One year ago today Princess Cruises’ Diamond Princess ship set sail from Yokohama, Japan, for a 14-day trip with 2,666 guests and more than one thousand crew.
What no one knew at the time was that one of those passengers had developed a cough the day before he boarded the ship. That man left the ship on January 25 and tested positive for COVID-19 on February 1.
But the ship’s journey continued until it returned to Yokohama, as scheduled on February 3, where the Japanese government put it into quarantine.
Over the course of the following weeks, according to the Japanese government, more than 700 passengers and crew of the Diamond Princess tested positive for COVID-19 and 14 people died.
The situation on the Diamond Princess represented the first direct and large-scale impact of COVID-19 on the travel industry. In the subsequent weeks and months, the virus permeated ever sector, in every corner of the world.
In recognition of this grim anniversary, we review key moments of the pandemic in relation to the primary sectors of travel and take a look at the current state of strategies to take advantage of a recovery.
Cruise
Following the Diamond Princess saga, by mid-March all major ocean and river cruise lines had suspended operations.
According to data compiled by the Miami Herald, as of October 2020, 87 passenger cruise ships globally have been linked to COVID-19, with a total of nearly 4,000 cases and 111 deaths.
In June, Royal Caribbean Group and Norwegian Cruise Line Holdings convened the “Healthy Sail Panel,” with leaders from public health, biosecurity, epidemiology and more. The group’s list of 74 best practices has been submitted to the U.S. Centers for Disease Control and Prevention for review.
In the meantime, cruise lines have been enhancing their health and safety standards and procedures. Since the summer, some lines have resumed sailing, notably some short “cruise-to-nowhere” trips in Europe and Asia.
But most of the large companies are on hold till at least the second quarter, with Carnival Corporation’s Carnival brand on pause until April 1, Holland America on pause until May 1, and Princess Cruises paused until May 15. Royal Caribbean is similar, with sailings for most brands suspended through the end of April.
Air
Within three days of the Diamond Princess setting sail for Yokohama, on January 23 one of the last flights from Wuhan, often referred to as the epicenter of the pandemic, landed in Sydney, Australia.
A week later major global carriers were cancelling flights to cities in China including Beijing and Shanghai. By mid-February two-thirds of China’s passenger planes had been grounded.
Airlines began introducing mask policies, highlighting hygiene policies and later middle-seat blocking initiatives. Once COVID-19 was declared a pandemic on March 11 and countries closed borders, there was little carriers could do apart from helping with repatriations and moving vital medical equipment to virus hotspots.
It has been a rollercoaster ride since last March for carriers, with countries lifting restrictions and establishing some travel corridors over the summer, only to go back into lockdown again - with very little notice to passengers - in the last few months of 2020.
The International Air Transport Association has estimated that airlines will have lost $11 billion in 2020 improving to losses of $34 billion in 2021 on the back of hopes of travel industry recovery for summer 2021. This is reliant on governments lifting restrictions, the effectiveness of vaccines being rolled out and ongoing testing initiatives.
However, earliest predictions for recovery to something akin to 2019 levels are for late-2023 and many believe carriers have embarked on an era of smaller, leaner operations.
Accommodation
The cancellation of flights and closing of borders – along with the stoppage of most business travel - had a direct and immediate effect that rippled through the global hospitality industry as guests either could no longer travel or were no longer willing to do so.
Some hotels shut down, others reduced staff to a bare minimum. For most of the hotel brands, the second quarter of 2020 was rock bottom – Hilton lost $432 million in the quarter and adjusted EBITDA dropped 92% compared to the same period in 2019, while Marriott revenue dropped more than 72% to $1.4 billion.
Short-term rentals similarly struggled initially but seemed to bounce back faster and more sharply.
According to a report from STR and AirDNA, average daily rates for short-term rentals were reported as higher in July 2020 than in July 2019 in the United States, Spain, Italy, France and China.
Airbnb rode that wave to an IPO in early December, opening at $146 per share on its first day of trading – more than anticipated share price set the day before.
