LOTUS CORONAVIRUS UPDATE (14.04)
Media reports today have announced the Office of Budget Responsibility findings that the UK economy faces a 35 per cent dive in output in the second quarter of 2020 if a lockdown remains in place for three months, which in turn, will leave more than two million people unemployed. The downgrade to the OBR’s March forecast was largely due to a collapse in tax revenues, which would be 15 per cent.
The IMF has said Britain’s economy will shrink 6.5 per cent — the biggest fall in a single year since the Great Depression and more than the entire 6 per cent decline over 18 months between 2008 and 2009 after the banks crashed.
The Observer reported that Link Group has calculated that a total of £25 billion of dividends has been scrapped by UK public companies since March.
The country which has reported more than 20,000 deaths from Covid-19 has allowed bookshops, stationery outlets and children's clothes shops in some regions to reopen as of Tuesday. The forestry industry has also been allowed to resume operation.
Full restrictions are not due to be lifted until 3 May, and there is speculation that schools will not reopen in this academic year. Lombardy and Piedmont, the worst hit provinces, remain on full lockdown.
Factory and construction workers in Spain went back to work on Monday and Tuesday after the government lifted a 10-day industrial lockdown that had closed all non-essential businesses. The state of alarm which has closed schools and forbids people from leaving their homes except for essential reasons will remain in place and is likely to be extended beyond 26 April, when it is due to expire.
Czech Republic and Austria
Czech Republic allowed bicycle shops and suppliers of building materials to reopen last week. Austria has opened all retailers including shopping centres and hair salons.
Daycare centres and the first five forms of primary school will be allowed to reopen on Wednesday, although only about half of schools are expected to be prepared to do so.
Yesterday, France extended its lockdown period until 11 May, which will be reviewed only if the outbreak has slowed.
The Observer said that Germany’s economy is forecast to shrink by 9.8% in the second quarter, the biggest fall in its GDP since records began in 1970 and double the decline recorded during the financial crisis in 2008-9. The fall in growth between April and June will follow a predicted 1.9% contraction in the first quarter. Angela Merkel will have talks with regional ministers on Wednesday to discuss relaxing restrictions.
The German tourism industry has welcomed the government’s decision in favour of money-back vouchers for cancelled package holidays, saying it will prevent widespread insolvencies and job losses throughout the sector.
The number of confirmed cases and deaths lowered for the third consecutive day in the US.
6.6 million Americans claimed unemployment support last week – taking the total over three weeks to more than 16 million.
Travelmole reports that guests staying at hotels in Beijing are now required to produce negative Covid-19 test results before being permitted to stay.
The new measure requires proof of a negative nucleic acid test certificate on check-in and hotel employees are required to conduct morning and evening temperature tests on guests. Additionally, guests should provide information about their personal contacts in Beijing.
- International and domestic passenger traffic at all airports in Greece in March 2020 was down by 59 percent due to the coronavirus (Covid-19) pandemic, the Hellenic Civil Aviation Authority (HCAA) said last week.
- According to the latest report by the Institute for Tourism Research and Forecasts (ITEP) on the effects of Covid-19 on the Greek hotel sector, the total estimated loss in turnover for Greece’s hotels has been estimated at 4.46 billion euros with 65 percent of the hotels that operate in Greece on a year round basis consider bankruptcy possible or very likely
With estimates that the Covid-19 outbreak is costing Greece 2.5 points off its GDP for every month it continues, Greek Tourism Minister Harry Theoharis said that Greek tourism is set to decline by as much as 50 percent this year.
The ministry is also looking into border “entry protocols” as part of its plan to recover.
Analyst Jakob Suwalski of the Scope credit rating agency in a report for The Economist last week said that he expected the pandemic to impact Greece’s tourism sector more than in any other country in the eurozone due to its dependence on tourism. He forecast a drop in GDP of between 7 and 18 per cent this year.
GTP (Greek Travel Pages) reports that Greece is to allow Greek airlines, ferries and tourism enterprises (hotels and travel agencies) to reimburse customers with 18-month vouchers for bookings that were cancelled due to the coronavirus (Covid-19) pandemic, instead of cash refunds.
However, it is noted clearly that if the vouchers are not used within 18 months by customers, businesses will be required to refund the initial amount of the bookings in cash.
The MailOnline has reported that prospective Australian holidaymakers were warned not to book any trips abroad for the foreseeable future, with the ban likely to be in place until 2021, officials said.
Travelmole also reports Tourism Minister Simon Birmingham told ABC trips abroad won't be allowed 'for quite some time to come.' He didn't put a timeframe on when international borders could open but 'wouldn't put any guarantees that you could undertake an overseas trip in December.'
The world will suffer its deepest recession in almost a century this year as the coronavirus pandemic causes an economic collapse many times worse than in the financial crisis, the International Monetary Fund has warned.
In 2020, the IMF forecasts that the world economy will shrink by 3 per cent, which it stressed is a best case scenario that assumes that restrictions are lifted in the second half of the year.
