Tourism And Travel Will Take More Than 3-5 Years To Recover
September 4, 2020 – The travel and tourism industry is unlikely to return to normal in the next three to five years, as lingering health concerns and the general loss of disposable income will continue to hound the sector, Moody’s Investor Service said.
In its recent sector assessment published on August 25 on the hospitality sector, the credit-rating agency said the hospitality sector may start to see hints of improvement in the second half of 2020 but will be “nowhere near” pre-pandemic volumes.
The “recovery to anywhere close to pre-pandemic levels is unlikely until consumers are comfortable travelling again en-masse, likely after vaccines and treatments are widely available. We do not expect a return to pre-COVID volume until 2023 at the earliest for most sectors,” Moody’s said. “A full ‘return to normal’ volume — similar to 2019 levels — is unlikely in the next three to five years.”
Even if the number of cases is stabilising in some parts of the world, Moody’s said consumers’ willingness to travel will still be impaired by health concerns, and the weakened economic conditions provide for less disposable income for personal travellers.
Business travel is also constrained by company policies protecting employees’ safety. For example, Moody’s said US lodging companies that rely on business travel for a majority of their earnings – Marriott International, Inc., Hyatt Hotels Corporation, and Hilton Worldwide Finance, LLC – will likely not see their earnings return to 2019 levels until 2022 at the earliest.
“These three companies generate about two-thirds of their earnings from business travellers. Lodging companies with this business model can shift to a more leisure traveller focus, but this comes at a cost — leisure travel is a lower margin business in general,” Moody’s said.
The adoption of video conferencing allows corporations to restrict business travel for longer periods if needed. Post-pandemic, Moody’s expects video conferencing to remain, but long-term adoption levels will depend on how companies approach their return to normal.
But travel won’t be zero
Moody’s said despite the dismal outlook on travel and tourism, there will always be some people that see an advantage for meeting people in person instead of through a screen and that some degree of travel will come back.
“Business travel will not go to zero as some fear. However, the cost-effective nature of teleconferencing may become entrenched in some companies,” Moody’s said.
For personal and leisurely travel, recovery is expected to be more gradual.
“Once a vaccine and effective treatment [are] widely available, we expect people to return to the roads, skies and seas. However, this return of pent-up demand will be gradual because of the process of widely vaccinating the world’s population,” the credit watcher said.
For the sector to cope, it will have to undergo “systemic changes”, Moody’s said, some of which include permanent health and safety measures.
