Friday, March 31, 2023

Vaccine rollout could boost travel industry and end big cuts

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The arrival of a coronavirus vaccine has prompted the U.S. travel industry to prepare for a rebound in demand after a historically terrible year. After months of significant discounts, with hotels offering sumptuous benefits and airlines that offer suspended fares such as $ 21 from New York to Florida – the prices should at least make up for some of the ground they’ve lost.

Travel providers have reduced capacity, so any gain in bookings will tend to increase fares. And as vaccines take hold, they’re poised to unleash a torrent of pent-up vacation requests as people come out of months locked at home. This is leading to optimism within the industry for a recovery in the spring and summer, even as rates remain depressed and a recovery business trips are far away.

“No one is going to open a bottle of champagne right now,” travel consultant Henry Harteveldt said of the airlines and hotel groups he surveyed. “But we are now hoping that the summer of 2021 will arrive and will certainly not only be much stronger than this year, but at 50% or more of our level in 2019.”

Already, some affluent travelers have started making reservations for a glowing vacation, said Jack Ezon, managing partner of Embark Beyond, a travel agency aimed at the super-rich. Customers have flooded the company with requests for big parties in Europe and the Caribbean, with budgets exceeding $ 1 million.

“Anything on the Mediterranean hits,” he says. “Space is already tight and it would be wise to have something in your pocket by the end of January so you don’t get left out.”

While it may soon be too late to get a luxury suite, for example on the Italian Amalfi Coast, prices for other types of travel do not yet reflect a potential increase in demand.

The pandemic has caused potential vacationers to wait much closer to their travel dates before booking airline tickets or hotels, which has given these companies less visibility on their ability to increase their rates. Any recovery in demand will need to be sustained before airlines consider raising prices, said Lacey Alicie, director of data analytics at Ailevon Pacific Aviation Consulting and former head of revenue at American Airlines.

There are other reasons why a recovery may not be quick. The depth of this year’s collapse has been unprecedented and risks abound, from bottlenecks in vaccine delivery to the virusmutations. And any rebound will only come after a brutal winter as COVID-19 continues to tear the country apart. The start of 2021 will bring “really difficult months”, Southwest Airlines General manager Gary Kelly said recently.

“We expect next summer to be much better than this year, but not normal,” Andrew Nocella, chief commercial officer of United Airlines Holdings Inc., said in an interview. “We think 2022 is probably the most important year.”

the $ 900 billion congressional relief bill passed on Dec. 21 is expected to provide new funding for loan programs that have helped hotel owners stay afloat, but the industry remains in dire straits. STR, a lodging data company, predicts room rates will stay below 2019 levels until some time in 2023, with urban markets from New York to San Francisco taking longer to rebound.

“Our owners, these people are struggling, a lot of people are focused on the need for cash,” said Michael Deitemeyer, CEO of Aimbridge Hospitality, the world’s largest third-party hotel manager.

Yet vaccines offer hope that Americans will rediscover their desire to travel and reject the limits of video chats and phone calls. The day the Pfizer coup wasapprovedfor use in the United States, hotel reservationsjumped upto the highest daily number since the pandemic began in March, according to RateGain, which manages reservations for major hotels and online travel information providers.

United predicted on December 11 that third-quarter bookings would beonly 40% below2019 levels compared to 70% currently. Delta Air Lines sees “a level of optimism” in vaccines, said Joe Esposito, vice president of network planning.

“Six months, if not three months ago, we didn’t know where the end was,” Esposito said. “Now we can at least see that in the spring and summer there will be pent-up demand for people to travel and go out because everyone has wasted a year.”

Leisure leads

While it is likely well into 2021 before vaccines are available to all adolescents and adults in the United States, travel could rebound earlier once vulnerable seniors are vaccinated. With aging parents or grandparents vaccinated, younger parents may decide it is safe to visit even if they haven’t been vaccinated themselves, airline analyst Savanthi Syth told Raymond James Financial.

The recovery will be driven by leisure travelers, who typically pay fares below corporate road warriors or conference attendees. But airlines, in particular, have become lean companies, with the six largest US carriers losing nearly 84,000 jobs since January. The reductions mean fewer flights and fares that are likely to be higher than in 2020, as vacationers gradually return to airports.

It’s a similar story for cruise lines, most of which plan to resume operations in March, but with occupancy rates of up to 50% on some routes. The International Association of Cruise Lines said the pandemic had cost the industry nearly 164,000 “direct and indirect” jobs in the United States and $ 8.6 billion in lost wages.

Cruise companies are planning a phased return to the seas. Carnival, the world’s largest cruise line, is withdrawing 18 ships from its fleet, continuously reducing capacity by 12%.

“We’re going to have limited capacity with pent-up demand,” said Arnold Donald, CEO of Carnival, on the company’s latest earnings conference call. “And I don’t think demand will be a big deal in the short term.”

When a travel manager is feeling more optimistic, it’s probably time to consider buying before the offers run out.

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