The only certainty this January is uncertainty, says Steve Endacott
Most industry observers are expecting January sales to be 30-40% of traditional levels because, although the news of a vaccine is a massive boost to consumer confidence, too much uncertainty remains over the speed of the rollout and access to low-cost testing to allow travel.
With hundreds of aircraft sitting on the ground, and jet aviation fuel currently 37.8% cheaper year on year, flight capacity will return rapidly for summer 2021 once demand returns, creating an ‘ultra-late’ market for holidays. However, low cost airlines’ yield models are based on low early prices establishing solid load factors before the usual ‘lates market’, which in normal years is the period within three months of departure – and natural caution is likely to lead to capacity remaining at 70% of 2019 levels. So less overseas holidays will be sold in 2021 compared to 2019 peak volumes.
Travel companies’ January marketing will have to change to reflect changes in the mix of customer types booking and the types of products demanded. However, since there are so many variables at play, it’s hard to predict these changes with any certainty so a ‘measure, and react fast’ policy is required.
A key impact cutting across all passenger types, is the increased differential between the ‘haves’ and the ‘have-nots’. The impact of Covid-19 lockdown measures has not been felt equally across all industries or employment sectors. If you’ve been working throughout, you will now have increased disposable income having spent less in lockdown and likely have a large number of holiday days left to use. However, many people have been furloughed or made redundant, making these customers unlikely to be in the holiday market this year.
There are a few trends that can be predicted, however.
Traditionally, about 60% of January sales come from families booking early to secure the right hotels during school holiday periods. With the cost of Covid-19 tests currently about £120 per person per test, it’s hard to see families booking in January as the combined cost of inbound and outbound tests, in theory, could be as much as £960 per family, which is untenable for a mass-market beach holiday.
Contrary to popular belief, this could be the first market to return to booking, as they have the greatest certainty of being able to get a vaccination and have been locked down the hardest over the last nine months. Covid-19 has reminded us all of our own mortality and the importance of enjoying life while we are healthy enough to do so. Apply this to an age group with the finances and time to travel, and you can easily see a surge in bookings from this sector. Cruise is the obvious beneficiary, but watch out for growth in demand for destinations like Cyprus, Malta and Benidorm that have older customer profiles.
Test costs are lower and potentially bearable so, depending on economic circumstances, this group should be willing to book and will make up a higher percentage of the reduced January booking levels.
This sector remains the most Covid confident, as the health impacts are much lower, but their disposable income is lower and the need to book early is minimal. Why would they book in advance when they are being told that there will be plentiful late availability?
I personally believe lockdown tiers may also impact consumer psychology and introduce a further potential regional impact on demand. If you are in Tier 3 and cannot socialise with friends outside the house, in pubs or restaurants, for example, you are a lot less likely to discuss holiday plans. Historically, this has been a big driver in the ‘dream’ stage of deciding where and when to go. How often have you booked a holiday because you heard friends talking about their holiday plans?
Predicting changes in destination mix is equally hard, as the unpredictability of the government’s travel corridors is a nightmare for the travel industry and customers alike. Even with a reduced quarantine period of a test after five days, quarantine corridors will have a massive influence on demand and cannot be predicted with any certainty in advance. Therefore, it’s hard to predict what changes in destination mix we will see until January bookings start coming in.
However, it is likely that the demand for self-drive holidays and staycations will remain high again in summer 2021, given it is unlikely the majority of the holiday-taking population will have been vaccinated by summer and Covid-19 avoidance may remain front of mind.
The phrase ‘the only thing certain is that nothing is certain’ has never rung truer for the travel industry.
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