Market indications have shown that pent-up travel demand awaits an end to COVID-19 travel restrictions. Will airlines, hotels, car rental, and cruise companies be able to handle the demand?
Pent Up Demand
With the entire world cooped up, many are looking for an outlet. In the US, the closure of most foreign destinations has led to an increase in domestic travel, in particular, to Florida. Fort Myers, FL was the number one destination for domestic tourism over Thanksgiving week and lost just 12% of inbound travelers from 2019 (a record year for travel generally.) Comparatively to the rest of the domestic US market, Fort Myers outperformed by nearly 5x.
China has experienced a dramatic uptick in travel domestically as well, replacing trips abroad. So much so that China’s largest booking site, Trip.com recently returned to profitability.
“Jane Sun, chief executive officer of Trip.com, touted the growth of domestic travel in China. Trip.com, China’s top online travel agency, reported a quarterly profit this week for the first time since the start of the COVID-19 outbreak, thanks to domestic demand.” – Fortune.com
Mexico is experiencing a surge in demand because it is close to the US (cut off from most other countries), warm, and comfortable for American travelers. Travelers are shrugging off health concerns, leaving the world’s highest hit country for COVID-19 in favor of number four on the list.
These are all stopgaps until the world reopens.
COVID Travel Restriction Protocols
Foreign travel has stymied recovery efforts even in countries that had fewer incidents than the US.
Singapore is feeling the pressure of regulations it put in place to protect its citizenry and has started a domestic travel initiative in the island nation-state, a significant challenge due to its size. The country was one of the first to sell flights and cruises to nowhere, demonstrating that people will do just about anything to recreate a travel experience. They can neither replace the experience of travel nor the budget hole from a 99% drop in travel without it.
Just as Japan announced it wouldn’t require proof of vaccination nor quarantine ahead of the 2020 (2021) Olympics, the country again closed its borders. The UK variant of COVID-19 has caused the US to add a requirement of a negative test result to enter the US. The Centers for Disease Control and Prevention (CDC) issued the order on Christmas Day.
COVID-19 restrictions change constantly and are difficult for travel companies as well as would-be travelers. Costa Rica has been one of the most manic, first closing its borders (as almost every country did), then opening to some Americans, then to all Americans. Most recently, the country began restricting outdoor tourist activities.
Will Travel Companies Be Able To Handle It?
The travel industry may not be ready to resume international travel when countries reopen. Some American airlines are already showing cracks in small upticks in air travel demand. Delta uncharacteristically experienced operational trouble at Thanksgiving then another collapse over the Christmas holiday.
These struggles are without the return of business travelers as almost all of the increased demand was from the leisure travel sector. Now that 18 million vials of the COVID-19 vaccines have been distributed (though only a million actually taken), travel companies need to alter their efforts to network planning for long term adjustments to the market.
Assuming those 18 million initial vials are injected, and the more than 18 million that have had the virus and now possess antibodies – more than 10% of the US population should be ready to return to life as normal. As Moderna and Pfizer, as well as competitors with vaccines in approval stages continue to ship product, even more will become immune to COVID in short order.
While public health concerns will persist for some time, cruise lines, airlines, hotels, and car rental companies should be preparing now for their return.
In the case of most US airlines, they have passed small stress tests of the holiday travel loads. But as pointed out in a post last week, some travel companies may not be ready for a return to normal in terms of service for some time. So many have sized their operations down. Hertz sold half a million vehicles as it entered bankruptcy early in the crisis.
American Airlines retired a significant portion of its long haul fleet (757s, A330s, and 767s), Delta did the same with its newly renovated 777 fleet. Assuming the resumption of even half long haul schedules would significantly constrain assets, personnel, and add costs to overcome service issues.
All travel companies are in survival mode, appropriate for the times we are currently in. But with hope on the horizon and pent up demand waiting in the wings, it seems that travel companies may not be poised for their customers return.
What do you think? Is there pent-up demand? Are travel companies ready for it? What could they do to prepare?