Appetite for travel returns - OTT's latest Green Shoots Survey
Independent travel analyst Peter Morris joined OTT’s aviation lunch last week to present the results of the latest Green Shoots survey. Read on to find out why we could be two years away from a return to 2019 travel levels…
The appetite for travel has returned with more than a quarter of respondents to OTT’s latest Green Shoots Travel survey reporting a bookings increase of 75 percent or more in March 2022, compared with March 2021 (26.65 percent).
The survey, which focused on trading from January to March this year, was OTT’s first Green Shoots survey of 2022. Responses were spread across the sector, from agencies of all sizes, tour operators, and destination management consultancies. More than 27 percent of those surveyed reported that their bookings had also seen a significant uptick of between 50 and 74 percent (27.69 percent).
Independent travel analyst Peter Morris revealed the results at an OTT aviation lunch last week. He said: “Whenever you get a big decline, then you get an increase again, proportionately the numbers look spectacular. But the baseline reality is that we are not back to 2019. Around 55 percent of people were saying that they were seeing bookings up year on year or 50 percent and above - undoubtedly better in March 2022 than in March 2021.”
“Our survey respondents spanned microbusinesses to big corporate agencies and shows quite a spectrum of recovery. Some people have been talking about 75 percent up and other people talking about a rise of about 20 percent. Clearly, they're experiencing different markets and different things going on, but with more than half saying more than 50 percent, you can definitely say it's better than 2021.”
Industry is still on a “recovery curve”
Peter cautioned that the industry was still on a “recovery curve” to the accepted benchmark of a return to 2019, the last year which saw relatively normal trading conditions. “It's interesting that about 40 percent are saying 2025 or later,” he said. “They're likely to be reflecting their own kind of individual circumstances and what their perception is. Around 60 percent - the majority - are saying by 2024, but you've got a significant minority of 40 percent saying 2025 or later.”
While there is a slow return to normality for revenue and booking levels, the pandemic has resulted in permanent changes in the way people work. When asked what strategies companies were still using in light of the downturn, more than 63 percent (63.54 percent) said the staff was working from home with 21 percent employing short-time work. A quarter of those surveyed (25.83 percent) said they had used the government’s furlough schemes. Thirteen percent had a recruitment freeze while 9 percent had used redundancy to keep their businesses afloat.
Peter explained: “It's clear that there's an element to which people have tried to keep staff on as much as they possibly could, including working from home or short-time working, for the reasons that we're now seeing on the airline side - having laid them all off they’re now trying to get them back.”
Working from home is the “preferred option”
He added that while working from home had been seen as a necessity for keeping businesses running during the pandemic, it was now being seen as a preferred option by agents and was better supported by the companies themselves.
Around a quarter of survey respondents thought revenues would return to their 2019 levels in 2024 (25.14 percent). Just over 20 percent predicted a return to pre-pandemic levels in 2023 (20.38 percent). More than one-third thought enquiries would return to 2019 levels next year (33.94 percent). Peter said this rise in enquiries was a “positive indicator” of revenues down the line.
And while the survey focused on the sector’s ongoing recovery, it also measured the effect on respondents’ personal earnings. From business owners to employees there had been some staggering losses over the past year. One-third of survey participants reported a loss of between 1-20 percent of earnings and nearly a quarter reported a loss of 21-40 percent (33.61 percent and 23.44 percent respectively). While just 6 percent had reported no impact on their personal income (6.43 percent), more than 18 percent had seen losses of 61-80 percent with 15 percent experiencing even higher levels of losses at 81-100 percent (18.46 percent and 15.77 percent respectively).
The survey also looked at which travel sectors and regions were bouncing back quicker than others. Within corporate and business travel, nearly 40 percent of respondents (39.27 percent) said they’d seen a ‘moderate recovery’ for Europe, while a third (33.72 percent) had experienced the same with travel to Transatlantic destinations.
“Companies have made savings on travel so I can see a gradual return,” said Peter. “Certainly within conferences, people are probably going to look a bit more skeptically at these for a while.”
“The other side of this is the devastation of the conference sector by Covid, they too are in the process of rebuilding. There are long lead times of a year or so for these so the conference market is going to remain patchy or with a hybrid format for a while.”
Airlines will struggle without corporate travelers
“Corporate budgets tend to be agreed in advance, so it could be 2024 before corporate travelers are back doing business in person again, aside from vital travel that people have already got back to. Of course, there is a higher margin on corporate travel, and without that higher margin, the airlines are going to find it very tough to just get by. This will probably be a boon to the low-cost sector because the major carriers will be slow and reluctant to put services back in the market until they can get those high yields, whereas the low-cost ones have been used to going for low yields.”
Within the Leisure sector, around a third of respondents reported a ‘moderate recovery’ in each of the major regions: Europe, Transatlantic, North America, Latin America, Asia Pacific, Middle/East Africa, and Other.
Peter explained that even the terminology around recovery was difficult. “Many years into recovery, people think to themselves, ‘Oh, it's back’. But we’re not talking about that, we're actually talking about things being back to 80 percent of what they were. That’s not a recovery, but a 40 percent increase is pretty good.”
“Teething problems” will continue throughout this summer
He predicted staffing shortages within airlines and airports would continue to hamper summer season getaways, slowing the industry’s recovery. “The teething problems are going to continue for the whole summer because we're ramping up to summer now. With everyone thinking that they’d like to go somewhere nice in southern Europe, as a consequence, you are going to have full flights and fares through the roof. It’s a classic case of supply and demand.”
“As to forecasts, there are murmurings about different variants of the virus and the impact that it might have in a fairly short space of time, which could happen if another nasty variant emerges which is systemically resistant to the vaccine. Nobody is able to predict more than a week or two in advance as to what kind of restrictions could be in place once you get 175 sovereign nations all taking decisions about health and how that will affect people passing through by air or by rail.”
2024 recovery “seems very logical”
Without these variants, Peter explained the recovery path would be largely dependent on the recovery of the airlines and airports. He added: “Moving into the winter, they'll catch their breath and have had time to recruit more people. Then you'll start to see the potential for 2023, certainly in the early parts of the year, of being a service level not too dissimilar to 2019 and the industry will then be able to cope with that summer peak in 2023 - so we won’t have another wave of frustrated people who couldn't get away, all dressed up ready to go! A 2024 recovery seems very logical.”
The OTT Green Shoots Travel Survey is produced on a quarterly basis. Data from the Q1 survey was collected from 485 respondents during April 2022, with respondents spread across multiple, independent and freelance travel agency businesses, tour operators, and destination marketing consultancies.