What's the Economic Impact of COVID-19 on the Travel Industry?
The COVID-19 pandemic has many asking what both the immediate and long-term economic effects on the travel industry will be.
NTA recently surveyed its members to gain insight into their experiences. Their responses reflect the significant negative economic impact the travel industry is experiencing as a result of the COVID-19 crisis.
"In February, we were forecasting record profits, with 95% of it coming from March to October," said Paul Larsen, president of Ed-Ventures, an NTA tour company member based in Rochester, Minnesota. "Now my goal is to make it through the end of the year."
Key Survey Findings
43% of responding tour operators have furloughed or laid off employees, and 31% have reduced staff member hours. An alarming 70% of tour suppliers have furloughed or laid off employees, while DMOs are faring slightly better: 59% have not made reductions in staff positions or hours.
Every responding tour operator, DMO, and supplier has experienced cancellations. Operators report that the bulk of cancellations were set for March, April and May, but they are also seeing cancelations into 2021.
Of the operators that canceled trips, 79% refunded customers and have received refunds from vendors. Nearly half (47%), though, have issued refunds to customers without first receiving refunds from vendors. Some have issued refunds under both scenarios. NTA tour operators have canceled more than 59,000 trips, affecting nearly 1.8 million travelers, and have refunded nearly $1 billion to customers.
The vast majority of DMOs and tour companies are open for business—but with staff working remotely. At least half of responding tour suppliers are temporarily closed, with others operating on reduced hours or having employees work from home.
Of tour operators, 54% have postponed trips to later in 2020 and offered credits to travelers. Almost as many (51%) have pushed scheduled trips to 2021.
Most DMOs (93%) have enacted budget freezes or reductions, as have operators (88%) and suppliers (74%).
Of responding tour operators and suppliers, 80% said their company plans to take advantage of federal stimulus programs. While only half of the DMOs currently plan to apply for federal funds, it's important to note many do not yet fit eligibility requirements.
NTA tour operators such as Laurie Lincoln, CTP, president and CEO of Main Street Experiences in Lakewood, California, are finding that acquiring those federal funds is neither simple nor quick.
"After numerous phone calls and visits to my bank, I got an appointment to file an application for the Paycheck Protection Program earlier this week," Lincoln said. "My banker took my application and copied the information by hand onto their own form. I gave her a one-page payroll report, and that was that."
Lincoln said her banker, who appeared flummoxed by the new program, didn't ask her to submit tax returns or any of the other information Lincoln had taken to the appointment. "I have no idea where it goes from here, and there was no point in asking my banker because I'm sure she has no idea, either."
Ed-Ventures' Larsen, too, is seeking federal assistance for his company, but in the form of an Economic Injury Disaster Loan.
"If I can get the EIDL, it will still be rough sledding, but we have a good chance to make it through the end of 2020," he said. "Without the EIDL, it will be much, much rougher, but we have a contingency plan."
Larsen added that with customers rescheduling canceled trips next year plus new business resulting from pent-up demand for travel, he projects a small profit in 2021 and a better one in 2022.
"That should give us enough to pay off the debt from this year and have a little left over," he said. "We can be grateful and keep moving forward."
That level of optimism is not unique to Larsen. NTA President Catherine Prather, CTP, said although she is hearing deep concerns from members, they also are showing their resiliency.
"They are thinking ahead about travel in the post-COVID world because this is not only their livelihood—it's also their devotion," Prather said. "People have a need to travel and a deep desire to explore what's out there, and our members make that happen."
The COVID-19 NTA-member Business Impact Survey, which ended April 3, 2020, was completed by 253 NTA members, including 112 tour operators. For more information about NTA and its response to the pandemic, visit NTAonline.com/covid-19-central.
Courtesy of Groups Today.