The Refund Issue
Which? has run a piece which asked whether ABTA’s advice means consumers have to accept a credit note for cancelled holidays. Whilst the Package Travel Regulations haven’t changed, consumers don’t have to accept a credit note.
ABTA chief executive Mark Tanzer has clarified that travel companies should not be denying customers their right to a refund, but he called for more time to be able to give refunds.
Travel Weekly has reported that the European Justice Commissioner has repeated guidance to member states to find “flexible solutions” to demands for refunds on cancelled holidays during the Covid-19 crisis, saying consumers “should consider accepting a voucher”.
Justice Commissioner Didier Reynders called for “the right balance between consumer protection and support to travel and tourism businesses”.
Reynders wrote to member states at the end of March advising governments to alleviate the pressure on tour organisers and travel agents by allowing the issue of credit notes or vouchers in place of cash refunds.
EC president: 'Don't book summer holiday yet'
Travel Weekly reported that the president of the European Commission has warned people to wait before making summer holiday plans.
She told German newspaper Bild: "I'd advise everyone to wait before making holiday plans. At the moment, no one can make reliable forecasts for July and August.”
Her comments come as France said it would maintain strict border controls until October and asked other EU countries to keep their borders closed until at least September.
UK travel bookings are being made
TTG found that in a survey of 416 travel agents across the UK & Ireland, almost one in three (32%) had made a sale in the week ending 10 April, despite high street premises being closed and the majority of retail staff believed to be on furlough.
However, 75% said sales were down from the previous week – and 58% said they had received no customer enquiries at all.
Destinations booked were mainly long haul, with US destinations New York and Las Vegas regularly cited alongside Canada, Mauritius, the Maldives, Australia and the Caribbean.
TravelMole reports that Heathrow’s March passenger numbers were down 52% year-on-year, with many of the three million journeys made being repatriations, following travel restrictions across various markets as well as the Foreign and Commonwealth Office's advice against all but essential travel. The airport also said that the situation is expected to continue as initial forecasts show passenger demand in April down 90%, with 'lasting and significant industry-wide effects' predicted.
In addition, the London Loves Business site reports that Heathrow Airport’s overall cargo volumes were down by 32.5% in March as a result of passenger aircraft being grounded.
ABTA Travel Convention in Morocco postponed
ABTA has postponed its overseas conference, due to be held in Marrakech in October, until October 2021 and replaced it this year with a UK-based Travel Convention, which will be held at a similar time in the autumn.
An exit strategy for the UK?
The Mail on Sunday spoke to Gerard Lyons, former economic adviser to Boris Johnson, who has developed an exit plan that will be presented to Government for consideration. In summary this is:
- To reintroduce activity in stages
- For economists and health experts to work together
- To use a traffic light plan which will limit the spread of virus and minimise financial pain.
The timetable could go something like this, and would be dependent on infection rate and deaths:
1 May. Visiting friends and family would be allowed but no visits to grandparents. Small shops open with social distancing.
22 May. Schools and public transport to reopen but travellers must wear gloves and masks. Car travel not restricted. Restaurants can reopen if tables allow social distancing. Home working for those who can.
13 June. Public totally released from lockdown. Work returns to normal and large sporting and entertainment events resume. International flights to begin again. With limits only to countries that are deemed to be high risk.
Seven Stages of Lockdown
Timothy O’Neill-Dunne on Phocuswire has put together his believed seven stages of this lockdown:
Dedicated fans; careful trust building and good deals will save cruising
The Guardian reported that “with dozens of fatalities linked to ‘floating Petri dishes’”, shares in the sector have collapsed. However, the piece outlines that the sector has a great many cruise super fans and that there are dozens of Facebook groups dedicated to cruise ships with comments about wanting to cruise again outweighing those who are worried by the pandemic. An example of sentiment was from Ruth Bowe, 29, a primary school teacher from Leicester who has been on 13 cruises and cannot wait to go again. She said: “Cruising is a fantastic way to see the world for a reasonable price. The ships are clean and they always ask you to sanitise around the ship.”
All cruise companies are struggling financially. But Carnival shares gained last week after rescue funds from Saudi Arabia. Royal Caribbean has secured a $2.2bn (£1.7bn) loan against its ships. Norwegian Cruise Line has drawn down a $1.55bn credit line.
Ross Klein a professor from Canada said this crisis dwarfed others the sector had faced. Cruise companies will have to work hard to win back consumers’ trust, he says. “There will be some great deals for consumers to convince them to come on cruises, but it is going to be a hard task convincing people that cruise ships are safe”.
Robert Cole, an analyst from Phocuswright agreed and said that social distancing on ships is difficult and the cruising demographic – the over 60s – are also, necessarily risk-averse.
Separately, The Guardian reports that at least 6,000 passengers remain at sea on cruise liners despite the coronavirus pandemic.
