Looking to the recovery of leisure travel demand - Deloitte



The road ahead is uncertain, but early demand signals create some room for optimism. What do consumer’s evolving safety and economic concerns, future travel intentions, current travel spending, and online travel shopping behavior tell us about the recovery of leisure travel demand? Our global survey findings offer some insights.

The travel industry has operated through its share of pandemics. Cyclical downturns—often tied to broader economic recession—are an industry norm. But it’s been more than a century since these two forces were so powerfully intertwined. With consumers facing a dual-front crisis—concerning both health and finances—gaining insight into when vacation spending might return to some semblance of normal is difficult. Past pandemics and downturns offer some helpful perspective, but are largely unfit comparisons.

As travel providers continue to reposition their companies to adapt to current business conditions and shift some focus toward recovery, tracking vacation spending intentions and their underlying drivers is important. This is because operating an airline or hotel in an environment where demand is being weakened by a spike in safety concern will likely require a specific strategic response compared to a market where consumers are increasingly eager to travel but struggling to afford it. While concerns around both health and finances will shape vacation decisions for the foreseeable future, the extent of their influence may ebb and flow as the COVID-19 crisis evolves.

In this article, we explore findings from our Global State of the Consumer Tracker and InsightIQ business intelligence platform for insights into the trajectory of leisure travel in the United States.

Health concerns show signs of subsiding while financial concerns still loom

Offering an early signal of optimism, health concerns are gradually subsiding from their early-April peak. While still elevated, the number of US consumers concerned about their own health and the health of others is forming an observable downtrend. Should reopening activities not alter COVID-19’s downward trajectory, it’s likely that the downward trend will continue—forming a foundation that supports more confidence to travel.

But the story unfolding around the financial impact to potential leisure travelers is a bit murky. The percentage of US consumers concerned about making upcoming payments (27%) and delaying large purchases (43%) have yet to show signs of falling (figure 1). While the economic fallout from COVID-19 will naturally have a latent effect, a potential scenario of falling health concerns and prolonged financial stress brings important implications to the travel industry.

As the pandemic’s sudden and powerful shock drives travel providers to focus on alleviating safety concerns to surface demand, recovery strategies could increasingly shift to levers designed to pull demand from a market with weak consumer confidence. These levers, often working in concert, range from how providers bundle offerings and build promotions to how they approach revenue management. In our article, Planning for an uncertain future: How airlines and hotels can prepare for an economic downturn, we’ve discussed these levers in detail.1 As in-bound international travel will likely take time to gain momentum, US travel providers should rely on the strength of the domestic market for a lifeline. This makes the financial health of the US consumer more critical than ever. For example, US consumers, unlike their European counterparts, are quick to cut vacations from their budgets when times get tough. For perspective, in the year following the 2008 financial crisis, with no pandemic in sight, nearly 40% of US consumers went the entire year without spending on a vacation—a trend that lasted for three years.

Travel safety concerns remain elevated, but there are early signs of easing

Travel providers remain mindful of travelers’ long-term financial uncertainty, but in the short term, travel safety will likely continue to be the more powerful driver of vacation decisions. Safety concerns around flying and staying in hotels remain elevated. But optimistic signals are emerging—particularly on the hotel side. As of mid-May, nearly a third of US consumers said they would feel safe staying in a hotel—up from roughly 1 in 5 in early-April. During the same time period, feelings of safety around more everyday activities, such as going to the store, improved from 30% to 42%. Signs of consumers warming up to more everyday activities could be a good sign for travel.

Despite some positivity, however, most consumers don’t feel safe traveling right now—particularly flying. For travel providers, this makes efforts to build trust with consumers critical—with high potential of reward. Case in point: In other markets where safety concerns have fallen, intentions to travel are relatively high. China, for example, a country ahead of the COVID-19 curve, has some of the lowest safety concerns around flying. And even though financial concerns remain somewhat high there, roughly one-third of the respondents intend to fly domestic for leisure this summer.

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