This report breaks down the evolution and impact travel restrictions and COVID-19 concerns have had on travel, with an eye to evaluating the key underpinnings of the industrys return.
This article originally appeared on CBRE.
Since the COVID-19 pandemic began in March 2020, the travel and hospitality industries have been two of the hardest hit. The effects can be felt across the spectrum of hotels, airlines, car rentals, amusement parks and all the way to restaurants and convenience stores that support travelers. Without understanding the decomposition of the declines, it can be hard to estimate the composition and shape of the eventual recovery. This report breaks down the evolution and impact travel restrictions and COVID-19 concerns have had on travel, with an eye to evaluating the key underpinnings of the industry’s return.
EFFECTS OF COVID-19 ON THE TRAVEL INDUSTRY
During the initial months of the pandemic, the United States, and much of the rest of the world, was in lockdown which drastically reduced the ability, necessity, and desire to travel.
In 2020, domestic U.S. air travel fell by nearly 60% while international air travel dropped by over 70%.[i] These statistics include January and February as well as the beginning of March—the period just before the pandemic during which travel, and air travel especially, were in a boom. Excluding Q1, 2020 domestic air travel declined 71.5% and international air travel declined 86.0%.
Other forms of travel saddled much of the weight lost by air travel. Road travel in 2020, for example, decreased only 3% from 2019 and made up 97% of all U.S. travel.[ii] In fact, road travel saw almost a full recovery in the summer of 2020 and into September when it peaked over Labor Day weekend, although it regressed a bit in the months following.[iii] In 2021, road travel has continued to rebound, with year-to-date (YTD) trips only down 5.7% relative to 2019.
Despite the masses of people who road tripped in 2020, the travel industry was extremely hard hit and the impact is still palpable as we approach the final weekend of summer. While the outdoor portion of travel and tourism excelled—from campsite bookings to RV and camper van rentals to national park visitations[iv]—big city destinations and traditional tourist attractions suffered.
Not only were fewer people flying into these places, but attractions and surrounding restaurants, hotels, etc. were either forced to close or operate at minimal capacity due to COVID-19 restrictions.
TRAVEL VOLUME BEFORE VS. NOW
In 2019, 2.3 billion people traveled domestically.[v] In the same year, international visitations—from a foreign origin to a U.S. destination, excluding immigration—totaled 79 million.[vi] Although only a fraction of total value, international travel into the U.S. is an important piece of the travel industry as international guests stay longer and spend more. One U.S. Travel Association study found that foreign visitors accounted for approximately 15% of travel spending despite accounting for only 3% of all travel.[vii]
Visitations from overseas dropped from 40.4 million in 2019 to 7.9 million in 2020, falling by a whopping 81%. Inbound travel from Canada and Mexico was affected slightly less due to land travel across the borders, but visitations from the two countries still decreased by 77% and 61%, respectively.[viii]
Of international travel in 2019, just over half came from overseas while overnight trips from Canada and Mexico accounted for 26% and 23%, of all international trips, respectively.[ix]
Canada demonstrates an especially concerning narrative of the travel industry losses. Travel across the border creates the largest inbound market in the U.S., with 20.7 million overnight trips in 2019, excluding additional millions of day trips.[x] These overnight visitations alone brought in $20 billion in U.S. export income prior to the pandemic. Through 2Q21, Canadian inbound travel only reached 5,940,886 as compared to the nearly 8,352,643 visitations over the same period in 2019.[xi]
Domestic travel fell less than international, with total travel in 2020 (air + road) down 73.0% from 2019, and total travel in 2021 down a more modest 50.1%.
INBOUND VISITATIONS AND THEIR EFFECTS ON HOSPITALITY
The hotel industry hit a historical low during 2020, both in occupancy rates and revenue per available room (RevPAR). An astonishing 1 billion room nights went unsold in 2020, surpassing the 2009 low by more than 200 million. RevPAR was nearly halved.[xii]
While travel has picked up, YTD room nights sold are still down 19.0% compared with 2019 and international visitation and expenditures are down 75.3% and 72.4%, respectively.
As noted earlier, international visitors tend to stay longer and spend more than their domestic counterparts[xiii], although international guests only make up around 8.2% of guests.[xiv] International guests stayed approximately 9.7 nights, though this value is averaged from vacation and business traveling purposes. This compares to an average length of stay in the US of approximately 1 – 2 nights.
