NEF Spotlight: Mapping the travel sector’s recovery

Bloomberg New Economy Forum and McKinsey & Company, Fall 2020

The COVID-19 pandemic caused total disruption in the travel industry. Hotel occupancies in Europe dropped 90 percent in May compared with the same period a year earlier, and average daily room rates in the Asia–Pacific region decreased 40 percent. The aviation sector struggled to survive, with 80 percent of flights canceled. The pain was ongoing: global air-passenger volume in August was still 64 percent below 2019 numbers. The cruise industry was almost fully shut down, and several ships that started sailing again were halted because of COVID-19 outbreaks. Arnold Donald, CEO of Carnival Cruise Lines, still had 90 ships at anchor as of November.

Now the picture is diverging: even as some countries experience their highest caseloads ever, China posted record travel numbers for the October National Day holiday. Against this backdrop, leaders from across the travel industry came together at the Bloomberg New Economy Forum (NEF) last November to share insights and discuss the path forward for travel and its millions of related jobs. This article summarizes the key points from that conversation.

Lessons from China

Between January and February 2020, China’s air-travel and hotel bookings fell by more than 80 percent compared with the same period in 2020. Since the spring, however, China’s domestic air travel has rebounded completely (exhibit). During the Golden Week holiday, pent-up demand spurred 637 million Chinese citizens to hit the road during the break, and bookings at luxury and upper-tier hotels in China were 3 percent higher than during the 2019 holiday. As Arne Sorenson, CEO of Marriott, observed, “The domestic market in Sanya—‘China’s Florida’—is already stronger than it was before COVID-19.”

Domestic travel in China has almost rebounded to prepandemic levels.
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The global travel industry can learn a number of lessons from China’s experience. A Chinese airline CEO believes the government did its part by driving the virus caseload low and keeping it down, which was crucial to restoring confidence in domestic travel. Previous investments in infrastructure, in turn, paid off, once consumer demand returned. “China today is like the US post–World War II: the US had a new highway system, while in China, the network of high-speed trains and highways has increased domestic tourists’ ability to reach different parts of the country,” according to the head of a luxury-hotel chain.

As cases fell, Chinese travel and hospitality players repositioned themselves to respond to a market looking for new experiences, with new types of consumers. Several Chinese airlines began offering “limitless” tickets, which give customers access to unlimited flights over four months for a set price—allowing for easy weekend trips to domestic cities. In many cases, this helped quickly reboot passenger loads past 75 percent. Two hospitality CEOs noted that middle and western China are becoming more popular and that demand for remote, nature-based hotels has increased. Tourism players invested in previously small markets, such as diving experiences and helicopter tours, which grew strongly after the pandemic.

In all of these markets, new and old, providers’ agility and speed when adopting digital channels has been crucial. “Innovative methods such as livestreams allowed us to reach younger and high-end customers,” said Jane Sun, CEO of Trip.com Group. Thirty percent of Chinese tourists mention online travel-related articles as an important influence when choosing their next destination. Some hotel chains started offering online cooking and yoga classes and relied on WeChat to maintain customer interactions and to promote their rapidly launched food-delivery and laundry services.

Lessons for the rest of the world

Unless they can duplicate China’s performance in controlling the virus, most countries will see their travel sectors follow a different path.

Among NEF delegates, most expect the industry to continue to double down on domestic travel. “Domestic flights in Malaysia, Thailand, and the Philippines are back to 70 to 90 percent capacity,” said Karen Chan, the CEO of AirAsia. Like others, Ms. Chan suggested boosting flexibility to further lift domestic demand, for example, by also launching an unlimited flight pass. Others pointed to locally focused innovations, such as Qantas’s sightseeing flight, which takes off and lands at the same airport but provides passengers with low-level flybys of Australia’s most iconic sights, or such as the shift by large hotels to renting out day rooms for office workers who simply want a change of scenery.

In those countries where the virus caseload is low, such as in parts of Southeast Asia, border closures and lack of international coordination on COVID-19 monitoring remain roadblocks for many travel players. Despite similarly low caseloads, most Asian countries are hesitant to open up and form bilateral or multilateral “travel bubbles.” Right now, low trust is the biggest barrier, observed one leader in hospitality, and as a result, countries such as Vietnam and Thailand continue to struggle.

A digital health pass, such as CommonPass, could help passengers demonstrate to airlines and authorities that they have tested negative for COVID-19, which would help lower the trust barrier across borders. “Although most of 2020 is lost, we can still save 2021 by taking initiatives that will allow countries to open up and establish travel bubbles,” said a travel technology player. The CommonPass initiative is already supported by airlines such as United Airlines and Cathay Pacific, and by more than 30 governments.

Travel players themselves can do more to facilitate border and health checks, according to Ms. Chan, by adapting their reservation systems to include COVID-19 test results online during the flight ticket-booking process, or by allowing customers to upload results on airlines’ websites to share with the government of their destination.

A deeper and lasting recovery will demand a lot more of this kind of innovation. “The travel industry is interlinked,” said Ms. Chan. “Everyone is facing the same crisis, and to survive, we need to collaborate.” Airlines feed guests to hotels and cruises, which in turn fuel aviation and rental-car demand. Players are setting up new collaborations, such as between airlines and online travel agencies (OTAs) or cruise lines, and are even thinking beyond travel itself to explore collaborating to support logistics in transporting future vaccines.

Collaboration, including with governments, will be essential at every step of the recovery. Indeed, as Mr. Donald of Carnival noted, “Demand will not be an issue for us; people are ready to sail. The challenge is to do so safely and with the support from governments.”

Where travel goes from here

As the pandemic eventually recedes, what could be the next normal in travel? Which new behaviors could stick?

For many, the delights of staying closer to home may linger, even after borders reopen. Having been forced to settle for domestic or regional destinations, one study found that 30 percent of travelers declared themselves so satisfied with the experience that they plan to travel more domestically post-COVID-19.

In China and elsewhere, COVID-19 has created a rise in new travel occasions (staycations, short-haul getaways), activities (RV trips, glamping), destinations (nature parks, health and wellbeing retreats), channels (social media, livestreaming), and experiences (virtual reality, personalization). Group sizes may shrink as well. In China, as Ms. Sun noted, “there has been a rapid shift from traveling in a big group to small groups,” and hospitality players are quickly responding with new products.

Beyond the crisis, the rise of remote work could translate into travelers prolonging holidays and, instead of heading home, working remotely from their destination, thereby turning one-week trips into multiweek stays. Mr. Sorenson already sees that in bookings for this winter: “Typically, trips to warm-weather destinations would be for one or two weeks, but now we see people staying for one to two months.”

Regardless of region, NEF delegates from across airlines, cruise companies, and hotels are convinced that demand will rebound after the pandemic. “People still hunger for the experiences that you can only get away from home, such as culture, people, food, sights, et cetera,” according to Mr. Sorenson. Ms. Chan said, “We asked customers, and they told us that they would start flying as soon as possible. But at the same time, greater flexibility of travel is essential.”

Finally, leveraging digital technology will only increase in importance, whether through common infrastructure, such as expanding the CommonPass solution into eventual digital passports, or through individual products, such as hotel apps that let travelers customize room settings from their phone, or cruise line apps that cruise companies are using to prevent crowding and lines throughout their vessels.


In the short term, the pandemic will continue to test the industry’s resilience, and for many executives, survival remains top of mind. But as the recovery in China shows, players everywhere are already moving quickly to adapt and innovate. Ultimately, those responses, along with shifts in consumer preferences, will reshape the travel industry long after COVID-19 fades into memory.

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