May 31, 2020

Will There Be a Travel Industry in the Wake of Coronavirus?

The last century’s technological revolution has made traveling the world by air, land, and sea easier and more affordable than ever. However, the travel industry that fuels billions of trips each year is helpless against a virus that demands we stay put.

Every day that stay-at-home orders extend is another day individuals and families cancel flights, cruises, Airbnbs, conferences, campsites, and road trips. “This is the worst time of the year for this to happen,” says Isabel Hill, director of the Commerce Department’s National Tourism Office. “This is the season—spring and summer—when the travel and tourism [industry] makes a significant amount of [its] revenue.”

The consequences are bleak. If this virus’s spread and government lockdowns continue into the summer, the World Travel and Tourism Council estimates a global loss of 75 million jobs and $2.1 trillion in revenue. If you glazed over those massive numbers or don’t have the context to know what that actually means, just know it’s bad—like, really bad.

Tourism has blossomed into one of the world’s largest economic sectors, contributing over 330 million jobs worldwide and comprising 10.3% of the global GDP. And it’s overcome setbacks before, like its massive bounce-back after shrinking 31.6% following 9/11. However, this crisis is different. “The impact on travel is 6 or 7 times greater than the 9/11 attacks,” says Roger Dow, president and CEO of the US Travel Association.

With millions of jobs and trillions in revenue expected to disappear this year, can the travel industry survive in the wake of COVID-19? Will the gradual reopening of the US economy offer a light at the end of the tunnel, or is the tunnel about to get a lot darker? Let’s explore a few likely outcomes and possibilities.

Big Businesses Suffer Big Losses

It’s not hard to upset an industry that’s so dependent on incoming cash flow. With high tourism demand soaring in recent years, big businesses took big risks to invest in the future. Now, the average international carrier has fewer than 2 months of rainy day funds on hand. Apple, on the other hand, has enough cash savings to cover 6 years of expenses—nearly 3,500% more!

Hotels are feeling the COVID-19 pain, too, with upscale urban and resort lodgings suffering the worst revenue losses. Mid-tier and economy hotels in interstate and small-town locations are seeing less than half the revenue decline compared to classier accommodations.

Government aid packages for both “distressed industries” (the travel industry would definitely fall into that category) and small businesses will go a long way in keeping doors open until travel resumes again—that is if travel resumes again.

The Cruise Industry Has a Dangerous PR Problem

Before COVID-19, cruise lines had worked hard to paint an idyllic picture of big-boat vacations. Now, cruises will be associated with being stranded at sea while a deadly virus ravages the ship. Becoming a poster child for this pandemic is far from a great image for the industry.

With cruise sailings being pushed deep into the summer (or beyond), the cruise industry is in deep trouble. Worst of all, these companies aren’t eligible for government financing or bailouts because they’re not technically American businesses—many cruise companies have chosen to locate their headquarters overseas to avoid federal taxes and US regulations. Now, with cruise ships becoming floating infection vessels, expect countries to implement new regulations just in time for these ships to make their recovery voyages.

A Glimmer of Hope in the East

China, ground zero for the pandemic, provides some insight into what the travel industry might look like in a few months. When the country lifted restrictions, travel bookings saw a 50% jump, hotel bookings rose by 60%, and train reservations doubled. Domestic tourism is projected to see a significant recovery, in large part due to severe limitations on international travel.

The travel industry in the East isn’t fixed, but it’s headed in the right direction. There’s hope that the US can see the same bounce-back when domestic travel restrictions are lifted, although the US economic trajectory is a little less optimistic than China’s. Whether international travel restrictions will impact the recovery rate of China is yet to be seen. If international travel remains restricted, then US citizens will spend more of their travel budget on domestic soil. However, the US will lose out on the approximately 80 million international arrivals who typically spend around $4,200 each when they visit.

Domestic Travel Becomes the New Thing

With Americans hunting for jobs and cautiously spending their unemployment checks, travel plans will likely take a backseat. For those who are in a position to travel, it’s going to look different for the rest of 2020 and 2021.

Even if the US government removes its international travel restrictions, the countries that tourists want to visit must do the same in order for trips to happen. And with the coronavirus raging at different levels and speeds across the globe, fear of contracting the virus will likely keep travelers close(r) to home. 

Still, people love to travel, so watch for domestic hotspots to fill up quickly once this pandemic passes. Over the next 12 to 18 months, warm beachfront properties will sell out, and national park accommodations will face massive surges.

The Sooner, the Better

The longer that stay-at-home orders extend, the harder it will be for the travel industry to recover from this pandemic. Every day means more lost revenue, jobs, and businesses. The sooner we lift our travel bans, the better for the travel industry.

However, the coronavirus still isn’t contained, so any premature easing of restrictions could cause another wave of infections, more deaths, and more long-term damage to the economy. China’s restoration shows us that the travel industry can rally, but it’s going to need to be patient to do it right. That’s easier said than done with the peak traveling season fast approaching—but at least there’s a tiny light at the end of the tunnel. 

About the author

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Jesse Sumrak
Jesse Sumrak is a Social Media Manager for SendGrid, a leading digital communication platform. He's created and managed content for startups, growth-stage companies, and publicly-traded businesses. Jesse has spent almost a decade writing about small business and entrepreneurship topics, having built and sold his own post-apocalyptic fitness bootstrapped startup. When he's not dabbling in digital marketing, you'll find him ultrarunning in the Rocky Mountains of Colorado. Jesse studied Public Relations at Brigham Young University.

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