COVID-19 and Travel in 2020

On September 11th, 2001, air travel had been shut down nearly globally in a matter of hours. It left an indelible mark on us as a society as we noticed not a single plane in the skies above the US for 2 days. The effects on the travel industry had a rippling effect from fuel prices to overall customer sentiment. We saw in real time what could bring the entire travel space to its knees, with some unfortunate effects afterwards that to this day hurt travelers. Baggage fees, seat fees, booking fees, and a litany of other added, and costly, headaches in addition to stringent security protocols with questionable effectiveness.

We now find ourselves in a similar situation but in a more abstract manner. Novel Coronavirus, or COVID-19 (short for Corona Virus Discovered in 2019) hasn’t just been a pandemic, it’s been a phenomenon and its effects will be far reaching, not only because of the drawn out spread globally, but because this is the first time we have seen global quarantine precautions in nearly real time thanks to social media. But what will this mean when the quarantines are lifted and people itching with cabin fever are about to venture out again? Thousands of trips have been cancelled or postponed, and events planned for the summer are anticipating to take place in the fall. Will the global travel infrastructure be able to keep up with the demand while keep people safe, or will we see another spike in infections?

As of now, there are over 700,000 confirmed cases of COVID-19 globally, and this is expected to grow exponentially over the next couple of months.

https://www.worldometers.info/coronavirus/

The first effects we have seen have been economic. The crash of world markets coupled with an already overdue technical correction and the end of a massive 11 year long bull market have been the first shock to hit everyone globally. On top of this, JP Morgan has forecasted a 10% contraction in US economic output which is happening at the same as millions are beginning to file for unemployment. The last thing on people’s minds is travel, and for those who have to as a part of their livelihoods, alternatives are coming in to play that take travel out of the equation completely. But when the shock subsides and the quarantines have been in place for more than a month, travel will soon become the escape that everyone has been yearning for. What does this mean for the travel industry specifically?

The initial forecast for the travel industry for 2020 was ~$700bn in revenue, however the revised forecast is down 17% to roughly $568bn. With the Diamond Princess being the first major travel-related COVID hotspot, the downward spiral of the industry was fast and brutal, and since then we have seen further cuts across multiple verticals. Etihad and Emirates have stopped all routes and Singapore Airlines has cut 96% of its capacity. Music festivals have pushed their dates back until fall of 2020 and the Olympics has been postponed until 2021. Like 9/11, the sentiment towards travel is incredibly low. Airlines, cruises, and large gatherings have all facilitated the spread of the virus, but the question will be when this is all said and done, will that stop anyone from trying to get out of their homes and take the vacation they had put on hold.

Our outlook for travel is that it will make a roaring comeback towards the end of the year. Some studies and reports say the virus will die out over the summer in hotter clients, helping flatten the curve, and the quarantines currently in place for major cities across the US, Europe, and Asia will help stop the spread as well. We can most likely anticipate another spike in cases during the summer for those who prematurely venture out only to re-spread the virus, however this will die down quicker as faster testing and vaccines are made more readily available to the public. People will also be suffering from FOMO. Since this is the first major event that has affected people on a global level in the social media era, the first instances of people taking their trips will start the itch with many others. In China, there are signs of a wave of revenge spending set to hit. This is something that could head west as well, as the mindset of people stuck in quarantine focused more on what they will do once they can leave, whether it’s engage in some retail therapy or find a getaway to somewhere far from Zoom and Slack.

In today’s world of instantaneous hyper-exposure to the lives of other people, we can anticipate that the need to get out will see exponential growth once the COVID crisis has subsided. While we will be at the mercy of governments and their willingness to let foreigners in and airlines having the ability to transport people, at the end of the day money talks. We will see massive discounts across the board, and so long as oil stays at its current price level, the deals should be quite impressive. Hotels, airlines, and regional tourist boards will be pumping plenty of money into getting travelers back into the spending mood after months of being cooped up. We’re hoping it will actually encourage a new age in travel, and cause a shift in thinking for both travelers and related businesses — a shift towards sustainability and responsible travel. Staying at hotels that are eco-friendly and mindful of their impact on the environment. Flying with airlines that are working to reduce their carbon footprint and investing in better airline technology. Spending time in areas of the world that are not only in need of tourist dollars, but who can contribute back to the area where they have stayed. The travel industry has a chance to start anew and for travelers to demand something better from the industry as a whole, and one can hope the travel industry will respond.

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