US Cruise industry
Travelmole reports that the US Centers for Disease Control and Prevention's 'No Sail' order was extended for 100 days, which will impact all cruise ships wanting to dock at US ports. The order means that the current 100 cruise ships in ports in and around US territorial waters will need to stay idle until July.
These ships have nearly 80,000 crew members aboard, with up to 20 ships housing crew diagnosed with or suspected of having coronavirus.
Will we ever take cruise holidays again?
The BBC ran a feature by Jonty Bloom on cruises on 9 April outlining how most ships – floating hotels - have been mothballed. The piece outlines how the sector is well-prepared for outbreaks of diseases on its ships – but instead of following the normal protocol of going to port, disembarking sick passengers and sanitising ships, governments have insisted that the ships keep passengers on board, which has led to a high number of fatalities.
Bloom says the industry has ‘few friends in high places’ as cruise companies are frequently not registered where they do business, in the USA and Europe, but offshore in places like Panama and the Bahamas.
The industry does this for two reasons - it saves a fortune in tax, and it means that they don't have to follow American or European labour laws. This means that they are not eligible for any of the bailout schemes – and they can’t be given tax breaks if they don’t pay taxes.
Professor Sheela Agarwal, from Plymouth University is quoted to say that it is likely that the sector will recover quickly. Right now, one of their biggest overheads – the price of oil - is bottoming out and the sector will be buying futures in this. They will also recover with the help of some aggressive pricing promotions.
Cruise demand for 2021
Travel Weekly reports that Celebrity Cruises is ramping up initiatives to help agents while claiming “positive demand” for 2021 sailings.
The line’s liaison with the trade is being stepped up. Celebrity Cruises, along with the rest of the Royal Caribbean group, have extended a ‘cruise with confidence’ cancellation policy to allow the flexibility to decide to cancel up to 48-hours prior to departure for any sailing departing on-or-before 1 September.
Private Equity Giant gorging off holidaymakers’ money
The Telegraph has reported that Britain’s biggest listed private equity fund is under fire for lobbying the Government to prevent holidaymakers hit by the Covid-19 lockdown from accessing cash refunds.
FTSE 100 investment firm 3i was accused of “gorging off other people’s money” after extracting almost £100m from a travel agent it owns before demanding a moratorium on rules that force the industry to refund customers within two weeks for cancelled trips.
The report follows up by saying how 3i is supporting ABTA’s efforts to lobby the government to change PTR.
World Travel Market: Exhibitor costs to spike?
Reed has announced that WTM will go ahead as planned at Excel in November, but The Sunday Times has reported that Excel and Reed Exhibitions are still charging exhibitors for events that won’t go ahead – and may hike costs for exhibitors for those that do – in order to recoup costs.
Lufthansa closes Germanwings
The Lufthansa Group has decided on a number of restructuring moves to combat the financial impact of the Covid-19 outbreak, including permanently decommissioning aircraft and closing its Germanwings low-cost subsidiary.
Ad spend on social media increased in Asia
Campaign Performance reports that ad spend on Facebook and Instagram has increased by 21.5% since the beginning of March in East Asia, where brands and agencies have started to recover.
These figures suggest that, once the crisis eventually subsides in Europe and North America, performance marketers should be ready for a sharp influx in spend and rising CPMs and CPCs.
Business Travel to recover first?
A Skift interview with The Daily Lodging Report Editor-in-Chief and founder Alan Woinski shared his outlook on the industry’s recovery. “Everyone thinks we’re coming back with leisure travel first because it always bounces back, but I think we’re in a completely different scenario right now and don’t think we can look at the past.” He says leisure travellers are unlikely to travel without a vaccine, however, if an antibody test was effective, corporate travellers would come back faster.
What kind of holidays will we take when we can travel again?
Juliet Kinsman has written a speculative piece on how travel will change when we emerge from the pandemic. She believes we will emerge slowly and will want to stay closer to home to start with - minimising times on planes. She believes we will want health-enhancing experiences, restorative immersions in nature, spirit-lifting exercise in the open air and safe escapes for quality time with our nearest and dearest. Her points are:
- To start with demand will be greater than supply
- Not all airlines will survive
- Travel insurance could be more limited; but we will want more financial security
- We’ll need to jump through more hoops for visas and require health certificates
- High-quality travel will be more complicated, restricted and more expensive.
- We’ll emerge from the pandemic more conscious, conscientious and sensitive to the health of people and planet
- The downturn has allowed nature to rebuild. She suggests low volume and high value business models will follow – as people will really need to feel that an experience is really worth leaving home for.
- Fully serviced private villas and luxury hotels with the highest standards of health will thrive. Avoiding mingling with strangers will be a bonus.
- There will be an increase in demand for private cars and jets. We’ll want more space in airports with self-service testing
- More time will be spent planning
- Conservation and travelling with a purpose will be a priority and we’ll support businesses that provide revenue for much-needed cultural and environmental preservation.
- We’ll want to immerse ourselves in fresh air and wilderness – without having to traverse vast continents.
- It’s a given that many of us will want and need immunity-boosting escapes for preventative or restorative reasons.