Recovery will be slow - but travellers more likely to use agents in future
Tourism revenue may take until 2024 to get back to 2019 levels with recovery depending on five key drivers, according to a recently released forecast by industry advisors McKinsey.
But despite the gloom, the expertise provided by travel agents may gain a post-pandemic boost with a third of respondents to a survey by Travelport saying they would be more likely to use their services than before the crisis.
McKinsey's recovery model, announced last week and reported in their article Covid-19 Tourism Spend Recovery in Numbers, predicts a cumulative drop of $3 trillion to $8 trillion before tourism expenditure returns to pre-Covid levels.
With global tourism one of the worst affected sectors during the pandemic, McKinsey predicts a slow recovery driven by the underlying dependencies countries had on domestic and non-air travel. McKinsey’s analysis predict no “one size fits all” approach and warns both companies and countries should prepare for their own recovery curves.
McKinsey has identified five key drivers to recovery, these include:
- Attractiveness of domestic destinations: Intrinsic attractiveness of domestic destinations is a core driver for sustaining domestic travel and supporting substitution of outbound trips
- Materiality of air transportation: Tourism’s dependence on air travel is expected to have a strong effect due to health concerns and potential supply reductions
- Health and hygiene factors: Health standards in destination countries (domestic or international) and insurance policies will increasingly affect traveller decision making.
- Importance of business travel: Impact on business travel is typically more pronounced that leisure segments and depends on local dynamics.
- Sustainability: High awareness of environmental impact is likely to affect travel decisions in the new normal.
Predicted recovery will be slow
McKinsey’s most optimistic recovery scenario would see the virus contained rapidly and economies rebounding. This would lead to a recovery to 85 per cent of 2019 volumes by 2021 and a full recovery by 2023. The company’s most pessimistic recovery scenario sees 2021 levels as low as 60 per cent of those experienced in 2019, further postponing a full recovery.
Domestic tourism likely to recover before international trips
McKinsey’s forecast predicts domestic tourism will return to pre-crisis levels around one to two years earlier than outbound travel. The shift towards domestic tourism will happen as result of there being fewer restrictions for travel within tourists’ country of residence, more substitution options for non air-based travel (such as cars and trains), passenger anxiety and a larger share of business travel. Domestic travel is also expected to recover faster than the hotel sector as we see a substitution toward vacation rentals and friends and family in certain markets.
Markets will recover at varying speed
McKinsey predicts that countries across the world will recover at different rates. Countries with a robust domestic tourism sector and high quality networks of land-based transport will recover at a faster rate.
Different markets have differing dependencies on domestic tourism and air traffic. This will drive recovery speed as both border restrictions and safety concerns are currently determining air traffic levels.
Germany will see one of the fastest tourism recoveries based on McKinsey’s predictions, based on its strong healthcare system and swift response to the pandemic. Its strong economy and range of land-based tourism options are likely to help its tourism sector recover between 2022-23. India’s strong GDP growth is also likely to lead to recovery over the next few years. China’s robust response to the pandemic means its tourism industry is forecast to recover in 2022-23, although fears of re-importing Covid-19 mean international travel will be slower to recover.
McKinsey places the UK further down the recovery scale, with one of the largest year-on-year percentage business decreases. Recovery from the pandemic will be slower and likely to take place in 2024. Brexit, a reliance on business travellers and air travel will mean that the UK will lag behind other European countries such as Spain, Italy and France when it comes to tourism recovery.
McKinsey’s report says tourism industry recovery would continue to be determined by “structural and macroeconomic factors.” It added that industry leaders could improve recovery rates through the introduction of measures to boost visitor confidence. These included improving the perception of air-travel safety, actively promoting domestic destinations, and ensuring government and insurance policies guarantee access to healthcare—even away from home.
While the UK’s hopes for a swifter recovery have been dashed by tighter lockdown measures coming into force in England this week (November 5) with airline bosses warning of a bleak winter ahead, there’s brighter news for agents in a study by global travel tech company Travelport.
Two-thirds of travellers "more likely to book through an agent"
Travelport surveyed more than 5,000 travellers from five countries in its Guide to Travel Recovery and found that respondents would be more likely to book through a travel agent than before the Covid-19 crisis. Reflecting the McKinsey report, Travelport also found that the majority of travellers would consider domestic and international travel, so long as important safety measures were introduced.
Travelport found travellers were more likely to book through a travel agent than before the crisis, with one third (33 per cent) of all travellers anticipating an increase in their use of travel agent services. This trend was particularly evident among the Millennial age group with 44 per cent responding that they would book through an agent. The two thirds (65 per cent) who claimed they would use the services of an agents gave this reponse as they said travel agents were best placed to provide them with the latest travel safety information.
Like the McKinsey study, Travelport found adherence to health and hygiene measures such as social distancing rules, mandatory use of face masks, and ready access to sanitizing gel or wipes, face masks and gloves would be critical to recovery. The study also revealed that additional measures still need to be implemented by airlines, airports, hotels and car rental companies to fully restore consumer confidence.
Health and hygiene measures mentioned in the survey include enhanced cleaning and/or disinfection, access to sanitising gel/wipes, face masks and gloves, social distancing, temperature checks, mandatory wearing of face masks, improved air filtration, staggered boarding protocols and contactless services such as plexiglass at check-in.
Flexibility, including fully flexible or refundable tickets was also deemed critical by travellers interviewed in the Travelport survey, with communication of all of these collective measures key to regaining confidence.
Have your say: OTT will be surveying agents about their bookings next month