There is no bounce-back coming over the summer and the industry isn’t going to be in “any decent state” until this time next year.
That was the view of a leading crisis management expert commenting on the impact on the travel sector of Covid-19.
Speaking on a Travel Weekly webcast about trust and reputation following the pandemic, Paul Charles, founder and chief executive of The PC Agency said: “You have just got to understand and plan for no bounce back at the moment.
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“I honestly don’t think the industry is going to be in any decent state before this time next year. So if you think about the impact of that on cash flow, how businesses are operating, they’re going to have to take some really tough decisions at the moment to get themselves through to this time next year.”
He said the impact differed by sector in travel.
“The hotel sector has been very badly hit. Hotels don’t know when they’re going to reopen. They don’t have much cash generally anyway, so it’s a very hard time for them.
“Tourism boards are in a better place. They are often government funded, their budgets are set much earlier in the year or in advance and they are destinations, which are much bigger than companies, so they’re not going to go away.”
“The airlines, of course, are having the worst time ever. The industry is going to lose something like $300 billion over the next 12 months, and it’s going to take three years to recover. So only airlines with huge pockets and huge amounts of cash are going to get through this in any decent shape, but they’re still going to have to retire maybe 30%-40% of their aircraft, and sadly see some redundancies among cabin crew,” Charles said.
He cited the demise of Virgin Australia and Air Mauritius, with others said to be on the brink of collapse.
“These are huge brands that have often transformed the destination or transformed how we fly. And it’s really sad to see some of them disappear or face such trouble because it means we, as consumers, wouldn’t have as much choice. Prices could ultimately go up for those left behind. And we certainly won’t get as good a product in the future.”
Charles added: “The biggest thing everyone is going to be battling against is that consumers will not have as much money. A lot of consumers will be furloughed, a lot will be taking salary cuts, they will want to save their cash over the next six to 12 months, if they’ve got any coming in.
“That will mean a smaller industry for the next year and a half. And that’s why I’m saying to clients, you’ve got to plan for that. You’ve got to rework your business models to cope with an industry that could be 30%, 40% even 50% smaller over the next 12 to 18 months. And if you can plan for that, you’ll be in a good position to benefit from it as a result.”