The travel industry, which depends on the freedom of people to move en masse, has been one of the hardest hit sectors of the economy during the COVID-19 pandemic. Due to health related fears and lockdowns in the last 12 months, there has been a dramatic decline in travel and a resulting downturn within the airline, hotel, and cruise industries. Through the rest of 2021, however, there is an expectation that these three sectors will rebound as the vaccine roll-out proceeds and pent-up demand is unleashed in the economy. The size of the rebound depends largely on the success of the vaccine distribution, as more than half of consumers see vaccine distribution as a key to traveling again. Long-term signs are positive and consumers appear excited to travel again, with 40% planning to travel by July of this year, 75% by September, and 90% by year-end (PWC 2020). However, it will likely take years for the industry to fully recover, and it may never look the same.

After years of impressive growth, the global airline industry was the most prominent travel-related sector to be crushed by the COVID-19 pandemic in 2020. In April of 2020, flying was down 94% compared to the April prior, and overall 2.7 billion fewer people flew in 2020. Facing billions in losses, airlines cut costs, staff, and fleets, and are still losing money in 2021 (The Economist 2021). The recovery for airlines is happening slowly and unevenly, despite progress in vaccine roll-outs globally. Some countries, such as China and Russia, have seen a strong return of domestic air travel, while others, including large markets like the United States and Australia, remain quite depressed. Additionally, profitable, long-haul international flights have not recovered at all, partly due to continued border restrictions. While the near-term future is bleak, airlines have a relatively unique advantage compared to other travel sectors in the form of government subsidies.

Along with protecting jobs, governments have long favored the airline industry for reasons of national pride, and 2020 was no different. Germany, France, and the United States have all lavished subsidies and loans on their largest airlines. Depending on the terms of repayment, these large airlines may now be just as subject to the interests of their respective governments as they are to overall market demand. As a result, lower cost, independent carriers could gain an advantage over larger national airlines who are saddled with debt, undercut by government interference, and dependent on lucrative business travel that may never return to previous levels (The Economist 2021). While the commercial airline industry will eventually return to full health, the “old guard” national airlines may never be the same. Along with airlines, the hotel industry was devastated by the COVID-19 pandemic, losing approximately $95 billion in 2020 (McKinsey 2020). This is four times greater than the revenue decline seen in the aftermath of the 9-11 attacks and the 2008 global financial crisis combined. After bottoming out in April of last year, a gradual recovery has been underway, though it has been painfully slow. Hotels are expected to add back approximately 200,000 jobs this year, but are still 500,000 jobs below pre-pandemic levels (AHLA 2021). Industry estimates project that half of US hotel rooms will remain empty across 2021. However, leisure-related travel and hotel usage is forecasted to return to normal levels as people are yearning to return to visiting family and friends. This return will also depend on the success of vaccines and the resulting belief that travel is once again safe. Business travel and related hotel use is only expected to pick up slowly in the spring (after an 85% drop last year), and will take much longer to rebound as remote-work becomes more permanent. In the long term, a full recovery for the hotel industry may take years as analysts expect revenue-per-room numbers to reach former 2019 levels by 2024 (AHLA 2021). Unsurprisingly, the largest and most financially strong companies appear better positioned to survive and thrive: smaller, independent hotels have suffered more than the larger chains, which have greater financial leverage and scale to endure economic downturns. When normal times return, the larger hotel chains may be stronger than ever before as they take market share from defunct smaller, independent hotel operators.

Having experienced a complete shut-down in response to the health crisis, cruise lines were arguably the most radically impacted by COVID-19 – operations are just now restarting, and tensions are running high between the CDC, state governments, and the cruise lines themselves. Early in the pandemic, the industry shut down entirely in response to outbreaks linked to ships and prominent news stories which featured quarantined vessels stuck in ports around the world. In July, limited cruising returned in parts of Europe, Asia, and the South Pacific, though major markets in the US, Canada, and Mexico still remain shuttered (CLIA 2021). Tensions are running high in the US, where cruise lines insist they have developed effective safety protocols and elected politicians to urge re-opening to benefit local economies. Governor Ron DeSantis of Florida recently threatened to sue the US Centers for Disease Control if cruise ships were not allowed to operate again in his state, where the industry generates billions for the local economy (Fearnow 2021). In the meantime, major cruise lines have responded to newly released CDC guidelines by re-locating ships to recently reopened Caribbean ports to avoid onerous US requirements for passenger safety. The cruise industry in particular illustrates the tensions between the interests of for-profit companies, public health authorities, and state politicians with constituents that depend on robust local economies.

The airline, hotel, and cruise industries have suffered badly through the COVID-19 crisis, and their respective recoveries reflect an interplay between private industry, public health, politics, and consumer sentiment. However, the speed and strength of recovery will ultimately depend on market forces in the form of pent-up demand unleashed through successful vaccine allocation and a return to confidence among leisure and business travelers. The recovery of the travel industry will also depend on each individual country’s effectiveness in controlling the spread of COVID-19, considering some nations were highly effective in extinguishing the virus while others continue to struggle to control it. Data suggests that this pent-up demand is very real. Even though safety levels have not yet returned to pre-pandemic levels, a recent report suggests that travel optimism among leisure travelers has fully returned. It seems that, despite everything, people want to get out of their homes and back out into the world more than ever (Turner 2021). As the travel industry gets back on its feet after near devastation, it is fitting to recall this famous quote from Robert Louis Stevenson: For my part, I travel not to go anywhere, but to go. I travel for travel’s sake. The great affair is to move.

Sources

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