Lack Of Travel Demand: OTAs With Deepest Pockets Will Survive
Anna Kroupina, Open Jaw
The coronavirus pandemic reduces both the ability and willingness to travel, severely affecting consumer spending for 2020, says GlobalData. And as financial performance is entirely dependent on the direct spending of consumers, all travel intermediaries, from the traditional in-store travel agency to OTAs, are at risk.
Last year saw US$1.9 trillion spent on outbound global travel.
According to GlobalData’s latest figures, US$166 billion was spent on travel intermediation in 2019, which is equivalent to 8.7% of global expenditure.
“Companies with a steady financial performance, operating through a multi-branded strategy and high cash reserves, are more likely to survive in this war-like period. But ultimately, lack of consumer spending is the greatest threat faced by all travel intermediaries and travel sectors," says Johanna Bonhill-Smith, Travel and Tourism Analyst at GlobalData.
“Travel intermediaries act as the direct link in the chain of distribution between a company and the consumer base working in tangent with airlines, hoteliers, cruise operators and insurance providers. Therefore, the financial performance and downfall of any travel-related sector will have a dramatic effect on intermediaries."
Despite a significant drop in share prices amid lack of demand, OTAs such as Expedia, Booking Holdings andLastminute.comare likely to be in a better position to weather the pandemic, says Bonhill-Smith. Traditional in-store travel agencies, however, will face greater challenges in a post COVID-19 world as more customers opt for an online booking platform over face to face interaction, she predicts.
“As travel restrictions continue to impose on the freedom of movement, the slump on consumer spending is not likely to lift anytime soon. It does remain clear however that the travel marketplace will be a lot less crowded as all companies struggle, with many on the verge of collapse," says Bonhill-Smith.
Anna Kroupina Journalist
Anna is OJ's newest member and she joins the team as a writer/reporter. She co-writes the daily news and covers events. Although she's new to the industry, pursuing a career path in travel/tourism has been a goal since her first family road trip to the Florida Keys sparked a desire to discover the world and this exhilarating, fast-paced industry.
Teodor Tanase- April 3, 2020 @ 16:37
Hi Anna ,
Just my opinion : I think Mrs Johanna Bonhill-Smith, Travel and Tourism Analyst at GlobalData is buying her tickets /vacations only on line. She never have been in a brick and mortar travel agency,or at least she never talked to one of us. She will be surprised to find out how many people returned to as after booking on web. Also for her information : the clients are dealing with us face to face in the following cases: a/to pay cash or debit b/ they are not owning a computer/smartphone or they are not sure how to use
their computer/smartphone c/they are making plans including more travel products d/they need our expertise. Here are one 4 reasons they will never use internet booking. In my agency those clients represent maximum 10%. What about the other 90% ? Please tell Mrs. Analyst they we are still using phones, emails, facebook, WhatsApp....so, on. If she wants to talk to us or even to buy, give her our phone number. Or my email address.
Stay safe. Have a nice weekend.
Teo Travel Services/House of Travel Global Montreal