Along with dealing with cancellations, refunds and creative revenue management strategies, hotels and rentals have prioritized solutions to address hygiene and social distancing in their properties – using things such as contactless technologies and partnerships with global cleaning brands.
But full recovery is still expected to be a ways off, with STR reporting in October that U.S. room demand and average daily rate are unlikely to hit 2019 levels until 2023 and 2025, respectively.
Corporate travel
With flights grounded from late January 2020, many large corporates with a presence in China and employees traveling globally for work, had an early warning signal of what was coming and curtailed travel even before an official pandemic was declared by the World Health Organization.
Once the outbreak took hold in March, travel management companies scrambled to help repatriate employees as well as find ways to get essential workers in sectors such as oil and gas and medical professionals to where they needed to be.
Then, as new bookings dried up, TMCs moved to liquidity preservation and cost-cutting measures. Repeatedly over the course of coronavirus, the business travel community has called on governments to introduce mass testing at departure and arrival points to open up travel again.
Many of the corporates they serve are more cautious, however, with large corporates deferring a return to the office until later this year, at the least. Large organizations say they will also provide employees with far more flexibility to work-from-home as COVID-19 has forced millions to embrace online collaboration tools.
The repercussions for corporate travel will be felt for years to come and some even predict 50% of business travel is forever lost.
Consolidation is inevitable, and has already begun, but the ongoing investment appetite into corporate travel starts provides a glimmer of hope.
OTAs
Online travel agencies have faced some unique challenges during the pandemic, due to their position between suppliers and travelers.
Early in the crisis some of the OTAs faced outrage from both ends – travelers wanting fast, efficient refunds and suppliers, mainly hoteliers, frustrated some of the OTAs were issuing those refunds without their input and undermining their efforts to offer credits.
Some of the OTAs announced efforts to assist partners, such as Expedia Group’s $275 million partner recovery program, with $250 million in the form of marketing credits and a temporary reduction in commission for lodging partners.
But one question debated by experts is whether now – with e-commerce adoption soaring - it is time for hotels to reduce their reliance on OTAs in favor of direct distribution, rather than reinforcing that relationship.
Both Bookings Holdings and Expedia Group closed the third quarter with signs of improvement, primarily driven by domestic travel and pent-up demand.
Booking Holdings saw room nights booked in the third quarter decrease 43% year over year – a marked improvement over the 87% drop in Q2. And Expedia Group reached cash-flow neutral in September for the first time since February, crediting a stabilization in the market and internal efforts to drive “margin expansion.”
Tours and activities
Like other sectors, tours and activities has been hit hard by the pandemic but, given the small, independent nature of many suppliers, it could be that many will not emerge out the other end at all.
Booking volumes were down 76% for the period to November, compared to the same period in 2019.
Throughout the pandemic, businesses have bemoaned how little help has been available to them, especially from companies such as Google that they previously partnered with and relied upon for business. Many have used this time to update websites and distribution processes, with a plan - or ambition - to secure more direct bookings in the future.
If COVID-19 has done one thing for the tours segment it has accelerated digitilization, with a huge boost to demand for contactless solutions. It is hoped that tours, activities and attractions will recover as consumers have an even greater desire for experiences after being locked down for so long.
Those businesses that found a way to reinvent themselves, taking advantage of all digital technologies have to offer, in preparation for the new normal, stand to do well.
Conclusion
These are just some of the pivotal moments in the past year as the travel industry grappled with the fallout of the pandemic.
Sadly, as thousands continue to die and the rate of infection remains high, there are minor flickers of light at the end of the tunnel for the travel industry.
China is one bright spot in this gloomy picture, with domestic travel back in strong way, triggering hopes of a further revival across the Asia Pacific region.
Still, as became apparent very quickly in the crisis, hopes are being pinned on the availability and take-up of a vaccination and a chance that travelers from many countries will be able to travel again at some degree of scale from mid-2021 onwards.
