Travel Industry Recovery

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Travel Industry Recovery

Asia Pacific is expected to enjoy a significant rebound in travel activity by the end of this year, led by interest in domestic travel and buoyed by local government initiatives to both support and promote the travel industry in the region.

Asia Pacific Travel Recovery Outlook

Domestic Versus International Travel Outlook

  • In parallel, the latest GWI consumer survey (summarized within the following graphic) found that consumers in Asia Pacific nations are unanimously more likely to travel in the near term to domestic or regional destinations, and are particularly likely to travel to the most nearby locations.

Asia Pacific Travel Initiatives

  • The advanced recovery of Asia Pacific’s domestic and international travel market has been fueled in part by advanced financial outlays by local governments to financially support regional travel and tourism organizations through the pandemic.
  • Among those nations that have allocated resources specifically towards the travel industry are:
  • In parallel, local governments have launched a variety of initiatives to capitalize on current consumer preferences for nearby travel destinations as well as spur global tourism to the region as pandemic concerns ease.
  • Perhaps most notably, the Japanese government is preparing a domestic travel promotion campaign entitled "Go To Travel" to start as soon as July 22 with the goal of promoting local tourism by the country's residents.
  • Additionally, Australia and New Zealand are establishing a "travel bubble" which will allow residents to travel freely between the nations.
  • In contrast, China has announced a package of measures to support rural tourism development in the country and spur both domestic and international travel to these areas.
  • Similarly, Thailand is reviewing the creation of "quarantine zones" on its islands to enable international travelers to visit these areas while minimizing the potential for a larger national COVID-19 resurgence.
  • Meanwhile, in a fashion somewhat similar to Japan, India has launched its "Dekho Apna Desh" marketing campaign, which is looking to attract regional and international travelers to the country by highlighting India as the "land of Buddha."

Emirates, Lufthansa and Air New Zealand consistently present a less optimistic forecast for the recovery of the global airline industry. In parallel with this somewhat pessimistic outlook, these organizations have largely focused on minimizing financial fallout due to the pandemic as well as the implementation of safety-oriented initiatives rather than demand generating activities.

Emirates

Expectations for Industry Recovery

  • Emirates Airline President Sir Tim Clark recently shared his airline's outlook on the recovery of the global travel industry during a presentation at Arabian Travel Market's inaugural ATM Virtual event this past May 2020.
  • Notably, Sir Clark's statements came after the airline announced in March 2020 that its financial performance for the entire year would be negatively impacted by the pandemic.
  • Despite the fact that Sir Clark characterized the pandemic as a "trillion dollar torpedo" that will require a "huge structural change" to the airline industry, he predicted that the travel business as a whole will be "moving back to some kind of normality" over the course of 2021.
  • He added that Emirates expects countries will not likely "open at the pace we would like," and may create interim complexity due to the "bubble effect," where nations allow services to resume only with select countries that have relatively low COVID-19 case levels.
  • Meanwhile, Sir Clark suggested that the aviation businesses overall is in a "critical and very fragile state" due to the pandemic, and that he was not optimistic that some carriers will survive even the "next few months," despite government bailouts.

Recovery Response

  • Consistent with this outlook, Emirates has cautiously reintroduced service over the past few months alongside industry-leading safety precautions.
  • After temporarily suspending most passenger operations as of March 2020, Emirates has since resumed flights to 58 cities as of July 2020.
  • However, in lockstep with this recovery response, the airline has mandated coronavirus test results for passengers from select domiciles, and has introduced new rapid COVID-19 blood tests for passengers at airports prior to flights.
  • These changes are among the many ways in which Emirates is "at the forefront" of launching new security measures within the airline industry in response to the pandemic.
  • Other safety enhancements introduced by the airline include providing personal protective equipment for cabin crew and airport teams, requiring all passengers to wear masks while on board planes, no longer allowing cabin baggage and ensuring that seats are kept vacant between individual passengers and families.

Lufthansa

Expectations for Industry Recovery

Recovery Response

  • As a result, Lufthansa's recovery response has been largely focused on survival rather than attracting sales or promoting travel.
  • As early as March 2020, the airline announced that it would cut 90% of long haul flights, suspend half of its overall flight schedule and ground its entire fleet of A380 super jumbo planes.
  • More recently, Lufthansa announced plans to cut 22,000 jobs amid the airline's continued financial crisis, adding that its $10 billion government bailout may insufficient to keep the company solvent.
  • However, as of June 2020, Lufthansa has tentatively resumed some flights with the goal of serving 90% of short/medium-haul and 70% of long-haul destinations by this upcoming September.
  • Additionally, the airline has invested in "many acts of Corporate Social Responsibility" during the past few months, including waiving the purchase fee of 920,000 masks to German health authorities, allowing German employees to be released to work in medical facilities without cutting pay and repatriating flights for stranded travelers.

