Research Insights U.S. segments: key developments and outlook

U.S. segments: key developments and outlook

June 2020
Phocuswright Research

Prior to the pandemic, the U.S. travel industry was on a steady growth trajectory according to Phocuswright‘s latest travel research report U.S. Travel Market COVID-19 Update. After falling considerably in 2009 after the Great Recession, it enjoyed 10 years of consistent gains. From 2012, growth settled into a steady pattern, and the U.S. travel market would record a compound annual growth rate (CAGR) of 4.6% between 2011-2019, reaching nearly $400 billion. Even though annual growth slowed considerably to just 2% in 2019 due to fears of a looming economic slowdown, Americans were still planning their vacations - all the way up to mid-March.

US Travel Market Gross Bookings YoY Change 2010-2019
(Click image to view a larger version.)

Key developments and outlook by segment:

Key Developments: With the number of passengers flying in the U.S. now down about 96% from 2019, airlines obviously need assistance to maintain their fleets, workers and crews so they can fly once restrictions are lifted.

Outlook: Airlines will enact policies to make travelers feel safe again, as well as outline how far security measures will have to go (e.g., testing or certification to board flights) to allow passengers back on planes. Any recovery this year will be for short, domestic flights until international restrictions are lifted, which could take months or longer.

Key Developments: With occupancy close to zero for some properties and bailout funds unpredictable, individual hotels are fighting for their existence. Relief from the government as outlined in the CARES Act won't be enough to cover payroll and debt payments as the industry asks for more.

Outlook: Some postponed meetings might be moved to the fall, hopefully creating a strong fourth quarter for those larger hotels and brands that reopen. Those survivors will need to be certified for cleanliness, put strict guest restrictions in place, and operate much differently in terms of the amenities and services they provide.

Key Developments: OTAs got slammed by the coronavirus in several ways. Judging by consumer sentiment and cancellations, many OTAs played catch up on cancellation and and refund policies.

Outlook: The "counter-cyclical lift" that OTAs enjoyed after other disasters, such as 9/11 and the 2009 recession, will be more subdued this time. In previous downturns travelers flocked online for shorter, last-minute, discounted, domestic trips. Now, even though OTAs will package their most attractive offerings (including those that are "certified" for safety) to stay relevant, the greatest shift to online has already occurred. In addition, more travelers might opt to go direct to suppliers for more assurances.

To see more key developments and outlooks for other segments like car-rental, cruise and packaged travel, as well as more insight into hotels, air and OTAs, access the full report here.

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