Travel’s Uneven Covid Recovery Sees Record Revenues, Lessons And Lingering Obstacles

Despite the chaos at airports, airline cancelations and staffing shortages, travel industry executives attending Virtuoso Travel Week in Las Vegas say consumers should begin to see their experiences returning closer to pre-Covid times, even if it costs more. While travelers and travel advisors say there are still plenty of gaps, officials of hotel companies, cruise lines, tour operations and tourist offices say most of the bumps are behind them – and us. It comes as the industry, which before Covid-19 accounted for about 10% of world GDP, is seeing an uneven recovery, with some destinations and providers recording record revenues while others struggle against lingering restrictions.

Destinations

For example, Japan has reopened to exchange students, group tours and business trips, while independent leisure travel is still not allowed. Michiaki Yamada, Executive Director of the Japan National Tourism Organization, hopes that will change by next year. FIT numbers, often high-spending luxury travelers, are at just 5% of pre-Covid totals.

Down under, Managing Director of Tourism Western Australia Carolyn Turnbull says the state’s travel businesses have been able to ramp up quickly with financial support from the government. Since international travel reopened in March, overseas visitors have reached 60% of pre-Covid levels. There are also new luxury properties, including a Ritz-Carlton in Perth and Samphire Rottnest, a private island set to open in October. Qantas is again operating its nonstop connecting London and Perth. Last month the national airline added its first-ever nonstop flight to Rome, also from Perth.

Tourism Montreal CEO Yves Lalumiere says he hopes that Canada will eliminate its buggy Arrive Can app and random testing soon. Despite the recent rebound – hotel revenues in July were 22% ahead of 2019 – the slow reopening means U.S. arrivals will likely end the year close to 30% below pre-pandemic levels. However, like virtually everyone at the conference, he believes the future looks bright. Montreal’s more than 100 festivals are back; over the past four years, the city has added more than 30 new hotels.

Sean Keliiholokai of the West Hollywood Travel + Tourism Board says since Los Angeles hosted the Super Bowl in February, ADR at its hotels has been beating 2019 levels. Even if occupancy lags, it’s still “day and night from the worst, when it was 8%.” International travel restrictions mean domestic visitors now account for 75% of totals, up from 60% before Covid. However, he adds that key markets like Australia and Canada are showing signs of recovery.

According to Michelle Buttigieg of the Malta Tourism Authority, hotels used shutdowns to start and complete renovations. She says airline connectivity to the island nation is back to 90% of pre-Covid levels, although, like many places, she says some businesses are struggling to reopen fully. “I think if everyone is honest, they will tell you, yes, there are restaurants and so forth that still have limited hours. Everyone wanted very badly to just have everything takeoff again like a rocket. As an industry, we are getting there, but we are still on the runway.”

As most executives say numbers are getting back to pre-pandemic higher, Brad Dean, CEO of Discover Puerto Rico, reports 2021 set an “all-time record” for visitor numbers, visitor spending, and tourism-related employment. In the first half of 2022, he says the territory is beating last year’s records. Of the robust totals, he notes, “That’s net of the cruise industry not being fully back and a slower recovery in the meetings and incentive market.” He credits the gains to marketing, enticing visitors to engage with the local culture and ecotourism. Visitors who have been exposed to its ad campaign stay an average of six nights instead the typical three nights, he says. Still, he acknowledges hotels are challenged to get back to pre-pandemic service levels, saying of workers, “We’re faring better than most…but still need more.”

Another destination that is coming back fast is Africa, says Sherwin Banda, President of African Travel. He says right now, the biggest issue is availability for 2023. “The camps are small, and people have to plan ahead,” he says. Covid also caused consumers to ratchet the continent up their bucket list, partly inspired by its lack of crowds. “Africa was social distancing before social distancing.” This year revenues should approach 85% of 2019 levels, and in a major shift, its fastest growing demographic is travelers under age 55, including more families.

Insight Vacations, which focuses on escorted motor coach tours, won’t restart itineraries to Asia until next year. However, the pandemic spurred demand for U.S. national parks. Despite initially thinking she might have to limit capacity on motor coaches, she says that hasn’t been an issue. There have been barriers to overcome, such as having restaurants in the parks shut down. However, the company pivoted to offering picnics, something she said scored very highly in post-trip surveys. It also led Insight to add programs for smaller groups using 17-seat Mercedes-Benz Sprinter vans.

Cruise Lines

One of the hardest hit segments of travel has been the cruise industry. After shutting down, restarts were hamstrung by Covid outbreaks on board, hiring back crews who had dispersed around the world, and then dealing with ever-changing restrictions that made itineraries subject to constant changes.

Azamara CEO Carol Cabezas says the stormy weather is now in its wake. All four of the line’s ships have been back in service since May, and she says revenues are being boosted by past customers who are cruising more often. The only thing missing from its pre-Covid offerings is its signature AzAmazing Evenings, where it would create private gala experiences onshore for the entire ship’s passengers. She says securing space and planning the events requires a year-and-a-half lead time and promises they will return.

For Ponant, just this month, it was able to get its entire fleet back into service. Navin Sawhney, CEO of Americas, says there are no longer disruptions to itineraries, and the line’s expedition vessels are offering the full range of amenities and services as before the pandemic, including its dining partnership with Alain Ducasse. Its newest vessel, Le Commandant Charcot, rated as a Polar Class 2 icebreaker, entered service earlier this year.

