Will travel take off in 2021?

As we heard in one Interview from an interim executive at the Global Business Travel Association, business travel tanked by almost 70%, going from USD 1.43tn to USD 738bn during April 2020 to year-end. There have been varying opinions on how much of this could be permanently lost, in part owing to technologies such as Zoom demonstrating that not all meetings need to take place in-person. However, this specialist is optimistic, emphasising that history is the best indicator of future behaviour. “There certainly is going to be a ramp-up period… we’ve got to wait until we see borders open up and quarantines get standardised or eliminated because of the vaccines and the testing, the fact is business travel will come back, I think, in its entirety, just like it did after 9/11, just like it did after some regional pandemics like Sars, and even after the great recession.” 

While remote collaboration technology will still be used in a complementary fashion, they believe there will be a “roaring economy” post-pandemic, spurring in-person meetings. Delta’s CEO, Ed Bastian, is optimistic, with a survey of their corporate customers revealing the 40% would return by 2022 – the company also forecasts that 51% of its corporate customers will be back by end-2023. On this, our specialist countered: “I would say that I think his number is not necessarily incorrect at all. It’s his gauge based on what he’s seen and the conversations he or his sales team are having with their corporate clients. I think it’ll take a little longer to see maybe that high a number… 2022 is pretty quick, but that is very possible.” Instead, the specialist posits 2025 as the date for pre-COVID business travel to return.

The hotel industry has also been disrupted, with the American Hotel and Lodging Association estimating that the impact from this crisis has been ninefold that of 9/11; hotel revenue was cut approximately in half, to USD 84.6bn, in the US alone. It will take some time before hotel capacity reaches pre-pandemic levels, but it is feasible that 60-70% of revenue per available room could be seen in H2 this year, a former SVP from Hilton Worldwide Holdings Inc told Third Bridge Forum. They added that, while it won’t be “as bad as 2020… I don’t think it’s a 100% recovery. Then I think 2022 will be interesting. I’m not sure exactly how it’ll play out, and, again, that has to do with vaccines, ability to get vaccines to the developing world.” It could be 2023 or 2024, they believe, when a full recovery takes place.

However, pent-up demand will provide a tailwind, bolstered by what the specialist calls “revenge travel” – “I am, for example, sick of being stuck at home and there’s some revenge travel coming. There’s also pent-up demand… people have been saving money during this time and not spending it on restaurants, on experiences, on things outside of their home.” They believe it will be pronounced among boomers: “they are just waiting to do it. They have the time, they’re retired, they’re waiting and they also know that they don’t have many, 30-40 years to live so they want to enjoy the time that they have now, see their grandkids, see the world.” 

Some of the lasting trends resulting from this pandemic include a shift in how we take holidays. One of these is so-called slow travel, in which people stay at destinations for longer periods and is partly influenced by environmental concerns. “We’re definitely seeing people stay longer. That’s a definite trend coming out of this. You don’t have to be in a certain place. You don’t always have to be in your office,” commented the former SVP. Another outcome will be “bucket-list” destinations. As well as realising how much we took for granted regarding being able to travel anywhere at anytime, the specialist said, “I think if I were a boomer, I would definitely have that mindset of, go on the bucket-list now, because you don’t know what’s going to happen in 10 years.” 

On the topic of cruise recovery, a former SVP from Carnival Cruise Line (Carnival Corp) believes this year will see the phased return of services. They also explained how these cruises may operate in light of requirements from the Centers for Disease Control, which issued a Framework for Conditional Sailing Order late last year. The order sets out requirements for testing, which must be performed in laboratories meeting Clinical Laboratory Improvement Amendments standards. It also highlights the fact that crew members living and working in close proximity has facilitated COVID-19’s spread. But if crew were to have their own quarters rather than sharing, the cruises could “lose 20-30% of their guest capacity”. Potentially, more capacity would have to be lost to accommodate quarantine areas and additional healthcare personnel. However, they project that major cruise operators “can probably operate just at break-even or slightly above break-even at occupancies down around 30-40%.”

While it appears that it will be difficult to restart operations prior to full vaccination and herd immunity, the prospects are much brighter once people are able to board freely. It took approximately six years following the global financial crisis for a full recovery. Although it is a comparable situation, there are many differences. One of these is more detailed understanding of customers. “Major cruise lines have extensive data about their cruisers. Where they’ve cruised before, what kinds of cabins they have, but they also have extensive information about their onboard spending.” This means that potential customers can receive personalised and targeted promotions – indeed, according to the former Carnival executive, “I think that all the major cruise lines are much more sophisticated in their revenue management approaches and promotions and those kind of things than they ever were back in the previous financial crisis”. In addition, compounding the fact that people may disproportionately spend on board, “there have been so many innovations and products driving onboard revenues… The ability for consumers to spend on board as they come back into cruising in ’21 and ’22 and ’23 will be very attractive, and they’ll have money to spend.” 

Navigating back to the new normal will clearly take time. But, as our specialists from across the travel industry spectrum emphasise, people are eager to travel again – and new styles of holidaying are set to emerge.