With the COVID-19 vaccine rollout pressing ahead at full speed and the potential for so-called ‘green corridors’, a surge in demand may far exceed supply over the summer travel window in Europe. As travel firms look towards the hope summer could bring, the delicate balance between under and oversupply will be even more difficult.
COVID-19 has had a detrimental impact on the travel and tourism sector. International border closures and travel restrictions have wreaked havoc on revenue streams and placed many tourism companies on the brink. GlobalData’s Traveler Demands & Flows Database illustrates a 43.9% worldwide drop in international trips by Europeans year-over-year, from 642.4 million departures in 2019 to 360.4 million in 2020. The pandemic has severely restricted traveller flows, resulting in a high level of pent-up demand that has built up during the pandemic.
The prospect of ‘green corridors’ has stirred up a high level of interest for holidays this summer in Europe. Travellers will be permitted to freely move between two states that have established a ‘green corridor’, requiring proof of vaccination or for travellers to be in possession of a negative COVID-19 test result. This necessity will be seen as a small inconvenience for Covid-19 fatigued travellers desperate to escape abroad.
Asset disposal may hamper the ability to meet demand
From airlines to hotels, cruise companies to car rental, firms have been looking at ways to right-size their businesses for the immediate term. Unfortunately, the disposal of assets has occurred due to the pandemic, and this may restrict the recovery efforts of some travel companies. With less supply now existent, some may be unable to respond and capitalize quickly enough to peaks in demand. As a result, firms may lose out on much-needed revenue.
Airlines have proactively used the downfall in travel to re-evaluate fleets including British Airways and Lufthansa, who have retired older aircraft from their fleets. However, with both Boeing and Airbus slow to produce aircraft, airlines’ fleets may be smaller than pre-pandemic for a sustained period of time. Long-term storage of aircraft has helped conserve cash, but the time it takes to ready these aircraft for service could be too long to meaningfully meet any sudden rises in demand.
Social distancing measures will reduce capacity
Operators across the travel and tourism sector may be restricted in the levels of supply they can offer, with some countries placing restrictions on aircraft/hotel capacity levels and mandating strict operating practices. The reduced capacity of onsite facilities at hotels may result in reduced room availability, as there is not enough space to accommodate all holidaymakers. Airlines restricted in the number of seats they can sell on a flight will mean less inventory on sale. Ultimately, if the level of pent-up demand is high and travel becomes a reality, many operators may not have enough supply to meet demand and it could result in operators raising prices.
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The hype around a limited return of international travel in mid-2021 is likely to become a reality, given the quick rollout of the vaccine in Europe. Hopeful times are ahead, but travel firms which have decreased operational output during the pandemic to save costs could be unable to cope with high levels of pent-up demand, which may leave them in a precarious situation this summer.