Green Shoots & Crystal Balls- Travel & Hospitality Reset

With a travel and hospitality sector hit hard in the current climate, we are all looking for signs of recovery but no one knows where, or when that will come, and in what form. It's far too early for green shoots and there are plenty of crystal balls to look into.Our current journey is a Path towards a 'Reset' (whatever that may turn out to be). In this summary we consider -and hope to influence-some of the factors that will shape its eventual outcome.


Many thanks to Mario Bodini (Chairman of ETOA), Liz Hall, Richard Bursby, Gerard Nolan and James Munro for participating in a first Panel for Travel & Hospitality (PATH) discussion. This focused on the changes forced upon the travel and hospitality sectors by the recent crisis and brought a weight of travel,legal, research,management, operations and investment expertise on a very insightful discussion..As sector specialists we are all monitoring relevant key data (for which we thank relevant travel and hospitality specialists such as STR for their generosity in sharing information) to identify trends.


Despite planes being grounded and hotels closed, what is in no doubt is that the challenges currently being faced will also bring out the sectors inherent ingenuity and will lead to positive solutions and new business models emerging as the world comes out of lock down in a new 'Reset' phase.

Although it is far to early to firm up many conclusions, a very constructive session focused on how the current crisis is evolving in travel and hospitality and what some of the the key issues are that we believe will shape recovery:


Timing is all: The full effects of the lock down on most businesses are yet to be felt and in some cases, even identified. Year 2020 is in flux...Focus should be on Q4 and Q1/2021 to identify any relevant trends.


Travel: Short term there remains uncertainty as to what shape flying will take or when it will restart but long haul inbound traffic to Europe (when it restarts) will be hit as some travellers may want to avoid some very desirable destinations where the crisis has been worst. Even with the prospect of Pandemic passports and shielded beach spaces, the leisure market is likely to respond first in any bounce back. Staycations could be a positive trend for domestic tourism with the international scene less consistent: some international destinations have already opened up to domestic travel but become selective in how much they open up to outside markets.


Consumer Behaviour: Feelings of 'safety', 'trust' and 'privacy' together with 'hygiene factors' will influence buying psychology for consumers making travel and hospitality choices. These may become key factors in decision making and influence short term behaviour until confidence returns. Has the 'era of consumer nirvana' (when a vast array of choice was available to consumers in many areas of day to day life from supermarket shopping to destination choice) reached its end?


Together but Apart: Social distancing and the extent to which it remains in force and the rules governing it is a key factor in how recovery can be managed by individual businesses- particularly for airlines, restaurants & pubs.


Businesses: The cash flow effects on current hospitality businesses are yet to kick in fully and will hit those with higher rents and substantial fixed costs most harshly. 'You don't see who is not wearing any swimming trunks until the tide goes out and the tide has well and truly gone out' (quoted with thanks to Rebound Consulting).


The New Normal: Even if businesses consider opening as restrictions ease, it may not pay some (particularly bars and restaurants) to throw their doors open unless they are assured that volume demand can be achieved to ensure they can cover fixed costs and remain viable.


Survival of the fittest: As these winners and losers emerge, they will shape everything from the make up of the high street to available distribution networks and will influence demand for destinations, accommodation and leisure products that best suit future trends.


Going Green?: Clear skies and clean water -some of the positives of lock down-will influence many consumers in their priorities and choice of travel, destinations and accommodation. The environment is well and truly back on the agenda.


Legal: As new structures arise, new rules made and past norms challenged, numerous legal issues are likely to need resolving. These will include property (landlord and tenant) and industry specific issues (operating and other commercial agreements) that affect most retail and hospitality business. Terms and conditions are likely to get new focus.


Upside, Downside & Opportunity: As many fall, others will rise. Already potential transactions are being considered with assets circulated for sale, some driven by pre-existing commercial or financial considerations and despite all of the uncertainty in variables affecting their potential commercial potential. Valuations -set against the most uncertain market backdrop in a lifetime -are once again becoming a key issue. In only a few more months as the dust settles and some cash flows dry up with financial restructuring becoming less certain for some, the full effects of businesses biting the bullet will become apparent and open up opportunity for new investors to acquire or consider potential M&A transactions.


With a positive but realistic mindset we look forward to the next Panel discussion and to sharing thoughts and insights. If you would like to participate and more importantly contribute to shaping the conversation and solutions that will have value in sector settings do contact us on or 00 44 (0) 7785 514831.

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