The lasting impact on travel and leisure sectors

The travel and leisure sector is potentially one of the worst hit by Covid-19 closures. As airlines have grounded fleets, travel agents have cancelled all bookings and leisure centres are all forced to close, the dramatically reduced income could have a lasting impact on the industry.

With Boris Johnson’s latest announcement and the government’s plan for a phased return to normality, it is likely that the industry will be unable to operate at its usual capacity until July/August at the earliest.

This article looks at the three key segments and how they are responding to and coping with the ramifications of the coronavirus pandemic.

Airlines

With three major losses in the last three years, the latest being Flybe being forced into administration amidst the coronavirus outbreak, the airline industry is particularly vulnerable. Timetables have been reduced and fleets grounded to comply with government bans on travel to prevent further spread of the disease.

British Airways and EasyJet have warned of significant revenue loss; Virgin Atlantic has reported a £750 million funding requirement, cutting 3000 jobs and selling off Branson’s majority stake in Virgin Galactic to prop up the business; and the International Air Transport Association has predicted a potential financial impact of up to £86.6 billion (estimate as at 5 March 2020).

IbisWorld expects a revenue drop of 5.31% for the 2020/21 financial year. However, forecasters predict renewed growth towards the end of the year, subject to the reopening of borders. Customers will be able to take advantage as companies will likely be competing for cost leadership to regain some cash flow.

Travel agents

Travel agents largely mirror the airline sector, as they have had to cancel or postpone all trips and tours for the coming months, with no certainty on when travel bans will be lifted.

This segment has been experiencing a shift over the last few years as companies adapt to consumer preferences for online holiday bookings; brick-and-mortar outlets are steadily closing down and more companies are switching to a predominantly online setting. The minimised cost associated with an online presence may be advantageous in the post-coronavirus economic recovery.

Additionally, brands such as TUI are planning hiring freezes amongst other cost cutting measures to shore up the company and preserve thousands of jobs.

Travel agents will follow suit from airlines and will likely be selling at discounted rates to try and regain some cash flow, once the lockdown is lifted. However, the impacts could be more long-lasting for travel agents as consumers are unlikely to be purchasing luxury holiday packages whilst they are also recovering from the economic downturn.

Gyms and leisure centres

Although more people than ever before have taken up running and exercising on a daily basis, gyms and leisure centres will not be able to take advantage of this trend for the foreseeable future. According to Professor Chris Whitty, Chief Medical Officer to the Cabinet, social distancing measures will have to remain in place for potentially the next 12 months, so gyms and leisure centres may not be reopening this year. It is important to remember that this is speculative as there is still much uncertainty, and is contingent on the rate of infection.

Digital fitness brands are in a fortunate position and some have seen significant increases in clients. Some personal trainers and fitness classes have continued via video conferencing software.

It has been inspiring to see businesses in this sector innovating and changing their service offering. One example is of a personal training company, whose trainers usually visit clients at their premises. However, due to the lockdown and social distancing, it is very difficult for them to continue operating in this way.

They have adapted by creating an online training programme for their clients. They have also created group sessions for multiple clients which has proved very popular. For this company, technology has enabled them to adapt and clients are even preferring the new style of training as they have more flexibility over when they train.

Conclusion

At present, we cannot predict when the disease will be contained, so we are unable to provide clarity for these sectors, but it is positive to see how businesses are managing to take advantage of technology adapt their services to meet the changing environment.

If you have a business in any of the above sectors and are seeking advice on navigating through the coronavirus pandemic, contact us at hello@geraldedelman.com.