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Expedia, Hilton Struggle As Travel Tries To Get Off The Ground

PYMNTS
·5 min read

As pandemic cases have ticked up over the past several weeks, the travel industry’s fortunes worldwide have ticked down. With lockdowns re-emerging in the United Kingdom and the European Union, travel restrictions and outright bans have followed. For example, the United Kingdom has banned all non-essential domestic and overseas travel from until Dec. 2.

That’s an outcome that experts say is setting up the entire industry for disaster. Emma Coulthurst of TravelSupermarket told The Guardian that British officials recently told citizens they could travel to the Canary Islands for vacations, and that thousands booked trips as a result. But the new rules now ban that.

“The return of the Canaries was heralded as a glimmer of light for the industry and for holidaymakers,” she said. “Now that has been torn to pieces.” Coulthurst said that’s leaving the travel industry “in shreds.”

When digital travel platform Expedia announced its earnings last week, contraction was undeniably a big part of the story. Revenue fell 58 percent year on year — its third consecutive quarterly contraction — although it still clocked in at $1.5 billion, ahead of the $1.39 billion analysts were forecasting.

However, gross bookings plunged 68 percent year over year to $8.6 billion. That’s a fairly dreadful result unless one compares it to the previous quarter, when gross bookings fell 90 percent year over year.

“Travel demand continued to be significantly impacted by the virus in the third quarter, but the increased travel in the quarter along with progress on our cost initiatives led to improved financial results,” CEO Peter Kern said. “As the last several weeks have demonstrated, the travel industry and the world still face a prolonged and bumpy path to recovery, with increasing COVID-19 cases and uncertainty around vaccine and therapeutic timelines.”

And Expedia isn’t the only industry player whose Q3 results indicated that the nascent phases of a travel thaw that might have been starting to take shape over the summer could be freezing back up.

For example, Hilton reported $933 million in Q3 revenues — a steep drop from the $2.4 billion seen a year earlier and below analyst estimates of $963 million.

Some Green Shoots

On the plus side, Hilton President and CEO Christopher Nassetta said the hotel chain’s third-quarter results showed “meaningful improvement” over the second quarter. For example, he said occupancy rose more than 20 percentage points during the three-month period that ended Sept. 30.

“The vast majority of our properties around the world are now open and have gradually begun to recover from the limitations that the COVID-19 pandemic has imposed on the travel industry,” he said. “While a full recovery will take time, we are well positioned to capture rising demand and execute on growth opportunities.”

In other early signs of travel industry recovery, the U.S. Transportation Safety Administration on Oct. 18 scanned the most airline passengers in a single day since March. Some 1.03 million travelers went through TSA checkpoints across America that day.

That’s a big milestone — but one that points clearly to the lackluster recovery underway. Compared to the same weekend in 2019, airline travel was still down by 60 percent.

The Industry Is Trying To Compensate

Travel companies are working to innovate their way around the renewed chill in consumer enthusiasm.

For example, American Airlines is leveraging biometrics to make fully contactless check-ins and boarding possible. The industry is also offering deep and inventive discounts like BOGOs and other highly enticing offers to get consumers off their fear of flying (and staying in hotels).

Hilton is likewise beefing up its loyalty offerings and extending the deadline for rewards points usage. Cruise ships are also readying relaunches after months in dock — this time with frequent testing, social-distancing procedures and no buffet-style dining on the high seas.

There is no shortage of mechanisms being experimented with to make traveling away from home feel safer than ever. Some — like NFC door locks in hotels or touchless airline boarding — are highly technological. But others aren’t, like enhanced and publicly posted cleaning protocols.

Unfortunately, Surveys Show Consumers Can Live Without Travel

But even as COVID-19 cases were declining over the summer, travel players projected hitting something of a plateau when it came to bring consumers back. Some travelers did return, but the majority seemed to eschewing airplanes, hotel stays and the other trapping of travel.

That’s a reality that PYMNTS data predicted back in May, when we started surveying consumers about what they wanted to get back to most acutely. Seeing friends and family topped the list, while eating in restaurants was also popular.

By contrast, travel didn’t quite get the same nostalgic bump. Domestic travel was a top priority for only 3.6 percent of consumers, and a top-three priority for less than 20 percent. In fact, only 44.7 percent of survey respondents mentioned domestic travel at all as a priority.

And international travel fared even worse. When it comes to globetrotting, less than 20 percent of consumers expressed any interest in getting back to that.

And that was in May, when evidence of “bending the curve” was on display worldwide. Six months later, case counts are up, travel bans are in effect and consumers are as committed as they’ve ever been to wanting a COVID-19 vaccine before they’ll consider getting back out there again.

The bottom line: The travel industry likely has a long and difficult journey ahead of it before reaching its final destination — the pandemic’s other side.