The worst year for the travel industry in living memory is nearly over, but what will be the lessons of 2020? Rob Gill investigates.
Nobody in the travel industry needs to be told how horrific 2020 has been for their business – the impact of the Covid-19 pandemic has made previous crises such as 9/11, the 2008 global financial meltdown and the Icelandic ash cloud seem like minor bumps in the road for the sector.
This time last year, the focus was on the upcoming “peaks” season and the impact Thomas Cook’s demise would have on the market, while the impending arrival of Brexit was the most significant cloud on the horizon.
Fast forward 12 months and the industry has been in a battle for survival since March’s first lockdown as Covid-19 decimated international travel. Meanwhile, frustration at the government’s policies around quarantine and failure to provide tailored support for the sector has been at boiling point for months.
Thankfully, with a host of Covid vaccines now making significant progress (and one already approved), hopes for 2021 have been raised – particularly once we get through these tough winter months. But what will be the lasting impact of the crisis on the travel industry?
Refunds and protection
The industry came in for a huge amount of negative consumer media coverage as it struggled (understandably) to deal with an unprecedented deluge of refund requests from people with cancelled holidays.
While some companies – such as Kuoni, Jet2 and Trailfinders – won praise for the speed with which they refunded customers, other big names certainly did not cover themselves in glory; including Virgin Holidays, which found itself under investigation by the Competition & Markets Authority (CMA) for the slow payment of refunds.
The CAA also criticised easyJet, Ryanair and Tui for “not processing refund requests sufficiently quickly” in the early months of the crisis.
While there has been some sympathy for the industry from the CAA and government in having to deal with such a huge refunding effort, expect there to be even more scrutiny in 2021 on how travel companies protect client money.
There are already signs of a move to trust accounts – where money is ring-fenced until customers return from their holiday – as an alternative to bonding through Abta or Atol, or increasingly unavailable financial failure insurance.
Both Saga and the revived Thomas Cook have moved to trust accounts. This could be a challenge to many travel businesses traditionally reliant on using customer cash as working capital, particularly when they have been starved of bookings for a prolonged period.
Whatever happens, the government and CAA is going to want to avoid a repetition of this summer’s refunds backlog and more negative publicity.
Flexibility and resilience
While there have been some big-name failures – STA Travel, as well as several smaller independent agency chains and operators – so far, the industry has been remarkably resilient.
But, as business advisor BDO points out, more collapses are “inevitable” with firms “running on fumes” and cash running out without a significant bounceback in bookings.
The industry has had to get creative to hang on to existing bookings – mainly through Refund Credit Notes (RCNs) currently protected by the CAA until 31 December for trips departing by 30 September 2021.
In cruise, a sector particularly badly hit by the pandemic, lines have been offering customers future cruise credits of up to 125% of the original price paid, as an alternative to refunds.
Booking conditions have also never been more flexible, with customers able to make changes or cancel days before departure. Travel companies have been adept at adjusting to demand for “closer to home” destinations, too, particularly UK holidays, with the likes of Kuoni, Explore and others adding domestic breaks to their portfolio.
Airlines and operators have also quickly restored flights and holidays in response to changes to the travel corridors regime – even for destinations that only enjoyed short-lived reprieves, such as Portugal and the Canary Islands.
Advantage Travel Partnership’s leisure director Kelly Cookes said: “We’ve introduced more domestic suppliers and domestic product, which helped our members during the summer. As soon as an area opens up, we have product. You have to be very reactive.”
Research from Advantage also showed some encouragement for the trade, with those aged 25-34 more likely to use an agent due to the current complexities of travel. Even if this is a short-lived phenomenon, it at least gives agents a chance to demonstrate their value.
Words like “shambles” have been regularly heard during the crisis over issues such as quarantine and the government’s reluctance to introduce airport testing or provide specific financial support to the sector.
There has been much talk about how travel fails to communicate to government with “one voice”, even when there are issues of broad agreement, such as quarantine or sector support.
Finding a solution seems remote in an industry with many divergent interests – as does hopes of having a dedicated tourism minister who understands the outbound sector and its value to the UK economy (£65 billion a year and one million jobs, according to Abta).
For most politicians, the travel industry only seems to matter when talking about domestic or inbound tourism.
This is demonstrated in the government’s muddled approach to whether travel agencies should be closed during November’s lockdown (yes to start with, then no).
Despite this, several campaigns, including Quash Quarantine and TTG’s #SaveTravel, have pushed the government into action, including the introduction of travel corridors.
While the industry has adjusted quickly to consumers’ desire for “closer-to-home” destinations, will this be a trend that lasts beyond the next few months?
A lot of product will continue to focus on short-haul travel – at least in the first half of 2021 – while some UK-orientated cruise lines are planning to resume operations in the UK and Europe.
Will other trends persist beyond the pandemic, such as the upsurge in demand for villas and self-catering properties?
EasyJet Holidays boss Garry Wilson told TTG he predicted a bounceback in demand for all-inclusive resorts in Turkey, Greece and Egypt due to their facilities and “value for money that’s always going to speak to customers”.
The importance of a Covid vaccine is summed up by European Travel Commission research showing that 51.7% of Brits are planning to resume travelling when a Covid treatment is found.
The study also revealed that UK holidaymakers continue to want sun and beach holidays as well as city breaks and cruises.
However, they were also the “most uncertain about when they will next take a trip” compared with other major European markets – with the vast majority either planning to travel domestically (39%) or within Europe (36%) within the next six months.