With the world shutting down boarders because of COVID19 throughout the year and the prospects of future lockdowns growing, it is no wonder that travel companies have taken it to the chin. Below a comparison of sector performance vs. the travel industry.
The market reaction is warranted given the massive drop in demand for travel services in the short term as well as the cash crunch most of these companies are going through. However, I would like to offer a positive perspective for the sector in the mid-long term.
Travel is (or used to be) a 1,4 Trillion usd industry and always comes back, stronger than before. This time will NOT be different. After every economic crisis, pandemic and terrorist attack in the past, travel demand has continued to grow.
People (myself included) are tired of being locked down in their small apartments in big cities and want to get out. I particularly want to go, either to relax or to visit family. I believe that I´m not alone in these thoughts. Even if today, not all travel is possible, the alternatives that are within reach are starting to see movement.
Short term travel trends
- Domestic travel will outpace international. Better if you can drive to the destination.
- Travel on a budget is key. People will want to stretch every dollar for their travel needs.
- The young will be the first to risk it. They are the least vulnerable to the virus.
- Leisure and VFR (friends & fam) will come back first. Business travel will have to wait.
There will be a short term focus on health information and cleanliness in travel operations but this will die down once we have a vaccine, a therapeutic cure or herd immunity. We will have one of these at some point… hopefully soon.
Some rays of light. Vacation rentals are seeing larger volumes than a year ago, given how many people want to get away from cities in exchange for more space.
I also believe that travel technology and online travel players will be accelerated by the COVID crisis. They will take advantage of the new normal and gain market share as a result of the pandemic. It will be especially true for travel companies who have strong balance sheets, can ramp up their customer acquisition and are able to satisfy the recovery demand with leading technology.
Some investors have taken notice of the reduction in valuations in the sector as well as the long term potential in the industry.
Even though Reservamos is still a relatively small player in the travel space, we are convinced that this crisis is an incredible opportunity for us to:
- Strengthen our core technology offering
- Develop new products and services
- Conserve cash now but prepare a strong plan for the recovery phase and think long term
- Work closely with suppliers and customers to adapt to changing trends
Planning + booking + going on a trip is still a pretty broken experience, even in 2020. This is why we believe the opportunity to improve on the travel experience through technology is still massive in the long run.
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