When will holidays take off again and how can the travel sector prepare?

With the market almost fully closed, on a scale not seen before, the travel sector has been one of the hardest hit by the impact of COVID-19.

We asked industry leaders how they are dealing with the crisis and expectations for recovery. They shared with us their views on how the industry is coping in the short and medium term and what their thoughts are around the post COVID-19 future.  

Managing through the initial crisis

Perhaps unsurprisingly our research showed most companies are more concerned with the length of the lockdown than any other factors. Cash flow requirements and a possible consumer and economic downturn were also prominent in joint second. 

Having furloughed staff, executives are now focussing on the next immediate crunch point. All surveyed have taken this action, 69% of respondents are operating with less than 50% staff currently and many with less than 25%. Key cash periods are expected to be quarters three and four of 2020, as is typical for travel operations, with added pressure this year given uncertainty over when revenues will return and at what level.

However, the majority of businesses expected to be able to meet their requirements through a combination of existing capital sources (both debt and equity), supplemented by government funding schemes.

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Preparing for the future

Our survey highlighted a focus on establishing new systems and processes for re-opening, given the likely ongoing requirements for additional hygiene and social distancing measures. 

Beyond that, many travel businesses are using the current period to restructure their businesses or invest in future requirements, to the extent cash flow allows.

Examples include restructuring teams, with many of respondents taking the opportunity to think about the optimal team size and structure beyond the crisis period. Those operators with physical assets are thinking about rationalising or refurbishing assets.

Others are taking the opportunity to progress with technology projects such as digital enhancements and website upgrades.

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Re-emergence

While there are divergent views, given the current level of uncertainty, most operators expect to reach a meaningful level of holidays within 3-9 months following the end of lockdown.

However, returning to a pre-crisis level of holidays is expected to take anywhere from six to over 18 months.

Much of that variability reflects on the type of travel business. Domestic travel is expected to return faster than international travel given potential travel restrictions; there is also a tendency for consumers to trade down to more domestic holidays during economic downturns, as we saw during the 2008 financial crisis. 

This may well be affected by the duration of lockdown, its easing and how this ties into the seasonality of the booking cycle.

 

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Different travel segments expected to feel different degrees of impact

In common with what we experienced in the 2008 financial crisis, there is expected to be less overseas travel and in particular less long-haul travel, fewer city breaks and fewer holidays taken overall.

What is different this time around is an expected decrease in group travel and older age travel. Survey respondents also anticipate a reduction in flights as a mode of transport alongside more last-minute bookings (the opposite of what many in the industry have been encouraging for some time, with the push to early bookings). 

Cruise and airlines are expected to be the sectors most impacted, given the restrictions on international travel and the issues some cruise lines have faced during the pandemic.

Corporate travel management companies are also expected to be heavily affected as business travel is likely to remain subdued for some time. Additionally, more stringent rules around travel for attending conferences and internal events are likely to remain in place longer-term – exacerbated by the widespread adoption of technological alternatives (N.B. Zoom has gone from 10m to 200m daily meeting participants in just three months).

Conversely, holiday park operators and vacation rental agencies are expected to be the least affected, as customers are likely to return to domestic holidays earlier once restrictions are lifted.  This will be driven by both health concerns and perceptions of relative value.

The longer game

With all operators, there is a trade-off between short term cash preservation and doing (and being seen to do) the right thing for customers in terms of cancellations and refunds. Corporate behaviour is being discussed on social media in a way many businesses have never encountered before and the potential for brand damage is heightened. It’s important for the industry that operators demonstrate their behaviour during lockdown focused on caring for their staff and their customers.   

Businesses should use this as an opportunity to transform into the business they want in the future. Operators which emerge from the crisis will be leaner and more focused on target customers and core competencies, which will position them well to benefit over the long-term.

While the industry faces serious challenges over the coming weeks and months, we remain positive over the long-term prospects of the travel sector and look forward to helping companies work towards future success.

If you would like more information please do not hesitate to contact us (see details below).

Contact us

David Trunkfield

David Trunkfield

Hospitality and Leisure Leader, PwC United Kingdom

Tel: +44 (0) 7764 235 446

Rick Jones

Rick Jones

Head of Retail, Consumer & Leisure, Partner, Corporate Finance, PwC United Kingdom

Tel: +44 (0) 7710 627 834

Eleanor Scott

Eleanor Scott

Director, Strategy& Travel & Leisure, PwC United Kingdom

Tel: +44 (0)7748 965165

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