Travel and tourism companies will not fully return to “business as usual” in the next three to five years, according to ratings agency Moody’s.
The agency said that the current weak demand, driven by consumers’ health concerns and less disposable incomes, as well as government-mandated coronavirus restrictions, will likely continue until the pandemic is contained.
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“Recovery to anywhere close to pre-pandemic levels is unlikely until consumers are comfortable travelling again en masse, likely after vaccines and treatments are widely available,” said Moody’s on Tuesday.
“We do not expect a return to pre-COVID volume until 2023 at the earliest for most sectors… A full ‘return to normal’ volume – similar to 2019 levels – is unlikely in the next three to five years,” it added.
Businesses in the travel and tourism industries, including airlines, airports, cruise operators, cruise terminals, hotels and lodging and rental car companies have been among the hardest hit by the pandemic.
Since the start of the outbreak, consumers have ceased travelling and visiting shared public spaces for fear of contracting the virus. The weak demand is also due to quarantine regulations and reduced household incomes following massive job losses and payroll cuts.
Across the Middle East, airlines are expected to lose billions of US dollars in revenues as a result of the crisis, and so far, thousands of employees in the UAE have been out of jobs.
Moody’s said the willingness to travel will remain subject to consumer sentiment about the perceived safety of travel on shared transportation, such as planes, trains, cruise ship, as well as in shared spaces like airports, hotels and theme parks.
“These attitudes are likely to remain in place for the most risk averse traveller until [the] spread of the virus is largely contained, which is increasingly unlikely in the near term as cases increase in many regions globally,” Moody’s said.
Since the virus was first detected in late December 2019, the number of infections has ballooned to more than 23 million worldwide, yet the availability or release of an effective vaccine remains uncertain.
Sectors to recover first
Moody’s, however, noted that some improvement in the travel and tourism sectors can be expected in the second half of the year, as restrictions have eased and businesses have reopened. The pace of recovery will vary from one region or sector to another.
It is likely that consumers who want to travel for leisure will lead the recovery, while corporate travel will lag behind.
“Leisure and personal travel, especially by automobile, will lead the way. We expect domestic and regional travel to recover faster than long-haul/ international travel,” said Moody’s.
“However, not all leisure traffic will resume as quickly, especially city breaks that risk a lengthy quarantine afterward… Business travel will remain limited as companies protect employee health and safety, try to limit costs amid lower revenue and rely on teleconferencing. Also, business travel tends to rely on air and rail, which will be slower to recover than auto travel,” it added.
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