It won’t get better in the second half of 2020
By Rafat Ali
I doubt I am the first one breaking this to the travel industry and it still breaks my heart to say it: It won’t get better for the global travel industry for the rest of the year. The glimmer of hope of May is now dissolving in the gloom of June headlines — and reality — all around us.
There was some hope after the lockdown of March and April that the second half of 2020 would be better, that the first wave of the pandemic will be over for the most part as lockdown would have flattened the curve in the majority of the world. There was the belief that even though a vaccine may not come until next year, people will be tired of being cooped up in their houses and will come out, adjust to the conditions and start traveling again. At least the pent-up demand will be there, and “40 percent occupancy” could become the new normal.
Even the usually skeptical team here at Skift was excited about the grand reopening of travel, so much so that we launched a fully dedicated site and timeline at Reopening.travel. And while many reopenings of borders, hotels, destinations and airline capacity increases are happening all around the world, the headlines — and the reality— around us tell a different and very difficult story ahead.
It may even beguilingly look like an OK summer for some of us in travel, historically the biggest peak season, but it hides the harshness of a down season to come after.
I wrote this three months ago on my social feeds and was shouted at by lots of people in the industry as a scaremonger.
There is a mass delusion in our travel industry about recovery, if my Linkedin feed, those youtube videos from travel CEOs, or analysis from consultant-types are to be believed: if you just hold on for few more months, the world will come gushing right back out, come Q3 or Q4. Add inspirational song here.
A huge number of travel businesses, majority of them small businesses, will be gone. Majority of our livelihoods are stopped, maybe gone. Events are done, for most of this year. Human habits have changed in an instant, business travel will forever be lower than the peak we had.
There is no V-shaped recovery waiting at the end of this, we don’t even know what the end is or what it will look like. For now, an l-shaped recovery awaits, the luxury of elective travel will have to wait years, maybe decade, to come back to pre-covid levels, if at all.
P.S.: I wish nothing more for me to be wrong, for this post to not age well, but I can only prepare my business — which depends on travel — with base case for now, not delusion.
Three months later, America is in the worst shape of its journey through this pandemic. At least 12 states have paused their reopenings, as of today. China is getting smaller but real outbreaks and even if it has the ability to contain it quickly, it means an even harsher lockdown, which plays havoc with any intent to travel now or in the future. Even the countries that have overcome it well in the first wave, like Germany, Australia, New Zealand, and some others, are seeing flare-ups.
The science of the virus doesn’t care for whatever hopes and beliefs you hold. The world’s response in tackling the global catastrophe has been a catastrophe of errors. And the economy teeters.
Travel is so dependent on consumer confidence and sentiment, including how the countries feel about themselves and about other countries. Besides consumer sentiment, research shows 197 million travel jobs could be lost going forward.
The crowded local beaches and people crowding outside their local bars and reopening of restaurants means little for the travel industry, the business of confident moving of people across the country or international borders. And even those reopenings seem to have caused outbreaks, particularly across US.
Our latest weekly analysis of Skift Recovery Index from the Skift Research team backs up these assertions well. The main reason for the SRI decline, according to our analysts, is the decline and stagnation of performance in China and the U.S., respectively. Skift’s Airline Weekly, which provides the most definitive analysis of the state of the aviation sector every week, has a cover story this week titled “The Winter Is Coming, with this ominous warning: “Airlines may be adding back flights and re-opening routes, but major U.S. carriers say their revenues are about one-quarter what they had planned for the summer. And it could take two or three years for demand to recover to pre-Covid levels, particularly for long-haul international flights. In the meantime, the industry has no choice but to shrink.”
Yes, there will be pockets of bright spots, and the summer may be ok for some of the popular destinations in Europe. It looks like local vacation rentals and Airbnb/Vrbo type accommodations are and will continue to recover, to an extent. Yes, certain types of hotel accommodation, particularly those geared towards longer stays, are and will continue to do well. Yes, some types of flight customers, particularly those visiting family and friends, may come out in larger numbers helping some of the airlines.
But our original contention, that the world of travel will only recover once a vaccine comes out and is properly propagated around the world, still remains the best hope for us.
The fall of discontent is coming. Let’s start planning 2021.
Note: This article was originally published on Skift by Rafat Ali, the CEO and Founder of Skift. Skift is the largest business intelligence and marketing platform in travel, providing news, information, data, and services to all sectors of the world’s largest industry.