KPMG: UK travel sector trends 2021

Undoubtedly, 2020 has been a tough and unprecedented year for the travel industry.

In order to assess the impact and find out what is likely to happen later this year, I spoke with Will Hawkley (Associate Partner, Global Head of Leisure & Hospitality at KPMG), recorded in March 2021.

The key findings were:

  • Government has launched a hospitality rollout plan alongside the progress of vaccines that gives some optimism to people.
  • In Europe, the situation is still worrying, there are no allowances expected at least until the autumn.
  • Pubs and restaurants clearly struggled, and it will be interesting to see how government support continues – furlough, CBILS, delay on HMRC payments and rent memorandums allowed the business to survive in 2020 and the plan for many is to still re-open. But some challenges were not resolved (e.g. rent and HMRC), but just postponed. 
  • Airlines had a terrible time, in Asia and China it is coming back, in the USA it is more domestic flights which are running currently. 
  • Airways and tour operators should think about high flexibility around capacity changes built in their model – since the routes might be opened and closed down within 48 hours. 
  • People are reluctant to get on a plane – they are conscious of social distance during the flight and personal safety.
  • Staycation – people might be booking the holidays in the UK, but still thinking about travelling abroad, and if the situation allows them to do – most of the UK based plans are likely to be cancelled. Therefore, tour operators should consider the cancellation aspect. People are basically double-booking the holidays – once the air corridors are open, people will definitely consider going abroad (Greece, Turkey, Cyprus etc).
  • We expect a phased approach back to travel normality;
    • Summer = UK domestic travel, which is largely booked already.
    • End of summer = European travel. Possibly in June-July, but not expected before.  
    • Early 2022 = long haul, it seems unlikely this will return until next year. 
    • 2022 = Business travel – will it ever come back? 20-35% of businesses are not expecting this to come back at all because they changed their behaviour. 
  • People will want to return to in-person conferences, because of the conference networking experience that cannot be fulfilled online. Demand for socialising offline is an evergreen trend. 
  • Vaccine passports or applications are likely to be rolled out – the EU is considering this option. The vaccination process and its speed will determine the type of travel on the travel market and the types of travellers. Different countries will have different limitations and quarantine rules (for instance, if you need to quarantine for 11 days or is it just when you come back home) – these aspects will influence the travel routes.
  • Flexibility and refund policies offered to the customers are key points to retain the trust and attract new customers. There is a tendency to roll over the holiday bookings for 2021 or 2022. Pricing is not likely to rise until 2022. 
  • Because of the uncertainty and the level of trust, the tradition tour operator model will still be resilient – if you book with a tour operator, in most cases you can get your money back, or it will be rolled over as opposed to building your own package option.
  • Technology use is accelerating – the digital capability of the brands is crucial to make the customer experience better and get the customer data to adjust the marketing and business model. This will be applicable in all the areas – resorts, supermarkets, restaurants etc.
  • Events will happen gradually with limited capacity – sporting events, Euro 2020, music festivals etc.
  • The level of deposit will not be high while trust is low – this will affect the business model if the deposit is the key part of the tour operator cash flow.
  • People are switching from airlines to trains or other alternatives – environmental sustainability and consciousness. 

Watch the full recording or check our travel SEO report. Hopefully, see you in a warm, sunny location soon!