The U.S. has experienced a major decline in both business and leisure international travel as depicted in Exhibit 3. The shortfall has been more of a headwind for business travel as international travel restrictions have led to more Americans vacationing domestically, more than making up for the drop in international leisure travel.
SOLUTIONS FOR HOTEL AND TRAVEL RECOVERY
Hotel and travel recoveries are contingent upon the relaxation of travel restrictions and a decrease in COVID-19 cases. In addition to increased vaccinations, international travel policies will be a major factor in hotel recovery.
The U.S. has continued to ban foreign travelers from across the European Schengen region as well as the United Kingdom, China, and several more COVID-19 hotspots.
In contrast, restrictions on certain Central and South American countries have been lifted, causing these regions to account for the greatest portion of inbound travel.[xv]
However, although now contributing the most to inbound travel, Latin American visitors have still decreased, albeit not too drastically. In comparison, European visitors have declined by as much as 12 million from 2019 to 2020 while Asian travelers have decreased by close to 10 million.[xvi] Yet in the summer of 2021, the White House reaffirmed its travel restrictions, a moderating of fears, increases in corporate travel budgets and a return to more normalized work patterns.
The travel industry in the U.S. can move toward recovery by tapping into one of its largest international markets: Canada. Before August 2021, the land border between the U.S. and Canada was almost entirely closed beginning on August 9, 2021, Canada reopened its border to Americans, if only partially. However, U.S. restrictions have not yet been lifted on the land border.
U.S. hotel recovery will depend on two primary factors: a decrease in COVID-19 cases and an increase in business and international travel. The two factors are dependent on each other. Although the industry still has a bumpy recovery path ahead, the data suggests that the most challenged times may be behind us.
[i] Goldstein, Michael. “2020 Airline Traffic Drops to 1984 Levels.” Forbes, Forbes Magazine, 20 Feb. 2021, www.forbes.com/sites/michaelgoldstein/2021/02/18/dont-bring-back-the-80s-2020-airline–traffic-drops-to-1984-levels/?sh=3b9bc72f4d9a.
[ii] Firshein, Sarah. “To Many Travelers, 2020 Was the Summer of 1965.” The New York Times, The New York Times, 4 Sept. 2020, www.nytimes.com/2020/09/04/travel/to-many-travelers-2020-was-the-summer-of-1965.html.
[iii] “COVID-19 Travel Industry Research.” U.S. Travel Association, 9 Apr. 2021, www.ustravel.org/toolkit/covid-19-travel-industry-research.
[iv] Firshein, Sarah. “To Many Travelers, 2020 Was the Summer of 1965.”
[v] “TRAVEL: THE HARDEST-HIT U.S. INDUSTRY.” U.S. Travel Association, 11 June 2021.
[vii] Sophie, Quinton. “International Tourist Drought Hits Some States Hard.” The Pew Charitable Trusts, 2021, www.pewtrusts.org/en/research-and-analysis/blogs/stateline/2021/06/28/international-tourist-drought-hits-some-states-hard.
[ix] “TRAVEL: THE HARDEST-HIT U.S. INDUSTRY.” U.S. Travel Association, 11 June 2021.
[x] “INBOUND MARKET PROFILE: CANADA (2020/21).” U.S. Travel Association, 2021.
[xii] Miller, Claire. “2020 Was the Worst Year Ever For U.S. Hotels. Here's What's Next.” NPR, NPR, 27 Jan. 2021, www.npr.org/2021/01/27/960384171/2020-was-the-worst-year-ever-for-u-s-hotels-heres-whats-next.
[xiii] Sophie, Quinton. “International Tourist Drought Hits Some States Hard.”
[xiv] Jack, Corgel. “How Much Do U.S. Hotels Depend on International Guest Stays?” Econometric Advisors' Blog, CBRE Hotels, 10 Oct. 2017, www.cbre-ea.com/public-home/deconstructing-cre/2017/10/10/how-much-do-u.s.-hotels-depend-on-international-guest-stays.
[xv] Sophie, Quinton. “International Tourist Drought Hits Some States Hard.”