Will the Hospitality and Travel Industry Recover in 2021?

Author: The Winning Team
Posted Date: Friday, Feb 19, 2021
Total Reviews: 64


Spring will soon be 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 supply chains were interrupted, the global economy collapsed. COVID-19's impact on the hospitality and tourism industry has been devastating and unprecedented.

How tough was it in 2020?

The aviation industry

According to the International Civil Aviation Organization, 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 was cut in 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 restaurants shifting to curbside pickup 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. Daily identified COVID-19 cases dropped from the peak at about 314,000 on January 8 to about 100,000 in the first half of February. Also, 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 the most sought-after international destination among the Americans (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 10 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 have 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 a 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, 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 recovery will occur as early as the second quarter of 2021 under an optimistic estimation, but this 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.

Source: hospitalitynet.org

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