Likewise, Seabourn now has all five of its ships sailing again. While itineraries that visited Russia, Japan and China had to be altered, Steve Smotrys, a vice president of Carnival Corp.’s luxury brand, says the biggest challenge is getting new staff performing at the high levels guests expect, something that improves every day. “Overall, it’s amazing,” he adds.

On the rivers, Uniworld Boutique River Cruises is seeing occupancy levels at around 70% compared to 90% before the pandemic. Last year it managed to launch five ships, and only India and Vietnam have yet to restart. Ellen Bettridge, the CEO, says the company was able to rehire 94% of the crew by offering anyone who returned permanent contracts, which bring health benefits, a pension, and more stability.

Hotels and Resorts

While hotels are receiving criticism for raising rates while not fully restoring services and amenities, Jane Mackey, IHG’s SVP, Global Marketing-Luxury Brands, says the owner of brands from InterContinental, Six Senses, Regent and Kimpton to Holiday Inn used the crisis to conduct a “massive quality audit and exit hotels that weren’t performing from a quality perspective.”

She says the group has messaged individual properties about the importance of updating their websites on what’s open, what’s not, and any limitations. Transparency may be paying. Recent data shows fewer complaints about food and beverage, a sore spot for travelers arriving late or departing early and wanting to be fed.

Stephen Alden, CEO of Accor brands Raffles and Orient Express, says business at his luxury hotels is now mostly exceeding pre-pandemic levels in most locations, with bookings four to six months ahead of forecast. “It’s exciting and at the same time challenging,” he says, with more time and effort being spent on recruitment. Things are changing quickly – for the better, he says, noting only in recent weeks have its properties in Paris and Singapore been able to fully open all restaurants and bars.

Minor Hotels, which owns eight brands, including luxury group Anantara, has seen its fortune diverge based on geography. Thailand, which recently dropped restrictions for foreign visitors, is now seeing a boost as arrivals shot up to around 50,000 per day from about 1,000 in a matter of weeks. On the other hand, Michael Marshall, the group’s chief commercial officer, says hotels in Dubai “were very quick” to recover. National carrier Emirates was among the first international airlines to restore much of its schedule.

In Mexico, Velas Resorts properties were only shuttered for about three months. Still, the road back has been long and challenging as each state implemented different regulations, including occupancy limits. While last year the restaurants operated with slimmed-down hours and menus, Executive Director Denys Montes de Oca says the only noticeable difference is at buffets, guests still need to wear masks. Staff still wears masks, something she says makes guests feel more comfortable. While markets like Canada, Europe and South America have been slow to return, increases in U.S. visitors have more than made up for it. In recent months, revenues are tracking 20% ahead of 2019 levels, with rates running 30% higher. Even though the meetings business won’t return in a large way until at least next year, she says destination weddings are back in a big way, beating pre-pandemic levels.

For Nayara Resorts, which operates six boutique properties in Costa Rica, Panama and Chile, it has been a mixed bag. Its property on Easter Island will reopen next month after being closed for two and a half years. In Costa Rica and Panama, business was back to normal by early 2021. CEO Leo Ghitis says the quick comeback was helped by a decision not to furlough any staff and its profile of small, secluded properties with freestanding villas, most with their own plunge pools. “It was a good time to be off the beaten track,” he says.

Ted Turner Reserves, which promises guests “vast short-grass prairies, staggering slot canyons, flowing streams, desert plains, and other breathtaking locations,” was also well-positioned, says Aman disciple Jade McBride, president of the CNN founder’s luxury eco-retreats. The remnants of the Covid area are mainly reporting requirements at this point, he notes, and the company has moved forward with expansion plans that have seen it grow its Vermejo property, which sits on 550,000 acres, from eight to 110 employees. Last year it contributed $500,000 in tax revenues to local coffers in New Mexico.

After spending $875 million to buy The Boca Raton in 2019, Michael Dell has already spent $200 million on a massive renovation and repositioning that is designed to position it alongside American classics such as The Breakers, Sea Island and The Broadmoor. President and Chief Executive Officer Daniel A. Hostettler, who cut his teeth with Peninsula Hotels before launching several small five-star properties, has divided the behemoth into five distinctive hotels, each with its own general manager. Plans call for spending over $100 million more on renovations, but that’s not it. Average wages are about 25% higher than pre-Covid levels, and attracting talent, always important, has become more critical. He believes independent hotels have an edge. Just like guests are looking for “curated experiences, so are employees.”

While New York City may have suffered hugely from the Great Pandemic of 2020, Pradeep Rama of The Baccarat says June and July were record-breaking months for revenue and rates. Restaurants and bars are back to pre-Covid hours, and the spa has even extended its operating times; the general manager says it is a tip to higher prices and a way to “add value for guests.” While things may seem back to normal, reminders such as sneeze guards at the front desk remain, for now, perhaps a reminder that things are still not entirely back to normal.

Travel Insurance

One of the most interesting segments of the travel industry, when historians look back on the Covid era, will be travel insurance. Travelex Insurance Services, part of Zurich Insurance Group, saw expenses rise with record payout to settle claims and, at the same time, saw an onslaught of new customers at a rate not seen since the terrorist attacks of 9-11.

“Sometimes it takes a large, catastrophic event to show people the value of something they hadn’t thought about,” says the unit’s CEO Shannon Lofdahl.