The Insider with Peter J. Bates: On the slow restart of the US economy and its once-vibrant travel segment.
Jul 23, 2020
  • By: Peter J. Bates

Five months into the pandemic, I am often asked about trends and conditions in the United States, so I thought I might share a personal view.

Here in New York, the situation is under control as I write this—temporary hospitals closed and the daily figures manageable, which gives the amazing healthcare workers some respite. However, the same cannot be said for over 30 other states, where numbers are increasing rapidly. We are warned to expect affected numbers to rise to 100,000 a day this month. Our national death figure has exceeded 130,000.

New York City Lights
In New York, the spread of infection has been brought under control, though other states are struggling.

The unemployment rate in June was 11.1%, according to the Bureau of Labor Statistics, down from a peak of 14.7% in April, but still far above the 3.5% level in February. With the present rise in COVID-19 cases, businesses may close again or be required to restrict services. It is thought July may reverse this trend.

The stock market continues to do well, particularly oil and tech stocks, which means High Networth consumers have the money, they just haven’t been spending on retail or travel. According to a recent YouGov survey, the consumer savings rate is 25-30% higher than during the last recession in 2008. It does appear that there is pent up demand for travel, but travel advisors tell us it is still very quiet, most reporting business levels 95% below this time, last year.

Graph Falling Down In Front United States Of America Of Flag. Crisis Concept
Graph Falling Down in Front United States of America of Flag. Crisis Concept

Most of the US is still working from home and I do not anticipate that changing very much before September at the earliest, and quite possibly into the next year. Major companies on both coasts are advising their staff not to return to the office. They are quietly reassessing their office space needs as they decide who can remain working remotely permanently and for those who will eventually return to the office, how the offices will be reconfigured.

Manyco~1
Many companies are reassessing their office space needs to figure how much of their staff can WFH permanently. Photograph: The Spiral NYC. Used for representational purpose only
Effect on the travel segment 

Travelling within the country is becoming more restricted—for example, you now must quarantine for 14 days if you wish to travel from California or Florida to New York. We anticipate these restrictions being in place for some weeks yet.

We are approaching the most popular summer vacation season, schools and universities are on break. For many High Networth consumers, this would be the time for European family vacations, which will not happen this year following the European community ban on American visits.

In addition to the ban, the apprehension about flying would mean that even without the travel restrictions, this was going to be a “stay local” year. Hoteliers and destinations have been gearing up to drive markets, although there is doubt if those measures will be successful since the virus continues to spread.

The great outdoors

Ranches, secluded resorts and national parks are all benefitting. Guests want privacy, space and the great outdoors. Anecdotal evidence suggests resorts such as Amangiri in Utah are full until September and others such as Montage Palmetto Bluff in South Carolina have been pleasantly surprised by the level of bookings since they reopened.

More And More Americans Are Choosing To Travel For Adventure And Nature To Destinations Such As The Grand Canyon.
More and more Americans are choosing to travel for adventure and nature to destinations such as the Grand Canyon.

Across the US, resorts are reopening. We are told spend is good and achieved rates are higher than expected. The key to reopening is to offer value without discounting, especially as not all services and facilities are open when some properties come back online.

Resorts Such As Amangiri In Utah Are Attracting Americans Looking For Rendezvous With Nature And The Outdoors.
Resorts such as Amangiri in Utah are attracting Americans looking for a rendezvous with nature and the outdoors.
The challenges of opening hotels

City centre hotels, on the other hand, are taking a much more cautious approach, many only opening limited floors and offering basic facilities. We anticipate that many will wait at least until September before reopening, and it could be later depending on corporate demand, which is currently low.

We have all seen the key initiatives published by the major hotel companies announcing protocols in place when they do reopen. However, our research finds that guests want services to be as close as possible to pre-pandemic.

City Hotels Are Adopting A Cautious Approach To Reopening Operations. Photograph Used For Representation Purpose Only.
City hotels are adopting a cautious approach to reopening operations. Photograph used for representation purpose only.

One brand manager of a major chain explained to me that the bathrobes, coffee makers, minibars, all removed before reopening, are now being put back to meet customer demands. Social distancing is hard to enforce and clients want to enjoy themselves.

Before booking, the guest or their travel advisor expects reassurance, so websites must be up-to-date, and staff trained to answer questions with knowledge about the protocols in place. I believe, however, that the expectation in dealing with a luxury property is that cleanliness is a foregone expectation.

For a firsthand view, I asked Jim Strong, President, Strong Travel Service—who has visited Las Vegas and California hotels with whom he does significant business—his opinion on the openings so far: “It was striking to see the visual and non-visual differences between hotel brands and individual hotel products both in-room and in the public spaces.

Pull Quote Jim Strong

He adds, “Other more individual hotels gave the impression of working within the CDC guidelines but still maintaining a more personal level of interaction with noticeable PPE in use.

 “In all cases, there is a real desire by the hotel staff to ‘soften the blow’ of the new rules. There is also the issue of everyone understanding the ‘rule of the day’. The guidance is changing so quickly, it is difficult to impose restrictions on paying guests when there is no one source to rely on for up to date valid information.

In each case, I did observe many travellers enjoying their surroundings and being provided with many smiles and efforts of luxury service.”