Air New Zealand

Expectations for Industry Recovery

Recovery Response

  • Ultimately, like Lufthansa, Air New Zealand's recovery response has centered around survival, with the airline's CEO Greg Foran commenting: "we must first survive, then revive and finally thrive."
  • Like many airlines in March 2020, Air New Zealand announced that it would pull back operations, including by "placing itself into a trading halt," reducing long-haul capacity by 85%, cutting domestic services by 30% and eliminating staff redundancies.
  • More recently in June 2020, Air New Zealand also followed industry trends by restoring its flight capacity to 55% for July and August, after New Zealand lifted all COVID-19 restrictions earlier in the month.
  • With that said, the airline recently reversed course by instituting a temporary hold on all new flight bookings for three weeks in July to "better align flights with the hotel locations."
  • Meanwhile, amid these operational adjustments, Air New Zealand has taken steps to improve the safety of its passengers and crews by making a "clear separation" between its domestic and international flight staff.
  • Additionally, as COVID-19 case levels drop in its domestic market, Air New Zealand has also eliminated previous social distancing requirements for domestic flights in an attempt to help the airline experience "return to normal."
  • Meanwhile, the airline is more recently experimenting with "business-timed" flights to better "cater for resumed business travel" and corporate customers.


While Hilton Hotels, Kempinski Hotels and Onyx Hospitality Group have been somewhat cautious in forecasting a timeline for the hotel industry's recovery, these companies have been comparatively aggressive in adapting their offerings to attract travelers.

Hilton Hotels

Expectations for Industry Recovery

  • Hilton Worldwide CEO Christopher Nassetta discussed his company's perspective on the state of the global hotel and travel industry during a June 2020 interview with Bloomberg Businessweek.
  • As of June, Hilton's CEO reported that the global hotel business is enjoying a "significant recovery" but is "still very significantly off historic standards."
  • Specifically for Hilton Hotels, this translates to monthly sales volumes that are double or triple what they were several months prior, but are still at levels less than one-third of average occupancy.
  • This is because leisure travelers are the most resurgent source of growth for the hotel industry at present, but represent a relatively small share of business, given that 75% of traditional hotel sales for major chains come from business travelers.
  • Meanwhile, going forward, Mr. Nassetta predicts a "significant shift up in the level of occupancy" over the next 100 days, while cautioning that it will take two to three years for the industry as whole to fully recover from the pandemic, due to its lasting impact on the economy.

Recovery Response

  • Hilton Hotels' recovery response has been a fairly balanced combination of fiscal management and incentives to maintain or expand demand.
  • In terms of protecting the financial solvency of its business while travel has been at a "virtual standstill," Hilton has rolled out cost-cutting measures, including 2,100 corporate layoffs, the furlough of most employees, 20% pay reductions for remaining staff and 50% to 100% pay reductions for executive staff.
  • Despite these financial challenges, the hotel chain has also made extensive efforts to preserve the loyalty of its existing customer base, through actions such as waiving cancellation fees and extending loyalty member status.
  • In parallel, Hilton has introduced new programs to stimulate demand, including the following:
    • Partnering with Lysol and the Mayo Clinic to provide "hospital cleanliness standards" in its hotels under the Hilton CleanStay program.
    • Expanding awareness of the hotel's contactless entry program, including digital check-in, room selection and key.
    • Accelerating the rollout of connected room features for temperature, lighting, audio and visual.
    • Launching "responsible group booking programs" starting in the fall.
    • Adding "pipe" and other communications capacity into hotels to accommodate an anticipated shift to part virtual, part in-person conferences.


Kempinski Hotels

Expectations for Industry Recovery

Recovery Response

  • In contrast, Kempinski has been particularly vocal during the pandemic about what the hotel is doing to support its customers' safety and evolving needs.
  • Perhaps most notably, the luxury hotel chain promoted its new "Kempinski White Glove Service" as a means of offering guests an unparalleled level of safety and security within its properties.
  • According to Kempinski COO of Asia Michael Henssler, this new procedure requires all Kempinski hotels to "meticulously follow a 70-page guide" that improves the safety of all aspects of hotel operations, including guest arrivals, public area furnishings, food & beverage offerings and housekeeping.
  • In parallel, the hotel chain has introduced new flexibility in the hotel's offerings and policies to maintain its differentiated, luxury-oriented brand during the pandemic and continue to attract guests, including:

Onyx Hospitality Group

Expectations for Industry Recovery

  • Onyx Hospitality Group has presented cautious optimism related to the hotel industry's recovery, without making any formal statements about the timing of a potential rebound.
  • For example, Onyx Hospitality Group CEO Douglas Martell has shared that he is "confident that the coronavirus...will eventually pass."
  • As such, the Onyx CEO asserted that Onyx's focus at this time is on a recovery plan to meet the "pent-up demand," which Mr. Martell asserts could "swiftly pull the tourism sector out of its hole."
  • However, amid this optimistic focus on the future, Mr. Martell has expressed concerns that the Asia Pacific hotel chain is experiencing some of its "toughest times," amid the lack of bookings for March and April during the "Asian season."
  • Notably, Onyx was somewhat sustained earlier in the year by American and European travelers, who had "booked ages ago" with vacations.

