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Will the hospitality and travel industry recover in 2021?

Spring is here. People are celebrating the Lunar New Year. Do you see a brighter future in 2021? 

Without a doubt, 2020 was a challenging year for most. Besides lockdowns, many companies let employees work from home permanently. When many business activities were put on a break and the supply chain was interrupted, the global economy collapsed. COVID-19 pandemic’s impact on the hospitality and tourism industry is devastating and unprecedented.   

How tough was it in 2020? 


The aviation industry


According to the International Civil Aviation Organization, the global air traffic dropped from 4.5 billion in 2019 to 1.8 billion in 2020. The financial loss to the industry was $370 billion. Additionally, airports and air navigation service providers reported a loss of $115 billion and $13 billion, respectively. In the U.S., the six largest Airlines lost $35 billion in 2020. 

 

Hotels

 

The American Hotel and Lodging Association (AHLA) estimated that COVID-19’s impact on the travel industry in 2020 was about nine times of that from 9/11. Hotel room revenue dropped half, from $167 billion to $85 billion. Hotels were running at about 44% occupancy in 2020, down from 66% in 2019, although extended-stay hotels and the home-sharing sector seemed to be more resilient during this pandemic. 

 

STR, a leading provider for data benchmarking, analytics, and marketplace insights for the lodging industry, reported a decline of 84.6% in U.S. hotels’ gross operating profit per available room (GOPPAR). In 2019, U.S. hotels were running at $245.10 in total revenue per available room and $94.72 in GOPPAR. Such numbers went off the clip to $88.90 and $14.62 in 2020, respectively. 

 

Restaurants

 

The restaurant industry ended in 2020 with about $659 billion in total sales, $240 billion below what the National Restaurant Association estimated for the year before the pandemic. Fast-food or quick-service restaurants, as well as the restaurants shifting to curb-side pick-up and delivery services, seemed to do fine. 

 

The new year brings hopes to the industry

 

There are signs of improvement toward containing the coronavirus even with concerns over the variants. First and foremost, fewer people got infected. The daily identified COVID-19 cases dropped from the peak at about 314,000 on January 8 to about 100,000 in February. Then, the vaccination rate is increasing. Close to 10% of the U.S. population has received at least one dose. Additionally, a clinical trial showed that AstraZeneca’s COVID-19 vaccine remained effective against the U.K. variant. 

 

Travelers are hopeful

 

Travel Pulse shared some key findings from a survey of over 5,800 travelers. It appears that close to 70% of the participants want to travel in 2021. Many of them also carried over some of their vacation days from 2020 into 2021. For example, 

 

  • 61% feel hopeful about travel in 2021, of whom 83% will take two or more domestic trips and 44% plan for two or more international getaways. 
  • 7% are excited about travel. 
  • Europe remains to be the most sought-after international destination among the Americans (by 68% of participants), followed by Asia (30%), the Caribbean (28%), and Mexico (25%). 
  • Within the U.S., the West/Pacific Northwest is the hottest region (52%), followed by the Mountains of Idaho, Montana, Wyoming, and Colorado (40%), Southwest (37%), Hawaii (31%), and Northeast (31%).
  • 52% of participants plan to participate in outdoor activities.  
  • 68% want to avoid crowds.
  • 26% of respondents carried over 11 or more vacation days from 2020 to 2021; 15% carried over between six and ten days. 
  • 30% of respondents have 21 – 30 vacation days. 
  • 31% of respondents have 31 or more days. 
  • While many are making plans for trips, only 15% of respondents purchased tickets for domestic travel, and fewer than 10% have purchased flights for international trips. 

 

Air travel may only see a small improvement in 2021 

 

The International Air Transport Association only predicted a 13% year-to-year improvement in 2021 in a worst-case scenario. The new lockdown restrictions due to the new coronavirus variants could be the reason for such a dim outlook.  

 

The hotel industry is unlikely to expect a full recovery until 2024 

 

According to AHLA’s report, hotel occupancy in the U.S. will increase from 44% to 52% in 2021, and further to 61% in 2022. That was still below the 66% level in 2018 and 2019. Room revenue will reach $110 billion in 2021 and $144 billion in 2022, down from $167 billion in 2019. Before the pandemic, 5% of respondents took zero business trip. Such a number changed to 26% in 2020 and 24% in 2021. Recovery is likely to take stages: 

 

  1. Domestic leisure travel will fuel the first phase of recovery. 
  2. The second phase of recovery is likely to occur in Quarter 2, 2021, with small and medium events. 
  3. The third phase of recovery is expected to resume in Quarter 3, 2021, with group and business travel. 
  4. Business travel revenue is unlikely to return to the 2019 level until 2024. 

 

Restaurants sales are improving 

 

U.S. restaurant sales are projected to increase 11% in 2021 to $731.5 billion, but still far behind 2019’s $864.3 billion. By December 2020, roughly 110,000 restaurants and bars, or about 10% of such establishments (one million), had closed for a long-term or permanently. Additionally, many restaurants have adopted contactless self-service in operations. About 2.5 million restaurant jobs vanished in 2020. It is unlikely these empty positions will be recreated or filled soon. 

 

All in all, it seems that the recovery will occur as early as the second quarter of 2021 under an optimistic estimation, but it is also contingent on the effectiveness of the vaccines and the vaccination rate. Recovery will take time and in phases, starting from domestic leisure travel. A full recovery is not expected until 2023 or 2024. 

 

Are you feeling optimistic about the future in 2021? Do you believe a full recovery for the hospitality and tourism industry will occur before 2023? If so, why will that be the case?


Note: This viewpoint is also published on MultiBriefs.com; the picture was downloaded from Embodybyv.com

Comments

  1. Gloria Medina HRT 3020-02 (011682294)

    As of March 18, 2021 restaurants are going to be able to open their doors for dine-in. Which is great news for servers like me, restaurant managers and owners. I'm currently a server at Olive Garden in Downey CA. As a server I truly believe that restaurants will be able to recover from this tragedy within 3-4 years. It's very hard to be a server during this time because we don't get the same amount of hours nor get tipped the same as before. Even Though we are considered to be the 2 most busiest Olive Garden in the country it still isn't enough for both servers and the restaurant to get back on its feet. During the time that we remained closed the bills stayed the same and the debt only increased. Which is going to affect the revenue of business in the hospitality industry. This year is going to be slightly better than last year because we are still recovering and in the process of normalizing everything again but it’s definitely going to take more than a year to see the same revenue and sales as before. The good thing is that the desire from customers to travel and dine inn is increasing which is what gives this industry hope. Now our only goal is to stay safe and maintain open as much as we can. In addition to that is being able to adapt to the new customer needs and desires in order to keep customers coming back.

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