In the series on COVID - 19 impacts, this post will look at the impact on Travel and Tourism at a broad level from a point of view of a layman as it comes across. In simple terms, the impact is going to be a big negative impact.
The first recourse to manage the spread of COVID 19 was the imposition of lockdowns, across geographies globally. Not getting into the aspect of compliance by citizens and residents to the same. This resulted in a sudden and humungous drop in travel both on roads and by rail and air. The direct impact of this drop can be assessed by the sudden drop in oil prices to historical lows, albeit other aspects of the coordination between the oil cartels not being up to the mark in view of the pandemic also did contribute to the drop. The main backend of travel and tourism the energy sector especially fossil fuel bore the immediate brunt of the Pandemic, my view is this will continue for at least the six months post the rollout of vaccines as and when tested and rolled out.
The next impact was the restaurant sector as eating out is severely impacted. Considering restaurants before hotels as they have a lesser resilience to prolonged periods of closure. Already in many geographies, we have seen restaurant closures, the discontent with food delivery service providers prior to the pandemic also poses a problem in quick recovery as, in these restrictive times, the scope for delivery exists albeit with muted demand and provides a scope to recover from the close-down. My view is that the restaurant model as we know it, is expected to change, the pre-pandemic set up had delivery kitchens / traditional fast food carts on one end with fine dining outlets at the other, the majority were the regularly priced cafes and small restaurants. While both ends of the spectrum are expected to recover and also flourish, the majority of regularly priced joints are expected to be hit for a significantly longer duration. The rationale being, costs are expected to go up, demand is expected to be muted, sanitation and other requirements are expected to go up and add to the costs making it difficult to price their offerings in a competitive manner.
Coming to Hotels, globally, significant attrition has already occurred. The subsequent use of hotels as quarantine facilities while helping the hotel industry maintain the property with a skeletal staff is usually based on rates fixed by authorities and not expected in any way to contribute to the bottom line of Hotels. Post the pandemic, given the nature of the pandemic, demand is not expected to scale up to levels prior to the pandemic anytime soon. As with any industry, the hotel industry has also been growing by way of rooms over the years. This is expected to stop until such time that demand for the existing portfolio of rooms builds up to a reasonable level. This can only happen when events and seminars and global tourism starts picking up and reaches closer to pre-pandemic levels, which I believe is a long way away. The hotel room aggregators are also a factor to consider as these would be preferred choices given the model and pricing at which these operate in a competitive environment. The current top brands in the Hotel industry are however expected to the first to recover.
Business travel constitutes a major chunk of global travel and hotel stays. The Work from home compulsion during the pandemic across the globe has worked towards reducing the resistance to this concept of work from home. For some, global companies which have a significant percentage of their costs associated with global travel, stay, allowances and related costs of its executives have seen a windfall by way of a significant reduction in costs of doing business, while business and global negotiations still continued to happen given the technology infrastructure already in place. For local organizations which have sizeable head-counts and in businesses where they can deliver their responsibilities from home, for e.g. knowledge workers and services are also considering moving to this model on a more permanent basis as it helps them reduce infrastructure costs and work with smaller business premises and workstations. I do believe work from home or through the connected devices is going to be a chunk of permanent business loss for the global and local business travel and stay industry.
Packaged tours as we know it wherein a group of people or in other words busload of tourists are grouped for tourist destinations by tourism companies and tours organized is definitely expected to change. For now, this is going to be not an attractive option till such time that Pandemic is declared as over with sufficient immunity in the community. Post the same, given human behaviour, I do expect such tours to be not as much in demand as currently. Creative family packages for each family is what is expected to gain prominence.
Cruise tourism is expected to be hit for a long time to come. As it is cruise tourism had a bad name, but with cruise ships in focus at the start of the pandemic, wherein ships were not allowed to anchor and passengers had to spend significantly more time on board than they had bargained for. Significant thought will have to be put in to rejuvenate demand for cruise tourism if they are to get back on their routes any time soon.
Overall, the travel demand is expected to be muted on account of several factors. Expatriates in a country are the first to be negatively impacted by the economic outcomes of the Pandemic and expected to return to their homeland. Only essential travel is expected to be undertaken, leisure travel will take time to recover. Personal transportation is also expected to be more in demand. This sector is expected to be the most severely impacted with a long recovery cycle.
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