The stalling of the cruise industry

If the hotel industry is beginning to open, the same cannot be said for the cruise industry, which received so much negative publicity in March. With many of the cruise companies headquartered in the USA, the global cruise ship fleet, comprising 483 vessels, has collectively lost US $4 billion in value to just over US $167 billion at the end of the first quarter, according to shipping data provider VesselsValue.

The Cruise Industry Is At A Global Standstill With Very Few Exceptions.2
The cruise industry is at a global standstill with very few exceptions.

We see the river cruise industry being the first to make a partial recovery, relying on the reopening of Europe and European cruisers. Traditionally, an important market segment is the US traveller, but with closed borders and a raging pandemic, it is unlikely this will be a focus this year.

The US Center for Disease Control and Prevention [CDC] is implementing new protocols for the cruise industry. An industry which has four major stakeholders to satisfy (including the ports they wish to visit, which are all under different jurisdictions), the crew who want to ensure they are safe in restricted quarters, the CDC who is keen to regulate, and the passenger who wants to be satisfied that protocols are in place.

Senior executives explain that bookings for 2021 are on pace. However, at least 50% of these bookings are transferred from cruises that would have taken place this year. The industry has also relaxed deposit and cancellation policies, making it unclear how much 2021 business will stick in the final analyses.

The transformation plan

The business of travel remains the main concern. There will, in my opinion, be a transformation in the travel and hospitality industries as a result of COVID-19 and the next year will see many changes to our industry.

Airlines, hospitality companies, tour operators and cruise lines are implementing major reorganizations as they flatten structures and consolidate responsibilities. Many staff are still furloughed and will be until at least October. Companies are making deep cuts; figures quoted are 21-25% of corporate staff. We are hearing of many familiar faces who are taking this opportunity to retire or seek a new opportunity.

Airlines Are Reorganizing To Stay Afloat. Photograph Used For Representational Purpose Only.
Airlines are reorganizing to stay afloat. Photograph used for representational purpose only.

Major travel agency groups are appointing new executives to lead consolidated organisations. For instance, Travel Leaders announced a restructuring, with a new name for the parent company, Internova Travel Group headed by CEO JD O’Hara. The reorganization, which puts all major corporate accounts under the ALTOUR banner, will continue to be led by Alexandre Chemla.

Meanwhile, Flight Centre Travel Group (FCTG) has named Marc Casto, President of Leisure Brands for the company’s Americas division. Flight Centre established this role “on the heels of its recently implemented retail transformation and to oversee and steer the implementation and day-to-day execution of its new business model.” This has resulted in the closing of many of the Liberty Travel storefronts, with only around 30 remaining across the nation, with the creation of regional hubs with advisors based at home.

Throughout the travel agency community, many advisors are furloughed. One exception is American Express Travel & Lifestyle Services, which announced at the beginning of the crisis they would maintain staff levels through to the end of 2020.

Several B2b Events Such As Virtuoso Travel Week Have Been Cancelled Or Postponed, Impacting The Mice And Events Travel Segments.
Several B2B events such as Virtuoso Travel Week have been cancelled or postponed, impacting the MICE and events travel segments.

B2B events like trade shows and exhibitions have cancelled – Virtuoso Travel Week will be virtual in August, IMEX America in September is cancelled and I fully expect the GBTA Convention rescheduled for Denver in November to go the same way.

We await news of ILTM North America in September and ILTM Cannes in December. The New York Times Travel Show in January 2021 has already been cancelled. One new show that did emerge in late June was the virtual New Travel Conference created by PR guru Pavia Rosati, freelance journalist Shivani Vora and the irrepressible founder of Virtuoso agency Embark Beyond, Jack Ezon. I asked Jack to sum up the event:

Pull Quote Jack Ezon

“Aside from sharing great stories, it was an incredible morale boost for everyone involved. I think the biggest takeaway for me is that the role of the travel advisor is more valuable than ever. Travelers want answers and handholding, they also want comfort, and while a travel advisor can’t provide any guarantees, the right advisor can give you comfort and the latest information out there which, as the ad goes, is priceless.”

Jack added, “One theme emerged so strongly throughout. When we get back to travelling, we will — and should — do it more thoughtfully. This may mean going to fewer places, and it certainly will mean worrying less about ticking off a bucket list and collecting snapshots for Instagram. On the very, very positive side, it will mean staying in a destination longer and getting to know it by finding ways to meaningfully connect with the community and the locals.”

Destinations And Hotels Will Have To Reorient And Reinvent The Playbook To Stay Relevant. Photographs Montage Palmetto Bluff2
Destinations and hotels will have to reinvent the playbook to stay relevant. Photograph: Montage Palmetto Bluff, South Carolina.

Hospitality companies, travel agencies, OTAs, cruise lines and destinations all must reinvent the playbook. Travel will return—I do not doubt that. However, we must all expect it to be a reimagined industry. Everything has to be reassessed and so we are all charged with playing our part in reinventing this amazing restructured industry, continuing to sell dreams and bringing hospitality and travel back to life and profitability.

*Jim Strong and Jack Ezon are members of Travel + Leisure’s Travel Advisory Board.

Peter Bates, President, Strategic Vision

Peter J. Bates is president and founder of Strategic Vision, a global marketing communications consultancy for the luxury travel, hospitality and publishing industries, with such clients as Accor, Ponant, Travel + Leisure, Departures, Food & Wine, The British Virgin Islands Tourist Board & Film Commission and Virtuoso. You can reach him by emailing pbates@strategicvision.org.

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