The 2022 Hangover effect
It is absolutely fantastic to see travel back, to see bookings across the sector up, along with average spend, and to see more and more jobs in the industry being advertised. However, the travel industry needs to be careful because for all the positivity and increased revenues, is there not a black cloud potentially around the corner?
So when I sat down to think about what to write about this week, I kept coming back to the same topic. I can’t say I’m the most positive person in general, but equally, I don’t really want to be this guy, and I dearly want to be wrong. It is absolutely fantastic to see travel back, to see bookings across the sector up, along with average spend, and to see more and more jobs in the industry being advertised. However, the travel industry needs to be careful because for all the positivity and increased revenues, is there not a black cloud potentially around the corner?
I know, it’s painful to write it too, but having seen the effects of Covid decimate the industry, the optimism and planning need to be measured and tempered, and here’s why:
The Covid-19 Hangover
While current figures and booking values are up, they are largely based on two years of pent up demand. With people largely restricted for the last couple of years in what they were able to do, there has never been such a desire to travel and a willingness to pay a little more. According to ATOL, there is still £85 million worth of refund credit notes, along with the undisclosed amounts where operators have internally converted paid bookings to undefined booking dates. This is going to present, for some operators, massive financial pressures when they come to actually paying out suppliers because not all the money, in some cases, is there. This, coupled with a potential downturn as the hangover wears off, may see more operators fail.
With all the support during Covid and the state of the world, it seems like something of an inevitability that inflation would rise. With no real break to catch our breath, inflation is already at its highest for 40 years, and a potential double-digit is not far off. Travel, unfortunately, will suffer as a result as costs rise and disposable income falls; the hangover effect of 2022 could be far more sobering come the summer of 2023.
Certainly in the UK, there is now little mask-wearing, and Covid is largely out of sight and out of mind. This isn’t the case, though, in many parts of the world that still struggle to contain it. It seems likely that there will be another variant. Hopefully, all countries will be up to speed with an effective vaccination rollout, but this may not be the case.
The war in Ukraine is a tragic reminder of how reliant the world is on all countries for supply (and peace). Not only is the war affecting commodity prices, but for the travel industry, it’s affecting people’s feeling of safety. Also, from a practical perspective, Russian and Ukrainian tourists accounted for 5% of the tourist in Europe previously.
It is probably not a stretch to imagine there will be something else in the world – war, famine, disease, social unrest.
It’s not all doom and gloom, though, and I don’t want to detract from the optimism there is in the market. The caution comes though from the need to plan properly and correctly. Three years ago, we had no idea what Armageddon in the travel industry (as well as much of the rest of society) would look like it. If you are still in the industry, you survived, you’ve seen the dark side but be cautious, be ready, and you will be fine. Still, the world is very different from 2019, and my negativity is more from the need to remember that and to learn from the lessons, not to assume it will be alright and the world is back where it was, which I fear many people have.