Travel companies are fighting for their lives. Being at the bleeding edge of the storm has violently thrown us from a predictable risk environment into the deep uncertainty of uncharted waters.

Nobody has a playbook, and only with a clean-sheet mindset and the proverbial “out-of-box” thinking will we manage to find our path out of this mess. We might not come out stronger from it, but hopefully faster, leaner, and a little wiser.

This piece aims to forward-engineer four possible scenarios for how the travel industry will emerge once this pivotal crisis is over.

A peek into the future

The potential scenarios that unfold are narratives of four plausible outcomes in the travel of the current COVID-19 catastrophe. Each future substantially differs from one another, highlighting profound trends this crisis has unleashed and that might play out in very different ways.

To bring the scenarios to life, I created a matrix that addresses the uncertainties around traveler behavior and economic recovery.

• Y-axis: “to which degree will travel behavior change after the pandemic?” This axis reflects a wide range of collective shifts in societal attitudes about why and how we travel.
• X-axis: “how long will the economic crisis last and how fast will the world recover?” This axis illustrates the depth and length of the economic downturn and the degree that it will impact companies across the entire travel industry.

Depending on how the economic recovery and the changes in travel behavior play out, a very different travel industry landscape will emerge out of this crisis. The different outcomes can be distilled in four distinctive scenarios:

Game-changing trends that will dictate the outcome

Among all the moving pieces unfolding in the current seismic shock, a number of consumers, health protection, regulatory and macroeconomic trends stand out.

They will all shape either the economic recovery on the X-axis or the travel behavior on the Y-axis.

Let us look at these potential game-changers:

• Consumer shifting towards online shopping and experiences
• Virtual becomes business as usual
• Health and hygiene standards go mainstream
• Social distancing while traveling

Health and economic drivers impacting travel

With the entire world was brought to a crashing halt to help control the spread of the virus, there was simply no historical precedent on when and in which shape the economy will rebound.

Economists traditionally sketch three broad possible recovery scenarios, which are described as V-U-L:

• V-shaped
• U-shaped
• L-shaped

How long it takes the world economy to get back on its feet will profoundly shape the future of our travel industry.

• Virus severity and spread
• Government economic policies
• Border barriers and travel restrictions

The scenarios, beginning with the first below and in further articles, outline four ways the interplay between the economic crisis and travel behavior shifts might unfold and its ripple effects on the transport, accommodation, and travel distribution sector.

Scenario 1:  Travel swings back to normal in 2021

If history is any lesson, recent epidemic outbreaks have enjoyed a classic V-shape GDP recovery, as these charts from a Harvard Business Review paper clearly illustrate:

Containment efforts in all countries made the outbreak peak in April 2020. The rapid drop in new cases and mortality from May onwards is allowing governments to gradually start relaxing social distance measures following the successful playbook of Asian nations. And now, it appears public sentiment and business confidence starts moving up again.

On the economic front, governments and central banks across the world opened up the financial floodgates, pumping a jaw-dropping $8 trillion of fiscal stimulus into the global economy.

This unprecedented effort in postwar history allows industries to absorb most of the shock of the economical shutdown for both businesses and workers hit by the COVID-19 sledgehammer, preventing larger structural damages to the economy.

Looking forward, the fear of a second wave in the fall of 2021 does not materialize, thanks to a world much better prepared to selectively contain the virus.

In Q4, most of the world enjoys a strong economic rebound reaching pre-crisis metrics in early 2021 and triggering a new growth cycle for years to come.

 

The miracle of traveling

Recent crises have shown us that travel is one of the world’s most resilient sectors – and this time will be no different. The industry’s underlying demand economics of a growing global middle class, with the financial means and the desire to discover the world, remains untouched.

Glimmers of hope can already be spotted in China, where four months after the initial outbreak, with the easing of movement restrictions, traveler confidence bounced back.

In April 2020, Chinese airlines added approximately 600,000 seats back each week into scheduled services, mainly on domestic routes.

Even if the shock-recovery time takes longer in the Western world, travel bans are gradually being lifted from May onwards and consumer travel sentiment is starting to rise again.

The pent-up demand during the lockdown period, the eagerness to visit friends and family, and millions of credit vouchers issued by airlines in exchange for canceled bookings are strong drivers to bring travelers back to the road.

Most nations focus on bringing domestic travel back to life for the summer season to protect themselves from potential second-wave outbreaks from overseas and to support their local tourism infrastructure.

Tourism levels during the summer peak season are still a long way from pre-crisis levels, but it sows the seeds for a progressive ramp-up of most of the worldwide transport and accommodation industry.

During fall and winter, with seasonal outbreaks under control thanks to laser-focused social distancing measures, travelers’ confidence keeps growing, and business travel swings back to pre-crisis levels.

What back in the darkest moment of the global lockdown looked more like a miracle than a credible reality, has happened: travel is back, and the scars left by the downturn have healed in record time.

Some coronavirus side effects will certainly stick around for some time, mostly around hygiene and safety concerns. Health screening and stricter vaccination controls translate into longer queues in airports and at border checks.

 

Green shoots everywhere

Across the travel landscape, all sectors see green shoots emerge between Q3 and Q4. Players with a weak balance sheet before the virus outbreak stumble and fall, but most transport, accommodation, and distribution players, heavily backed by financial aid during the crisis, manage to get out of the dark tunnel in reasonably good shape.

Ground transportation, notably high-speed trains, enjoy a strong boost from early Q3 thanks to the rapid increase in domestic travel.

Similar to previous crises, online travel agencies take the lead on the recovery front by capturing the rising online demand thanks to their edge on search engine marketing and metasearch traffic.

But airlines and hotel chains are not willing to repeat the 9/11 errors, where a new breed of tech travel distributors, such as Expedia and Booking.com, capitalized on the huge distressed inventory from suppliers and the online shift of consumers to become the new travel giants in today’s world.

They are now stronger, faster, and smarter on the digital front and will fight for their share of the direct business. As a result, 2021’s growth momentum in travel will be evenly shared between suppliers and OTAs.

Google Travel, which in the pre-coronavirus world already dominated the travel sector like no other thanks to its market-crushing search engine and neatly integrated travel ecosystem, sits in the front row of the recovery phase, harnessing the ever-increasing shift towards hyper-connected consumer behavior.