How should the travel industry rescue itself?
Survival strategies for budget airlines, small hotels, and cruises under the pandemic
The travel industry is one of the most hurt fields since the outbreak of COVID-19 this year. Many companies are in full collapse and industry groups flocked to Capitol Hill with the hopes of a government bailout.
However, as the $250 billion portions of the Treasure Department package to the travel-related businesses mainly target the large airlines and hotel chains, smaller and deep-discount airlines and hotel groups are the losers of the federal bailout.
So how the travel companies, who failed to received sufficient government fundings, self rescue themselves in the global pandemic? Let take a look at the suggested strategies of different categories.
Unlike large airlines that have their own lobbying organization to influence the policy in their favor, small and regional airlines are struggling to survive and compete with the main airlines.
With the decline of demand to fly, the prime strategy was to cut the costs and operations. For example, Spirit Airlines proposed its “survival mode” to requested an exemption from the rule and submitted a list of 26 cities it would like to discontinue serving, including New York, Minneapolis/St. Paul, San Francisco and Indianapolis. Allegiant dropped 21 cities, including Albuquerque and Tucson, as a response to its passenger traffic fallen 90% from normal levels.
According to a letter by the hotel association sent to congressional leaders in April 2020,
“Hotel revenue has declined by nearly 70% since the outbreak Covid-19.”
While the government bailout aims to pay staff salaries, 60% of a hotel’s expenses are fixed costs, which shows a mismatch when it comes to hotels’ needs. Therefore, the immediate task for the hotel industry, as a whole, is lobbying the government to modify the bailout program and ask for more latitude in how they use the federal money.
A unique strategy for small hotels is to provide at least some sort of living facilities for families or individuals under quarantine due to the COVID-19, which perhaps the large chains are reluctant to do, to keep the business alive during the hard time.
The general rule is that there will always be places where small independent hotels will survive, because they must be in certain places where the big chains are missing.
Cruise lines are perhaps the most injured ones in the travel industry, as CDC recommends that travelers defer all cruise travel worldwide. Even worse, cruises are unlikely to be treated as “essential” like air and hotel because they neither carry cargo nor participation in the necessary transportation or logistics supply chain. There is nothing cruise lines can do currently and thus, they should create a vision of the future.
A potential strategy is to build and rebuild the trust of their long-term loyal customers. For example, provide some vouchers for future itineraries, ease the cancellation and refund process, etc. Cruise lines should also redesign the structure and safety performance of their ships to prevent a “Diamond Princess”-like public health tragedy from happening in the future.