One year ago today Princess Cruises’ Diamond
Princess ship set sail from Yokohama, Japan, for a 14-day trip with 2,666 guests
and more than one thousand crew.
What no one knew at the time was that one of
those passengers had developed a cough the day before he boarded the ship. That
man left the ship on January 25 and tested positive for COVID-19 on February 1.
But the ship’s journey continued until it returned to Yokohama, as scheduled on February 3, where the Japanese government put it into quarantine.
Over the
course of the following weeks, according to the Japanese government, more than
700 passengers and crew of the Diamond Princess tested positive for COVID-19
and 14 people died.
The situation on the Diamond Princess
represented the first direct and large-scale impact of COVID-19 on the travel
industry. In the subsequent weeks and months, the virus permeated ever sector,
in every corner of the world.
In recognition of this grim anniversary,
we review key moments of the pandemic in relation to the primary sectors of
travel and take a look at the current state of strategies to take advantage of a recovery.
Cruise
Following the Diamond Princess saga, by
mid-March all major ocean and river cruise lines had suspended operations.
According
to data compiled by the Miami Herald, as of October 2020, 87 passenger
cruise ships globally have been linked to COVID-19, with a total of nearly
4,000 cases and 111 deaths.
In June, Royal Caribbean Group and Norwegian Cruise
Line Holdings convened the “Healthy Sail Panel,” with leaders from public
health, biosecurity, epidemiology and more. The group’s list of 74 best
practices has been submitted to the U.S. Centers for Disease Control and
Prevention for review.
In the meantime, cruise lines have been enhancing their
health and safety standards and procedures. Since the summer, some lines have
resumed sailing, notably some short “cruise-to-nowhere” trips in Europe and Asia.
But most of the large companies are on hold till at least the second quarter, with
Carnival Corporation’s Carnival brand on pause until April 1, Holland America
on pause until May 1, and Princess Cruises paused until May 15. Royal Caribbean
is similar, with sailings for most brands suspended through the end of April.
Air
Within
three days of the Diamond Princess setting sail for Yokohama, on January 23 one
of the last flights from Wuhan, often referred to as the epicenter of the
pandemic, landed in Sydney, Australia.
A week later major global carriers were
cancelling flights to cities in China including Beijing and Shanghai. By
mid-February two-thirds of China’s passenger planes had been grounded.
Airlines
began introducing mask policies, highlighting hygiene policies and later
middle-seat blocking initiatives. Once COVID-19 was declared a pandemic on
March 11 and countries closed borders, there was little carriers could do apart
from helping with repatriations and moving vital medical equipment to virus
hotspots.
It has been a rollercoaster ride since last March for carriers, with countries
lifting restrictions and establishing some travel corridors over the summer,
only to go back into lockdown again - with very little notice to passengers - in the last few months of 2020.
The
International Air Transport Association has estimated that airlines will have
lost $11 billion in 2020 improving to losses of $34 billion in 2021 on the
back of hopes of travel industry recovery for summer 2021. This is reliant on
governments lifting restrictions, the effectiveness of vaccines being rolled
out and ongoing testing initiatives.
However, earliest predictions for recovery
to something akin to 2019 levels are for late-2023 and many believe carriers
have embarked on an era of smaller, leaner operations.
Accommodation
The cancellation of flights and
closing of borders – along with the stoppage of most business travel - had a
direct and immediate effect that rippled through the global hospitality industry
as guests either could no longer travel or were no longer willing to do so.
Some
hotels shut down, others reduced staff to a bare minimum. For most of the hotel
brands, the second quarter of 2020 was rock bottom – Hilton lost $432
million in the quarter and adjusted EBITDA dropped 92% compared to the same
period in 2019, while Marriott revenue
dropped more than 72% to $1.4 billion.
Short-term rentals similarly
struggled initially but seemed to bounce back faster and more sharply.
According
to a report from STR and AirDNA, average daily rates for short-term rentals
were reported as higher in July 2020 than in July 2019 in the United States,
Spain, Italy, France and China.
