While no one can predict the future, we’re in the best position possible to anticipate what travel recovery will look like in the era of COVID-19 and beyond. Backed by the latest data and armed with historical insight, CEO Clayton Reid provides a snapshot of the most critical travel marketing questions. Read his quick takes below and click here for even more in-depth research, insights and webinars.
What is the traveler telling us about future plans and behaviors?
Travelers are becoming more positive. In the last month, we’ve seen a marked improvement in how people tell us they plan to travel in the short-term. A lot of people still say they won’t travel, but we know from experience that while people may say one thing they actually change their minds fairly quickly once they get past the fear.
When should we expect a return of travel volume?
The response of the traveler is so dependent on the news cycle and social media, as well as what the government and private enterprises are saying publicly. As social analytics tell us, things are becoming more positive; we see the consumers’ mindsets following that. So, we’re looking at a pretty decent summer demand period – especially for the drive-leisure market – and we think that will extend into the fall.
When can we expect to see a return of international travel?
We expect that will be the last of the recovery. While international destinations still need to stay top of mind among the long-haul market, they’re probably going to have to pivot to send as much regional traffic as they can.
You’re anticipating that leisure travel will recover more quickly?
I’m very confident that leisure travel is going to recover first. It’s evident to us that people are going to get in their cars, and they will start with local, community-based travel.
How will business travel fit into the recovery?
Unmanaged corporate travel and companies that are in the business of driving doing more travel in the summer and fall travel. There’s already an uptick in hotel revenue, especially relative to business travel that’s associated with the crisis: U.S. occupancy is now at 26%, while in China it’s over 40% and it’s around 17% in Europe.
How will the recovery evolve from there?
We expect longer-haul and mid-haul leisure to recover next. That’s when the airplanes will start to fly more full, and travelers will begin taking longer destination trips. That will be followed by corporate managed travel – probably two quarters out, so it will likely be fall or winter before we see big corporate travel-managed programs opening the spigots. The last, unfortunately, is group travel, which could be another two quarters behind.
Will brands lower rates and fares in order to induce travel?
Historically, any time we’ve come out of a crisis or a recession the traveler expects inducements around value. This time, market shifts are going to change rate strategies for suppliers. The fact that corporate and group demand will be tamped down means that leisure has to be the focus for every travel brand – and that means lower rates. We’re not going to have the strength of corporate fares or group rates that drive more revenue in the hotel industry, higher RevPAR in the airline industry or higher margins per seat.
Are there certain traveler segments that will be more important to focus on?
From our research, we know there’s the subset of travelers we call “resilient travelers,” which is about 16% of the U.S. traveler base. These are people who tell us they will travel in the midst of a crisis, even when a government advisory is in place. As soon as the airlines and other travel suppliers relaxed their booking policies in terms of cancellation and rebooking, we saw that subset of resilient travelers begin to book out months ahead. They also happen to be massive influencers in terms of tipping what other people’s behavior should be. It’s really important for travel marketers to engage with that component of the market.
How will airlines respond with routes and capacity?
The airlines have to think about markets entirely differently. Ultra-low-cost carriers are in a position to see a recovery more quickly because a leisure value-oriented traveler will be the first to return to flying. The big airlines with massive city-pair routes and front-of-bus passengers will have a much harder time recovering because we’re not going to see big corporate spending travel. Even the mainline carriers will have to strip out some of their costs, amenities and services in the beginning so they can afford to fly, at least at some kind of margin.
Do you believe China is still an important source market?
China and the U.S. are very different in terms of air travel. Domestic travel in China is certainly intracountry, but it’s also from markets like Hong Kong and Singapore. While in the U.S. we would expect ultra-low-cost carriers to drive some demand into secondary cities on short-haul flights, China’s going to have a much harder time doing that. Something like 29% of the carnage in the airline industry will be with pan-Pacific carriers, and I think that’s one of the reasons why. But no doubt, route maps are going to look very different. American Airlines, for example, came out and talked about how they will have a much different sized fleet and different configurations on their planes in the short-term. That’s going to change a lot about the way in which we can travel by air in 2020.
Will social distancing measures reduce airline, cruise, hotel and shared services capacity?
In the short term it absolutely will. You see airlines now requiring masks among both air staff and passengers, and most airlines have said they will not book center seats in the short term. However, I think that’s more optics than really making an impact. It’s a lot about how the airlines and other suppliers can make people feel comfortable in this new world order. I do believe that everybody’s going to change their service level, but I can’t imagine a restaurant requiring customers to wear masks in which they really can’t eat. My view is that by early 2021, a lot of this will be in the rearview mirror.
How will the cruise industry fare in the short- and long-term?
The cruise industry has one of the most loyal customers of any travel segment. These are passengers who come onto the ships year after year; and even today, when you look at cruise bookings for next year, some cruise lines are at record levels with booking pace. That tells you that while people are a bit cynical about traveling on a cruise line in the short term, they absolutely want to get back to it. Because cruise lines have a lot of cash, they have a product that people love and they have loyal customers, they’ll actually do a lot better than people are suggesting.
We also don’t believe that the coronavirus narrative will stick to just cruises since it has impacted everybody and every part of life.
The other most important element of the cruise space that people don’t talk about readily is the role of travel advisors. More than 70% of cruise bookings are through travel advisors, so they have a willingness and an imperative to book cruises coming out of this crisis.
Do you envision more industry consolidation from the economic fallout?
You can expect to see the OTA space shrinking down a bit – whether that’s the big two coming together, or an Amazon buying one of them, or even some additional small players in the meta-search engine or aggregation space coming in under the big umbrellas. I think within the airline space there’s going to be bankruptcy – those that are held up by governments that can’t make it to the other side. While we may not see a lot of acquisition around airlines, we’ll see consolidation of both route maps and of control relative to inventory and distribution. There’s certainly a chance that the hotel space is going to change. There are a lot of independent operators that may not be able to make it, so a big hotel owner like Blackstone could come in and buy more assets at good deals.