Travel, leisure & hospitality on hold

COVID-19 RESOURCE HUB | Financier Worldwide

TRAVEL, LEISURE & HOSPITALITY SECTOR

Like many sectors, the travel, leisure & hospitality space has been left reeling by the coronavirus (COVID-19) pandemic. Across the globe, businesses are in lockdown, with a great many facing the prospect of never opening again.

In truth, unlike retail – which, though also strongly hit, has a viable online option as a quasi-safety net – travel, leisure & hospitality was always going to struggle with an assailant such as COVID-19. The sector is obviously people-orientated, and while there are virtual alternatives, you cannot go on holiday, or to a pub, gym or restaurant, online.

Essentially, the self-isolation and social distancing recommendations, if not orders, issued by governments has delivered something of a knockdown blow for the sector. However, whether such measures prove to be a knockout, or the sector beats the count, remains to be seen. What is clear is the magnitude of the blow received by the sector thus far.

According to the World Travel and Tourism Council (WTTC), the coronavirus pandemic will put up to 50 million jobs in the global travel and tourism sector at risk, with travel likely to slump by a quarter in 2020. The WTTC also forecasts that, once the outbreak is over, it could take up to 10 months for tourism – which currently accounts for 10 percent of global GDP – to recover. In its ‘COVID-19 Hospitality Industry Impact’ the International Data Corporation (IDC) projects that earnings will be 40 to 50 percent less than what was predicted before the outbreak, depending on the length of the pandemic.

Furthermore, the Organisation for Economic Cooperation and Development (OECD) anticipates that there will be a 2 percent reduction in global GDP for every month of country lockdown and this will further delay the revival of the travel, leisure & hospitality sector. Given the gravity of the figures, some commentators believe that COVID-19 will have a more detrimental economic impact on the sector than the 9/11 terror attacks and the 2008 financial crisis combined.

“The outbreak of COVID-19 is having a devastating impact on the world economy and on the travel, leisure & hospitality sector in particular,” says Alex Campbell, a partner at Fieldfisher. “The outlook for 2020 looks very bleak. In the UK, government ministers have recently advised that the public should not book a summer vacation until the current restrictions have been lifted. They have also suggested that ‘areas of hospitality’ will be among the last to exit the government’s lockdown measures, possibly at the end of the year.”

With governments around the world adopting similar positions, the lasting effects of the pandemic on the sector are likely to be far reaching. “No one could have predicted the devastation this pandemic is wreaking on the sector,” says Lena G. Combs, a partner at Withum. “I believe people were hopeful that at some point in the near-term, the magic curtain would be lifted and business as usual would resume. But I think we all realise that is not going to happen. Businesses in the sector need to define what a ‘new normal’ looks like, in multiple scenarios, and plan accordingly.”

“While most travel, leisure & hospitality businesses will have sufficient cash reserves in place to cover anticipated seasonal dips, none will have budgeted the complete disappearance of their holiday market, potentially for the whole year,” she continues. “Without robust government support, many businesses will not be in existence by the time the market is properly back on its feet again.”

In response to the problems bedevilling the sector, governments across the globe have introduced a raft of financial measures, including loan schemes and direct cash for businesses, to help shore up the sector.

Yet, despite the devastation the pandemic has wrought and will continue to wreak across the travel, leisure & hospitality sector, there is light at the end of the tunnel.

“I anticipate that once lockdown measures are eased, that there will be a great surge of demand in the travel, leisure & hospitality sector,” suggests Mr Campbell. “There will be a pent up demand from people who are suffering from ‘cabin fever’. People have an in-built desire to travel and explore, and the public will wish to put the negative impact of COVID-19 behind them and resume their liberated lives again as soon they can.”

Fraser Tennant