Airbnb rode
that wave to an IPO in early December, opening at $146 per share on its
first day of trading – more than anticipated share price set the day before.
Along
with dealing with cancellations, refunds and creative revenue management
strategies, hotels and rentals have prioritized solutions to address hygiene
and social distancing in their properties – using things such as contactless
technologies and partnerships
with global cleaning brands.
But full recovery is still expected to be a
ways off, with STR
reporting in October that U.S. room demand and average daily rate are
unlikely to hit 2019 levels until 2023 and 2025, respectively.
Corporate travel
With
flights grounded from late January 2020, many large corporates with a presence
in China and employees traveling globally for work, had an early warning
signal of what was coming and curtailed travel even before an official pandemic was
declared by the World Health Organization.
Once the outbreak took hold in March, travel
management companies scrambled to help repatriate employees as well as find ways
to get essential workers in sectors such as oil and gas and medical
professionals to where they needed to be.
Then, as new bookings dried up, TMCs
moved to liquidity preservation and cost-cutting measures. Repeatedly over the
course of coronavirus, the business travel community has called
on governments to introduce mass testing at departure and
arrival points to open up travel again.
Many of the corporates they serve are
more cautious, however, with large corporates deferring a return to the office until later this year, at the least. Large organizations say they will also provide employees
with far more flexibility to work-from-home as COVID-19 has
forced millions to embrace online collaboration tools.
The repercussions for
corporate travel will be felt for years to come and some even predict 50% of business travel is forever lost.
Consolidation is inevitable, and has already begun, but the ongoing
investment appetite into corporate travel starts provides a glimmer of hope.
OTAs
Online travel agencies have faced
some unique challenges during the pandemic, due to their position between
suppliers and travelers.
Early in the crisis some of the OTAs faced outrage
from both ends – travelers wanting fast, efficient refunds and suppliers, mainly
hoteliers, frustrated
some of the OTAs were issuing those refunds without their input and undermining
their efforts to offer credits.
Some of the OTAs announced efforts to
assist partners, such as Expedia Group’s $275 million partner
recovery program, with $250 million in the form of marketing credits and a
temporary reduction in commission for lodging partners.
But one question debated
by experts is whether now – with e-commerce adoption soaring - it is time
for hotels to reduce their reliance on OTAs in favor of direct distribution,
rather than reinforcing that relationship.
Both Bookings Holdings and Expedia
Group closed the third quarter with signs of improvement, primarily driven by
domestic travel and pent-up demand.
Booking Holdings saw room
nights booked in the third quarter decrease 43% year over year – a marked
improvement over the 87% drop in Q2. And Expedia Group reached cash-flow
neutral in September for the first time since February, crediting
a stabilization in the market and internal efforts to drive “margin expansion.”
Tours and activities
Like other sectors, tours and activities has been hit hard by the pandemic but, given the small, independent nature of many suppliers, it could be that many will not emerge out the other end at all.
Booking volumes were down 76% for the period to November, compared to the same period in 2019.
Throughout the pandemic, businesses have bemoaned how little help has been available to them, especially from companies such as Google that they previously partnered with and relied upon for business. Many have used this time to update websites and distribution processes, with a plan - or ambition - to secure more direct bookings in the future.
If COVID-19 has done one thing for the tours segment it has accelerated digitilization, with a huge boost to demand for contactless solutions. It is hoped that tours, activities and attractions will recover as consumers have an even greater desire for experiences after being locked down for so long.
Those businesses that found a way to reinvent themselves, taking advantage of all digital technologies have to offer, in preparation for the new normal, stand to do well.
Conclusion
These are just some of the pivotal moments in the past year as the travel industry grappled with the fallout of the pandemic.
Sadly, as thousands continue to die and the rate of infection remains high, there are minor flickers of light at the end of the tunnel for the travel industry.
China is one bright spot in this gloomy picture, with domestic travel back in strong way, triggering hopes of a further revival across the Asia Pacific region.
Still, as became apparent very quickly in the crisis, hopes are being pinned on the availability and take-up of a vaccination and a chance that travelers from many countries will be able to travel again at some degree of scale from mid-2021 onwards.