Leisure travel likely to hit ‘100% of pre-COVID levels’ by next year: Analyst

Henry Harteveldt, Travel Industry Analyst and President of Atmosphere Research, joins Yahoo Finance Live to discuss the uptick in travel over Memorial Day Weekend and the outlook on the travel industry amid COVID-19 reopening.

Video Transcript

BRIAN CHEUNG: Anyone that was traveling this Memorial Day weekend may have noticed that the airports were getting more packed, and the data we got from the TSA seems to back that up. It hit a pandemic record in terms of travelers that were passing through. The average of almost 1.8 million people were moving through the airports each of those four days spanning the weekend.

And to discuss this more we've got Henry Harteveldt He's a travel industry analyst at Atmosphere Research. And Henry, it's great to have you on our show. I want to just kick things off by asking-- that number was still below the 2019 Memorial Day weekend level, which implies that maybe there's still more room to grow in terms of people getting back out there to travel. So what is the ceiling, at least from what you've been seeing so far, as the economy continues to reopen?

HENRY HARTEVELDT: Well, Brian, there are a couple of things to consider. First, we still have almost no international travel allowed from the US. So what we saw over the Memorial Day weekend was mostly domestic and to a handful of international countries, including Mexico and a few places in Europe. Second, there's no business travel taking place at all right now. And granted, you don't think of business travel during Memorial Day, but business travel does continue year round. So we're about 23 and 1/2% or so down from where we were in 2019. Considering where we are in terms of restrictions and limitations and what is available, that's pretty darn good for the airline industry.

- So let's speak about that a little bit, Henry. What is the outlook that you have for international travel, for business travel, at least through the second half of the year? When do you think those things are going to start to pick up again?

HENRY HARTEVELDT: We conduct market research with travel managers. These are the people who manage the programs and the budgets at different companies. Right now most of them are expecting their travel programs to resume in September or later in the year. And it's going to be, again, limited, mostly domestic, where they can international. There remains a lot of uncertainty.

It's going to take the business travel segment probably three years or so to recover for the US. It may be longer in other parts of the world. Leisure is probably going to hit 100% of pre-COVID levels by some point next year, and United Airlines is saying that they're already seeing leisure fares match the prices people paid in pre-COVID times.

So there's strong demand for now. I think we'll continue to see strong demand from leisure travelers. I also think leisure travel stretches out beyond summer. People who have the flexibility to work from home or work from anywhere may be able to work out with their managers, hey, look, I'm going to take four weeks and work from somewhere else, wherever that somewhere else may be, and then be back at home. They'll still do their jobs. It just may be somewhere else, whether Paris, Texas or Paris, France.

BRIAN CHEUNG: Henry, I want to ask about some of the adjacent industries like hotels and also home sharing like Vrbo or Airbnb. Everyone's trying to get out there and book travel, especially for this summer. It's the hot vax summer. Everyone's feeling ready to go out there and explore new places. What are you seeing on that front in terms of price pressures? We've been hearing anecdotes of people not being able to find decently priced bookings.

HENRY HARTEVELDT: You know, Brian, a lot depends on where you're going and when. So the rates have been creeping up, and people have been willing to pay more for their rooms, which is good news. Hilton Hotels reported that on the Saturday night of Memorial Day their hotels averaged 93% full in the US. So that's really amazing. And people will shed out for that money. They will pay the money for a good quality hotel, but they've got their limits.

So we anticipate seeing the hotel rates increase a couple of percentage points through the remainder of the year. Right now the industry has lost literally 14 years in terms of rate, average daily rate, but we anticipate that that will creep back up over the summer. There are some hotels that are even saying they're getting more than they were pre-COVID in popular leisure destinations, such as certain Florida markets, Charleston, San Diego, certain mountain resorts. And the five-star hotels, some of them are reporting they're sold out not just for summer, but even going into the Christmas season this year and for some Christmas 2022.

- So Henry, I want to quickly ask you about hiring in the hospitality sector. I mean, we've been talking about hiring across the board. A lot of companies out there are trying to find employees, and they simply can't. What are you seeing in terms of hiring on some new employees, at least in the travel and leisure sectors?

HENRY HARTEVELDT: Well, travel, leisure, and hospitality are no different than the broader market. TSA is struggling to hire people. Airlines are struggling to hire for certain roles. Hotels are struggling to hire. And this goes back to the point we were talking about a moment ago. Some hotels are limiting the number of rooms they'll make available for sale because they can't find enough people to work in the hotel, whether it's at the front desk, housekeeping, bars and restaurants, or other functions.

So that in turn, by the way, leads to higher pricing because the hotel's going to try to maximize revenue. Restaurants, shops, other parts of travel and leisure are all struggling to hire people, even if they're raising wages and offering sign-up bonuses. So if you're looking for a job, this is probably a great time. But my concern is that if they can't hire enough people, it strangles the recovery. And that affects not only the businesses, but the communities and the larger economy.

BRIAN CHEUNG: And we know that's certainly the case with over eight million people still on the sidelines compared to pre-pandemic employment levels. But Henry Harteveldt, a travel industry analyst at Atmosphere Research. Thank you so much for joining us here on Yahoo Finance this afternoon.