The summer holiday has long been a fixture in the Great British calendar. In 2019, the ONS reported 93.1m visits overseas by UK residents and nearly two thirds of those trips were for holidays. Fast forward to 2020 and the picture couldn’t be more different. With the travel industry effectively closed for much of the year, the outcome of Covid-19 has been dire. But how might the travel sector fair in 2021?
Signs of optimism at the start of the year
In December, the Bank of England reported UK households amassed around £100bn in excess savings during lockdowns, whilst travel businesses catering to the over-50s reported a surge in bookings thanks to the deployment of vaccines. These initial signs were promising, the data pointed towards a release in pent up demand and the beginning of a boom come Easter.
The impact of hotel quarantine rules
Fast forward a few days and the Government has dealt another blow to the sector, turning the operating landscape on its head with more bad news. The introduction of quarantine hotels for arrivals from a ‘red list’ of 30 countries is specifically designed to deter travel into or out of the UK and will see customers footing a bill of £1000 upwards to be hosted in quarantine for 10 days. This, coupled with fears of vaccine-busting mutations of the virus transported via tourism, will bring a new low to consumer confidence. Inevitably deepening the troubles for the travel and tourism sector once more.
Lacking Government support now a very clear risk
With no clarity on when these restrictions will be implemented, or end, the threat of survival for some, particularly major airlines, is now a very clear risk. Confirmation of the Government’s latest scheme targeting the aviation sector with grants of up to £8 million does not go nearly far enough. Indeed, both easyJet and Ryanair have reported significant losses recently, with revenue slumps of 88 per cent and 82 per cent respectively for the final quarter of 2020. With plunging year-on-year losses of approximately £1bn reported by both airlines, this small token of relief simply beggar’s belief. We’ll need to see much more from Government should airline passenger numbers continue to reflect the dire numbers witnessed last year.
| Home Office Report: Statistics relating to passenger arrivals since the COVID-19 outbreak
Percentage change in arrivals in 2020 compared with same period in 2019, by route
|Month||Air arrivals||Sea Arrivals||Rail arrivals|
The March 3 budget must provide support for travel. Either by expanding existing grant schemes to recognise the unique regulatory restrictions placed on the sector, or by extending schemes such as furlough support. For an industry that has generated little to no income since the start of the pandemic, it is discouraging that government has failed to act with the same persistence and level of support we’ve seen in the hospitality sector.
Hope for the second half of the year
With short haul holidays driving demand, our expectations are that the second half of the year holds more hope for the travel market. RSM’s Financial Conditions Index backs this notion with expectations of improved economic activity during the second half of the year and a sustained increase in consumer spending near to 6 per cent. Coupled with pent up demand, it must be hoped that the need for a much-needed sunny break following the vaccine roll out will overcome any continuing safety concerns.
Strategies for survival
Whilst sentiment will be slow to improve, talks of a vaccine passport and the pace of the vaccine program still offer some reprieve to the sector. But to survive, the industry will need to cater to transporting reduced numbers with increased safety protocols. This will mean increasing prices to maintain viability, potentially making overseas summer holidays a more expensive luxury than before.