Empty airport with blurred plane on a background

Less Air Travel, Less Tourism: What it Means for Small Businesses

6 min read • Dec 27, 2020 • Kayla Voigt

Airlines make up a $488 billion industry that’s been especially hard hit by COVID-19. 

In 2019, 6 million passengers flew an average of 102,000 flights per day45,000 in the US alone. By August 2020, domestic air travel dropped 51% year over year, while international travel dropped 81%. “[We expect] that we will see less than half the passenger traffic this year than we carried in 2019,” said Michael Gill, executive director of Air Transport Action Group, in a press release

It’s unlikely travel will rebound anytime soon. “While pent-up demand exists, consumer confidence is weak in the face of concerns over job security and rising unemployment, as well as risks of catching COVID-19,” said Alexandre de Juniac, IATA’s director general and CEO, in a press release. 

Travelers Stayed Grounded During 2020

COVID-19 accelerated existing trends and customer preferences

When travelers do fly, they’re likely to choose nonstop routes. Most customers still don’t trust that airlines have their best interests at heart, regardless of increased cleaning measures, middle seat spacing, and overall changes in flight operations. General uneasiness around flights persist:

Travel Anxiety Data Graph

Source: McKinsey & Company  

That’s probably because, unlike major hotel chains, airlines don’t offer a single standard. Some airlines block the middle seat. Some don’t. Some wipe down the plane with electrostatic sprayers between flights. Some only sanitize at the end of a shift. 

And news that airlines like Southwest are cutting back cleaning between flights doesn’t help matters, either. 

Even the busiest travel season of the year hasn’t returned to normal levels. TSA processed a pandemic-era record number of travelers, with more than 1 million people screened on November 26. While that number seems large, that’s still 40% of a typical year’s Thanksgiving traffic. Travelers overall are choosing to stay home or opt for road-tripping.

Reopening Borders Balances Economics and Public Safety

For air traffic to increase, more countries must reopen borders to international travelers. Doing so requires a tricky balance of economics and public safety. The IMF reported that Thailand, Greece, Portugal, Morocco, and Turkey all risk losing over 2% of their GDP from lack of tourism. 

So it’s no surprise that countries like Costa Rica recently opened its borders to international travel, receiving 5 weekly flights from the US. “The biggest challenge is rebuilding our country’s tourism sector in a manner that alleviates the financial burden on the tourism sector and promotes economic recovery, while prioritizing health management,” Gustavo Segura Sancho, Costa Rica’s tourism minister, told Skift. “While we are eager to welcome travelers back to Costa Rica, it is of the utmost importance that we do so in a way that is safe both for our citizens and visitors. We are anticipating a slow, but safe and successful reactivation of our tourism sector, and will continue to evaluate our efforts daily.”

Countries like Barbados, Georgia, and Bermuda went one step further, creating remote-work-friendly visa options that skirt the restrictions, allowing Americans to stay long-term. 

Airlines Must Adapt the Hub Model

When air traffic does return, the traditional hub-and-spoke model may be obsolete.

If you’ve ever wondered why your flights always connect in Newark (United), Atlanta (Delta), or Orlando (JetBlue), it’s because of this hub model. Centralizing air traffic mostly benefits airlines, which can offer more connections with fewer flights, increase the frequency of routes to more popular destinations, and concentrate lower passenger volumes to achieve greater efficiency.

Part of this is also from legacy operations, particularly when aircraft couldn’t handle nonstop long-haul flights and before consumers recognized the steep environmental price of air travel. Aviation generates 860 million metric tons of carbon dioxide each year, about 2% of global greenhouse gases. Customers have changing preferences, even for business travelers.

Short-term, airlines must reshape their hub routes, consolidating traffic and deploying more advanced analytics to price out connecting flights. This means that even when travelers start flying again, layover cities like Dubai and Frankfurt won’t see the same kind of tourism dollars they did before.

Air Travel Impacts More Than Airlines

That’s because air travel represents a far greater slice of the economy than just the airlines. 

As of November 2020, less than 2 billion people flew this year, compared to 5 billion in 2019. Less air travel represents a cascade effect, impacting mom-and-pop hotels, restaurants, and retail across the country. 58% of all tourists arrive at their destination by air, and international travel agency IATA projects over $630 billion in reduced GDP benefits from air travel-related tourism.

Small businesses in tourist areas need to take several short-term and long-term measures to protect their businesses:

  • Access short-term cash, either through government programs or loans
  • Work with local unions or industry associations to advocate for additional government support
  • Raise prices and/or communicate with customers about the impact of COVID-19 on your business
  • Pivot operations to focus on e-commerce, outdoor operations, or remote-friendly structure

Relying on tourism is no longer an option. Scott Mayerowitz, executive editorial director for The Points Guy, told Forbes, “It is going to be several months until most Americans feel fully comfortable traveling like they did before the pandemic.”

More than anything, small businesses must remain resilient if they’re going to survive the next few months. “The companies that thrive after this crisis will likely be those that work with travelers and employees to…find new ways to enable choice across the customer experience, and that communicate progress in an authentic and transparent way,” writes Melissa Dalrymple for McKinsey. “Take inspiration from a time when airline travel was exciting and new, and travel companies went out of their way to solve for traveler needs rather than just optimizing against the competition.”

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Kayla Voigt

Always in search of adventure, Kayla hails from Hopkinton, MA, the start of the Boston Marathon. You can find her at the summit of a mountain or digging in to a big bowl of pasta when she's not writing. Say hi on Instagram @klvoigt.