Industry Update
Opinion Article18 June 2020

Travel And Hospitality Businesses Are Picking Up

Some positive updates

By Linchi Kwok, Associate Professor at The Collins College of Hospitality Management

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Places are easing coronavirus restrictions. Travel companies are reopening their business with enhanced sanitizing measures. People are ready to travel again.

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Do you see early signs of recovery? Here are some positive updates, although it is still too early to claim it is business as usual.

TSA

The Transportation Security Administration (TSA) reported that 430,414 people passed the security checkpoints at airports on Monday, June 8. That was about five times the record low traffic day of 87,543 in April and accounted for 16.27% of the air traffic in the same weekday one year ago at 2,644,981. It is worthy to point out that the figure reported in 2019 showed an 84% increase from 2018, which recorded at 1.4 million only.

The traffic reported by TSA continued to climb to 502,209 on Thursday, June 11, the first time when the number passed half a million since the pandemic. Thursday's traffic was at 18.77% of the 2019 level at 2,675,686.

Airlines

United Airlines plans to restore flights in 150 U.S. and Canadian destinations in July, most of which were suspended due to COVID-19. Meanwhile, 140 nonstop routes will also be restored. Even though the airline's domestic capacity in July is only expected to reach 30% of the same period in 2019, that is already an improvement of 87% from June.

American Airlines planned to fly 55% of the carrier's domestic schedule in July. By comparison, the airline only flew 20% of its schedule in May.

Delta Airlines grounded hundreds of airplanes as the pandemic hit. The airline has brought 16 airplanes back to service in June and plans to add another 74 planes in July.

Other carriers, such as Virgin Atlantic, EasyJet, and Ryanair, are also planning to restore more routes in the summer.

Hotels, home-sharing, and vacation rentals

Hotel performance also showed signs of improvement. For the week ending June 6, STR found the following in the U.S. market:

  • Occupancy: 39.9% (-45.3 percent change from the comparable week of 2019, but up from 22% from the week ending April 11)
  • Average daily rate: $85.01 (-35.9 percent change)
  • Revenue per available room: $33.43 (-65 percent change)
  • Top markets with occupancy above 45%: Norfolk/Virginia Beach, VA (48.4%) as well as New York, NY (47.1%).
  • Top markets with occupancy between 40% and 45%: Phoenix, AZ, Philadelphia, PA-NJ, Tampa/St. Petersburg, FL, Atlanta, GA, and Detroit, MI.

The search for Vrbo was up from last year, although the queries for Airbnb was down 10% from last year. The search for hotels, however, was still down more than 60%. Additionally, Airbnb already saw a 70% increase in bookings in the first week of June than the week of April 6 - 12.

The demand for home-sharing and vacation rentals since COVID-19 mostly came from the travelers who traveled within 200 miles, a trip that typically can be completed with a tank of gas. In general, the data suggests that home-sharing and vacation rentals, along with luxury hotels, will likely recover before other lodging products.

Restaurants

Only curbside or delivery service was allowed in most restaurants during the pandemic. Now that more states have loosened restrictions on indoor dining, the data from OpenTable show that restaurant bookings are back to 70% of their previous levels.

NPD Group, a U.S. market research firm, tracks the transactions from 70 restaurant chains. The data suggests:

  • Transactions in fast-food restaurants fell to the lowest point, at 41% in the week ending April 12, but they are getting back to the pre-pandemic sales level now.
  • Full-service restaurants received the hardest hit. Transactions were down over 70% since the last week of March till early May. In the week ending May 24, transactions in this segment were still down 42%.
  • As many as 30% of independent restaurants, however, are expected to close for good.

The labor market

While the unemployment rate remains high, some fast-food restaurant chains began hiring in the summer. Dunkin's, for example, plans to hire 25,000 workers. Yum Brand's Taco Bell wants to add 30,000 new employees in the summer. The fact that fast-food restaurant chains are hiring new employees is a good indicator that this segment is recovering.

The new challenges

The workplace will no longer be the same as before. It becomes even more critical for employers to provide safe environments for both the employees and clients.

Even with extra safety measures, however, businesses might still find it challenging to fill the vacant frontline positions that pay minimum wages. Some people may not feel comfortable returning to work yet; others may simply not want to go back.

A friend of mine, who is a restaurant owner herself, told me that she furloughed about 100 employees during the pandemic. Now that she is reopening her restaurants, her staff told her they would rather take the unemployment benefits than working for an hourly wage.

Larry Kudlow, the Direct of the White House National Economic Council, is urging to replace the unemployment benefit boost during the pandemic with a return-to-work bonus. While there are still debates on such a suggestion, Idaho's Governor Brad Little has announced that the state's residents on unemployment would receive a one-time bonus of $1,500 for returning to work full-time, or $750 for working part-time.

Where do you see signs of recovery? What challenges face today's businesses?

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