The Plan to Recovery
When Will Visitors Return?
We certainly cannot understate the impact of the federal, state and local level shelter in place orders on domestic consumer spending, investment and travel. Economists continue to share a dismal outlook for the remainder of 2020 including an estimated GDP contraction of over 5%. Other economists predict unemployment to surge from 12-15% or higher before things begin to subside.
Alarming statements are being made daily from experts across the country. For example, the Surgeon General of the United States, Dr. Jerome Adams was recently quoted as saying, “this is our Pearl Harbor moment” and “it’s going to be the hardest moment for many Americans in their entire lives”. Some economists are predicting as much as a 40% decline in the US economy while others indicate that recent stimulus packages will result in the US debt eclipsing $30 Trillion. In the midst of all of this, studies show that a majority of Americans are living paycheck to paycheck and many families lack the funds to cover a $2,000 expense.
That said, analysts are predicting some areas of opportunity for the travel industry in Q3 and Q4 of 2020. While the US travel industry is facing a projected $400 Billion dollar loss, experts agree that rural areas will likely not experience the significant negative impacts like the metro areas. In fact, US travel is expected to continue to improve through the summer and fall of 2020 with rural areas likely rebounding more quickly.
While some indicators remain positive related to recovery, make no mistake, the US travel industry is likely to see an unprecedented drop in demand and revenues. A rebound is likely, but the year over year numbers for 2020 will be nowhere near 2019.
One challenge for the hotel industry will be the sharp decline in ADR in 2020. Even with the predicted recovery in late 2020 and 2021, ADR typically lags other indicators and generally experiences a sluggish, more long-term recovery trajectory. Certainly, lower ADR will impact profitability and will change the financial projections for both existing and prospective hotel operations.
On the positive side, recent Shelter in Place orders have created significant pent up demand. It would be hard to argue that a majority of people are not ready to get out of their homes and travel. In fact, experts predict that late 2020 and 2021 travel will put the industry on the road to recovery. Given the continued need for social distancing as well as concerns over COVID-19 response in other countries, international travel will likely not be a preferred option for many travelers in 2020, and even 2021.
According to travel industry experts, a significant share of the US population plan to travel when the virus begins to subside. Domestic travel is positioned to recover more quickly, but with
