The bans on unnecessary travel caused by the COVID-19 pandemic have had devastating impacts on the UK's travel and tourism sector. In 2020 we asked leading travel executives for their expectations for the future of the industry.
Travel and tourism companies, and the entrepreneurs who work in them, make up one of the most battle-hardened and resilient sectors of the UK's economy. The laws enacted to reduce the spread of COVID-19 have caused unprecedented damage to it: from outright travel bans to social distancing measures that make foreign or even domestic travel impractical.
In summer 2020, we spoke to leaders across the travel and tourism services to report on their expectations of recovery. It is important to note that at the time of speaking, these expectations were caveated with the assumption that there would not be a second wave of the virus: no one expected the peak booking season in 2021 to be restricted by another national lockdown and a renewed ban on unnecessary travel. There is still, however, a lot of valuable insight that we can take from this report.
Travel and tourism in 2021: expectations of recovery
The most encouraging conclusion from last year's short summer is that when restrictions were lifted on travel to top destinations, the pent-up demand for holiday travel yielded immediate results for the companies providing it. If the vaccine's roll-out is successful, bookings, apart from cruises and corporate travel, are expected to begin their recovery through 2021 and may yet reach the lower bands of the 50-90% of 2019 levels forecasted last summer. Leisure travel will bounce back, although the future for corporate travel is less clear given a changing landscape of travel policies and perceptions of business need.
Consumers, cashflow and consolidation
The economic fallout of the pandemic for consumers of travel services will be uneven: most respondents to our survey expected airline prices to rise and, despite governmental support, many families will cut back their holiday spend. However, average disposable income has remained high, and many travellers will be looking forward to making up for the lost summer of 2020.
For both operators and travel agents, summer 2021 is a long way off. Cashflow is key to survival, and with impending overheads of insurance and staff returning from furlough, there are still difficult times ahead. The extension of furlough support into 2021 was welcome, as travel firms were more able to take advantage of it with the frantic months of processing refunds and reschedules behind them. Firms taking out Covid Business Interruption Loans last year won’t have expected the travel drought to last this long, and many will have counted on new revenues arriving in the first quarter of 2021. It would be unfair to suggest that only those playing fast and loose with their finances will come unstuck: no competitive business model could plan for the disruption on the scale we are currently experiencing. Consolidation and a wave of insolvencies is inescapable.
For the firms and brands that survive this crisis, a consolation is that much of the industry will benefit from demonstrating added-value through excellent customer service when handling changed or cancelled plans. For the near future, the long-term trend towards direct bookings will see a correction as consumers value the expertise provided by travel professionals. Travel companies that dedicated resources to looking after their customers were able to hold on to more deposits, and word-of-mouth or social media endorsements should bring them new customers in the months ahead. Airlines will suffer, but if they remain operational and retain their slots, price and convenience will bring travellers back. The refund fiasco that dominated the media last year may soon be forgotten.
Changing trends and new business models
The travel experience will adjust to accommodate health and safety concerns, but established trends in technology – improving efficiencies and reducing the cost of travel – as well as a return to GDP growth will continue to drive volumes over the three to five-year horizon.
Insurance costs will rise, but the increasingly agile, asset-light travel and tourism industry will still be highly investible when predictability returns. Providing customer bases are retained, and brands, systems and processes are in a position to recover, survivors will benefit from lower competition. There will be a wave of redundancies, but the long-term prediction is a return to the entrepreneurial culture that has seen the industry reinvent itself with new brands and business models that, for travel and tourism services, is business as normal.
To read our full report on the insights and views from leading travel executives on how the industry is managing consolidation and preparing for growth in the recovery, please contact Yvonne Chappell or Felicity Bown.
Travel sector trends – further consolidation expectedFind out more
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