Recovery Response


Public statements by Disney, Carnival and Chic Locations suggest that resurgence in global tourism activity may be more dependent on government regulation than customer demand.

Theme Parks: Disneyland/Disney World

Expectations for Industry Recovery

  • Although Disney has released no formal predictions for the recovery of the global tourism industry, corporate statements suggest that the company is awaiting government policy changes rather than a return in customer demand to fully resume business.
  • Overall, Disney stated as part of its first quarter earnings reporting that while the pandemic has had an "appreciable financial impact" on its parks and experiences business, the company was "confident" in its ability to "withstand this disruption and emerge" in a strong position.
  • Additionally, Disney commented that its park and other entertainment business closures were "closed consistent with government mandates or guidance," implying that any expectations for industry recovery would be directly tied to government moves rather than increases in customer demand.
  • This implicit conclusion is corroborated by the company's reports that, upon the recent reopening of park properties, Disney's reservation blocks for its parks have been "gone within minutes" and the brand has experienced an overall "surge of interest" that crashed the company's booking system.

Recovery Response

  • While Disneyland/Disney World's initial response to the pandemic was to shut down operations, the entertainment company has aggressively reopened its resort and park locations as allowed by local governments.
  • Notably, by March 2020, Disneyland/Disney World had implemented a staggered but relatively rapid closure of all of its resort properties, theme parks and branded cruise lines.
  • However, the entertainment company was aggressive to reopen its Hong Kong, America, Singapore and other park properties in June and July 2020, as soon as local ordinances allowed.
  • Notably, these rapid reopenings were met with some controversy, despite the company's assurances that it could "open safely and responsibly."
  • Although Disney has described its safety modifications as "drastically different," the implemented safety changes appear to be somewhat basic, given that they are largely comprised of frequent cleaning and disinfection, capacity limits, the closure of indoor activities and requirements for social distancing.
  • However, despite the company's relatively straightforward safety plan and accompanying public debate, Disneyland/Disney World locations have not had the same need launch new initiatives to generate demand, as highlighted by the previously discussed corporate reporting.
  • Meanwhile, given Disney's rapid reopening of its park in Hong Kong, the company has once again needed to shutter operations starting July 15, 2020 following a new spike in local cases.


Cruise Lines: Carnival

Expectations for Industry Recovery

  • In a fashion similar to Disney, Carnival Cruise Lines has been hesitant to make any formal predictions about the recovery of the global cruise and tourism industries given the company's reliance on government mandates to resume services.
  • Although Carnival CEO Arnold Donald had previously stated that the brand "might resume some cruises on August 1," the CEO has since "backed away" from such specific recovery predictions.
  • Specifically, as of a June 2020 interview, Mr. Donald asserted that Carnival can't give a specific data for resuming services, let alone a timeline for the recovery of the larger tourism industry, "because it’s a regulatory matter."
  • As recently as July 2020, the US CDC extended its ban on passenger cruising from the US through September 30, and Carnival similarly canceled all sailings in North America through that same date.
  • As such, Carnival's corporate office asserted that the company is "unable to definitively predict when it will return to normal operations."

Recovery Response

  • Consistent with this pessimistic outlook on tourism industry recovery, Carnival's recovery response has been largely focused on addressing the reputational, financial and operation damage incurred during the first months of the global pandemic.
  • Perhaps most notably, Carnival's Grand Princess and Diamond Princess cruise ships were center-stage is some of the earliest COVID-19 outbreak crises and, as such, the company is focused on addressing related passenger lawsuits and a probe by the US House of Representatives.
  • In parallel, the company continues to struggle to fight off insolvency, after already raising $6.6 billion in debt and stock, exhausting its $3 billion revolving credit facility, deferring debt payments and selling assets.
  • As of June 2020, Carnival stated that it had early agreements to "sell another six ships in the next 90 days," and will continue to sell more ship and non-ship assets.
  • Meanwhile, Carnival continues to work to repatriate all of its employees. As part of this time-sensitive effort, the cruise line is offering its employees "physical and mental health" benefits including access to entertainment, counseling services and single occupancy cabin accommodations with outdoor access.


Guided Tours: Chic Locations

Expectations for Industry Recovery

Recovery Response

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