The covid pandemic has ended. Again.

New academic paper explores the four recovery scenarios impacting growth in the travel and hospitality sector

Travel and hospitality is an inherently optimistic business sector. The investments made creating incredible hotels, leisure facilities, restaurants and attractions are vast. The mantra ‘build it and they will come’ may in fact come from a Hollywood film, but these days it is a frequently heard saying in boardrooms around the globe.

While this positive take fuels innovation for companies and drives expansion, it can also have a downside. And this is something Pace Dimensions’ managing director Tim Davis and Jeroen Oskam, research institute director from HotelSchool the Hague, have explored recently in an academic research paper investigating how the industry may have been perhaps too upbeat in its assumptions with regards to the post-Covid recovery.

The report, ‘The Covid-pandemic has ended. Again’, has been published by leading academic research platform Emerald Publishing as part of the Journal of Tourism Futures. It investigates why the widespread belief that a pronounced ‘V-shaped’ decline and bounce-back for demand were and are misplaced.

Of course, context is everything. Travel and hospitality perhaps believed it would recover strongly given that is what it has always done. Past evidence of a robust recovery is everywhere, from the short-term hits of terrorist activity to longer-term impacts of the sector such as large-scale natural disasters. Across the world there are myriad examples where travel booms – eventually – after experiencing these events. Even past epidemics, such as SARS, have been overcome. So what were the assumptions, and where has the industry gone wrong?

In general, the belief was that widespread vaccination would prevent transmissions, that social and economic restrictions would be short-lived, and that consumers would be keen to spend again when the pandemic was over. However, Davis and Oskam suggest that these assumptions are too simplistic – and needed proper stress testing. Having done that, four contrasting scenarios are now playing out simultaneously. These are:

1. Cautious rebound: travel and hospitality businesses returning to ‘normal’
This baseline scenario can be viewed in much of the western world, where widespread vaccination programmes have been rolled out and the worst symptoms of Covid-19 are now in check. The end of travel restrictions means businesses kept afloat by government loans and furlough schemes can now return to work after a period of hibernation.

All well and good, but as we have seen, the return of normal life has brought demand-led inflation and labour shortages, while pent-up demand in both the leisure and corporate travel markets has also caused issues. However, in the longer-term the outlook is for a gradual normalisation in demand.

2. A sick world: limited travel and hospitality recovery in the developing world
Elsewhere, vaccines are not having the required impact. Low vaccination rates and the emergence of new variants continue to threaten society. In some of the poorest countries, such a scenario means Covid could continue to run unchecked, especially without governmental support. As such, economic recovery is being hampered and nations potentially face international isolation. The prospect of ‘Covid-ghettos’ emerging could create social tensions, inflame violence and erode consumer confidence, All the while, travel becomes something only richer consumers can do.

3. Endemic covid: lockdowns impact the long term recovery of the travel and hospitality industry
This scenario involves a world where vaccines are in short supply, do not offer durable protection, or face low take-up rates. Here, the pandemic continues in geographical pockets, with governments facing a constant round of ‘on-off’ lockdowns. Such a situation affects consumer confidence, makes planning difficult and leads to economic stagnation. In such a world, international travel can resume, yet it requires serious, co-ordinated cooperation between nations around health and safety controls. As we have seen, getting this degree of consistent consensus is not easily achieved.

4. Medicalised society: uncertainty drives new ways of living and working
Medical advisors have increasingly come to the forefront as countries shaped their Covid response. With these new policy figures has come a renewed belief – for many – that technological solutions will shape society. As we’ve seen in the west, digital working and flexibility have changed employment and leisure opportunities, but this is not universally welcomed. In the US in particular ‘pandemic anger’ – linked to a suggestion that Covid is a hoax or conspiracy – is widespread and a large minority are pushing back at this new world order. The result is increasing political polarisation, which in turn creates uncertainty.

As a result of these four conflicting scenarios running side by side there has been an inevitable stutter in the global recovery. Poor level of coordination between nations, and differing responses to inflation, vaccine availability, high unemployment, rising interest rates and nationalism have all stymied the assumed quick recovery.

What has emerged is a need to re-evaluate how quickly things may return to pre-pandemic levels – plus a need for travel suppliers to shake up provision by unbundling higher-yield services, offer more flexibility and package products smarter. Understanding why consumers are travelling, and what they require for each individual trip, has become increasingly important.

Looking further ahead, travel and hospitality providers must better grasp the drivers of demand – most particularly vaccine effectiveness, the social and economic restrictions to travel, and consumer confidence.

When it comes to the virus’ future, it seems virologists are still uncertain as to how Covid will develop. Most likely is that it becomes endemic, with a weakened form still causing widespread death in unvaccinated populations and less-serious infection continuing to impact on everyday life. As such, demand continues to be depressed. Meanwhile, further restrictions to people’s economic success and liberty still cast a cloud over recovery. Elsewhere, Russia’s invasion of Ukraine and rising global inflation threaten consumer confidence and run counter to the benefits of a globalised world.

What has become clear is that uncertainly reigns. The idea that a ‘V-shaped’ recovery was on the cards now looks fanciful. Demand and supply shocks, societal shifts in work-life balance, on-going travel restrictions and political polarisation are combining to interrupt years of ingrained growth and there is no ‘normal’ anymore.

To download and read the full whitepaper, authored by Tim Davis, managing director at Pace Dimensions and Jeroen Oskam, director the HotelSchool the Hague’s Research Institute, please visit the The Covid-pandemic has ended. Again. | Emerald Insight.

To explore recovery strategies for your travel and hospitality business contact Tim Davis on tim.davis@pacedimensions.com