• Darsh Shah

Can the Hospitality World Use China as a Benchmark For Recovery?

Updated: Jun 15, 2020

There is no denying That COVID-19 has sent shock waves through the travel industry. The 3 major Online-Travel agents are down on an average of 36% this year; private homestay giant, Airbnb, seems to have sacked its highly anticipated public listing.;All major airlines are drying up their liquidity funds and a multitude of them are seeking government bailouts. Large hotel brands such as Hilton recently reported their first quarter earnings (ending 31st March), with a 22.6% RevPAR decrease.

But not everything might be so grim. And to predict how the rest of the world’s travel might shape up, we can look back at China which lifted its lockdown on 8th April.

It seems like the occupancy for hotel rooms recovered nearly 55% from its Pre-Coronavirus levels in China. At the same time air traffic remained significantly low in part due to all major economies imposing traveling restrictions.

Everyone inside the hospitality industry seems to be hoping for a rebound in domestic US travel soon. We can take insights from countries like Australia and New Zealand which are reporting new covid-19 cases in single digits and mortality rate of just 1%. The countries would likely allow free movement between Australia and New Zealand while both keeping their borders closed with other countries.

This might give us a few insights regarding travel, if we can keep the mortality rate low. First, it will be the turn of Secondary and tertiary markets to open first as the cases at these places might be meagre compared to primary markets such as New York. Secondly, it might be the counties with least concentration of Covid-19 that open first compared to a few where there are huge clusters.

Based on above and recent news, states are going to begin reducing restrictions on lockdowns regardless if they have control over the covid-19 situations. It will ultimately be up to the general public and private organizations to make decisions for themselves. The hospitality industry has declared and teamed up with Stay Safe but the question is really will the general public take to travel despite all of the cleanliness measures put in place?

The other item to think about at this point, is the 30+ million folks that are unemployed at this time for the next roughly 6 months going to save the money or utilize it to travel. We would guess the former rather than the latter. Uncertainty in employment as well as the state of the economy makes those unemployed to take more risk averse budgeting and therefore reduce ancillary spend such as travel, etc.

What are your thoughts on the impact of lifting Lockdowns on the Hospitality industry?

(Sources: WSJ, Reuters).


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