahead. Going interstate meant running the risk of getting stuck on the wrong side of a border and losing money spent on flights and accommodation.
So we stayed local and, as a result, destinations closer to capital cities frequently put up the ‘no vacancy’ sign.
However, not every holiday destination benefitted. Cities such as Cairns in North Queensland, heavily reliant on interstate and international travellers, lost almost 9000 tourism jobs during the pandemic.
COVID’s winners and losers can tell us much about human behaviour and how we react to fear and uncertainty. Not knowing what will happen from one day to the next has crippled our desire to plan.
A holiday is a thing we would usually look forward to after months of work and daily grind. Having that taken away at the last minute due to a sudden border closure only adds to the pandemic’s stresses, strains, and emotional toll.
The lesson seemed to be obvious. Don’t book your holiday too far afield or too far ahead.
However, just like the pandemic, confidence, or a lack thereof, is highly infectious.
Beyond tourism, overall business optimism, particularly during 2021, took a severe hit. And whilst that confidence is now starting to bounce back, there’s still considerable nervousness across boardrooms and management teams.
For instance, how many date claimers have you received for major events in the second half of 2022?
Shorter-term planning and a decreased appetite for risk might have been prudent during the height of COVID, but businesses need to consider whether it’s still an appropriate strategy.
The problem is, that an overly risk-averse approach can impact your decision performance.
Confidence in getting an outcome is only one aspect of decision making – the trick is to consider it in a requisite way.
Specifically, we need to make our assessment on the scale and scope of benefit each option provides and then separately consider the probability that we will get that outcome.
Catalyze CEO Paul Gordon says risk has always been a key decision-making input.
“The challenge for management teams is finding a way to assess the risk appropriately to avoid overly cautious behaviour. No one wants the blame for getting it wrong, and that’s why when responsibility falls on an individual or a single business unit, cancelling or delaying a decision might seem easier and safer.
“However, when the whole team is invested, we better understand the cost of doing nothing, particularly as competitors begin to absorb a greater risk appetite. A decision-making framework helps to remove emotive, gut-feel responses by involving all the relevant stakeholders and prioritising what is important.”
Just as holidaymakers begin to venture further afield, so should Australian business.
When management teams employ an effective decision-making framework, they will be more likely to balance their views of the past, present and future without unnecessarily weighting one due to a bias that exists only in the short term. That way, firms will be best placed to avoid the mistake of applying a 2021 risk profile to a 2022 decision.
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