Future of travel: En route to a new post-pandemic reality

Of all the sectors of the global economy that are confronting profound and irreversible change, travel is perhaps the most extreme.

Globally, while tourism is expected to recover somewhat following a vaccine roll-out, business travel, in particular, may well never be the same as it was before the pandemic. As companies globally cut costs and carbon footprints, now that we have all come to learn how to use video conferencing technology it will be hard to see how demand for business travel will ever fully come back. According to the Financial Times, this reduction in business travel has meant a $710 billion loss for the industry in 2020.

Business travel will never be the same

Those lovers of the business class lounges and free glass of champagne may have to get used to settling for more mundane pleasures, in between commenting that a colleague is ‘on mute’. According to PwC, as much as 75 per cent of airlines’ revenue on some international flights is from business travellers.

In addition to that, major international hotel chains such as Marriott estimate that up to 70% of room bookings have traditionally come from business travellers.

The question remains: will people actually ever want to travel as much as before?

Outlook for South African tourism industry

Things are particularly extreme in the case of the South African travel and tourism industry as it faces a combination of a dwindling tourist sector and cuts in business travel.

Until 2019, the growth of the travel sector had been an absolutely critical engine of growth for South Africa’s economy. According to the World Travel and Tourism Council, the 2018 contribution of the tourism sector in South Africa directly accounted for 2.8% of real gross domestic product (GDP), which amounted to R139 billion, and was projected to grow to R145.3 billion for 2019.

The indirect contribution of the tourism sector to the economy’s GDP in 2018 stood at an even higher 8.2%, which captures the strong economic links to the demand and supply side that the sector has with other sectors of the South African economy.

READ: British Airways cuts flights between London and Durban

Business travel is the lifeblood for airlines and hotel

More importantly, travel and tourism was not only an essential employer in South Africa, it was one of the only sectors that were growing.

Business travel too is the lifeblood for airlines and hotel chains across the country. According to international flight regulator IATA, over 50% of revenue on flights from Europe to Africa is from business travel which may never return. Domestically, airlines such as Comair and SAA have been decimated by the slowdown in business and leisure travel, and hotel chains such as City Lodge have been on the brink of bankruptcy and forced into emergency equity raising.

The net effect of these trends is likely to be that the cost for leisure travel will increase as the business travel demand falls off; the age of budget weekends in Durban and Cape Town may be a thing of the past.

Many disagree, however, with not only the new airline ‘Lift’ opening for South Africa domestic routes but Comair coming back from business rescue and now offering competitive tickets on both its British Airways and Kulula brands. SAA and Mango look set to continue operating, mostly due to the largesse of SA taxpayer bailouts.

Travel, whether leisure or business, will continue but once the dust settles it will be a very different industry. For protagonists, be they international hotel chains or airlines or the smallest BnB and guest house operator on the Garden Route, to succeed but moreover merely to survive will be contingent on how effectively they can adapt to this completely new environment.