With the travel industry effectively closed for much of the year, the consequences of Covid-19 have been dire, so how might the sector fare in 2021?
In December, the Bank of England reported UK households had amassed around £100 billion in excess savings during lockdowns, whilst travel businesses catering to the over-50s reported a surge in bookings thanks to vaccinations. These initial signs were promising, with data pointing towards a release in pent-up demand and a boom come Easter.
Then government dealt another blow to the sector; the introduction of quarantine hotels for arrivals from a “red list” of 30 countries specifically designed to deter travel into or out of the UK. It will see customers footing a bill of £1,000 upwards for 10 days.
This coupled with fears of vaccine-busting virus mutations transported via tourism brought a new low to consumer confidence.
With no clarity on when restrictions will end, the threat of survival for some, in particular major airlines, is a clear risk. Confirmation of the government’s latest scheme targeting the aviation sector, with grants of up to £8 million, does not go nearly far enough.
EasyJet and Ryanair reported significant losses in the last week, with revenue slumps of 88% and 82% respectively for the final quarter of 2020. With year-on-year losses of approximately £1 billion forecast by both, this small token simply beggars belief. We’ll need to see much more from government if passenger numbers continue to reflect those of last year.
The March Budget must support travel, either by expanding existing grants to recognise the unique regulatory restrictions on the sector, or by extending schemes like furlough support.
For an industry that has generated little to no income since the start of the pandemic, it is discouraging government has failed to act with the same level of support we’ve seen in hospitality.
With short-haul holidays driving demand, our expectations are that the second half of the year holds more hope.
RSM’s Financial Conditions Index backs this notion with expectations of improved economic activity during the second half of the year and a sustained increase in consumer spending near to 6%. Coupled with pent-up demand, it must be hoped that the need for a sunny break following the vaccine roll-out will overcome safety concerns.
Whilst sentiment will be slow to improve, talks of a vaccine passport and the pace of the vaccine programme still offer some reprieve, but to survive, the industry will need to cater to reduced numbers and increased safety protocols.
This will mean increasing prices to maintain viability, potentially making overseas summer holidays a more expensive luxury than before.
