Travel & Leisure Industry Woes Unlikely to End Soon with Challenge of Social Distancing

The British Prime Minister, Boris Johnson, in his recent address to the nation, acknowledged that the way of life had been severely impacted in the fight against the deadly virus with abandoned businesses, shuttered shops, and darkened pubs & restaurants. Unlike other sectors where social distancing norms could be applied, Travel & Hospitality sector could take a lot of time for their revival as it is unlikely to see footfall due to fear and lack of confidence among the customers. Social distancing and keeping the reproduction rate (R) in check would be the key to easing the lockdown.

Johnson said that the next two months in the UK would be driven by the science, the data and public health. As a preventive measure, travellers coming to the UK by air including Britons would be quarantined for at least two weeks. Moreover, he emphasised that the UK is likely to reopen its hospitality sector with selective businesses and other specific public places only if they adhere to social distancing guidelines and other safety protocols. The government will closely monitor the progress and would not hesitate to put on the brakes if deemed necessary.

The Plight of Travel & Leisure sector

The Two-week quarantine for people travelling to the UK would be the final nail in the coffin for the already devastated aviation sector. According to some media reports, the travellers would have to go through temperature spot checks and would be asked for a local address at which they will self-quarantine themselves for 14 days period from the date of landing in the UK. For non-compliance, fines and deportation could be the possible actions taken by the authorities.

This move will not only mount additional pressure on the already drowning airline industry but would also dent other sectors such as education and professional services. The government needs to chalk out a roadmap for protecting thousands of travel-related jobs across the UK. This move will not only discourage people from travelling but would also lower their confidence levels with regards to safe travel. This would primarily dent the hospitality and the tourism sector and would lead to loss of revenues for the British government.

Last week, the UK based low-cost air carrier, Wizz Air Holdings Plc (LON:WIZZ) announced plans of recommencing flights shortly, expecting ease of travel restrictions. (Wizz Air Holdings Plc shares were trading at GBX 2,672.00 at the time of writing before the market close (at 10:15 AM GMT) on 11th May 2020, down by 0.67 per cent versus the previous day closing price.)

The cruise company, Carnival Plc (LON:CCL) had also announced plans to recommence operations on specific routes shortly awaiting approval from authorities. (Carnival Plc shares were trading at GBX 928.00 at the time of writing before the market close (at 10:16 AM GMT) on 11th May 2020, up by 0.96 per cent versus the previous day closing price.)

The leisure sector also includes Pubs & Restaurants, a vital part of the sector which are likely to remain shuttered, even in the gradual easing of lockdown. The leisure spaces, such as pubs, contribute significant revenues to the treasury. They are not a part of the resurrection plan as of now. According to the British Beer and Pub Association (BBPA), thousands of pubs will close if they fail to gather support from the government. As per the data from the Office for National Statistics (ONS), nearly 25 per cent of the pubs have closed since 2001 in the UK. According to BBPA, the industry is already facing issues with the Business Interruption Insurance schemes, as 56 per cent of pub applications have been rejected, and 44 per cent of applications are awaiting some result. The Pubs paying rent more than £51,000 are not eligible for grants of up to £25,000 in a retail and hospitality scheme in the light of the nationwide shutdown.

With reference to Covid-19, the exact statistics are yet not known, but the government recognises them as riskier environments. The sector is likely to collapse if it is placed at last on the list of the British government’s plan of resurrection.

The Covid-19 outbreak has claimed more than 35 thousand deaths in the United Kingdom. People are advised to maintain social distancing and are asked to stay at homes. The rapid spread of the pandemic over the past few months has worsened the situation for global trade and has also caused devastation across the sectors. The global trade is likely to grow at minus 3 per cent in 2020, as per the IMF. With the lockdown & travel restrictions enforced in most of the countries, the Travel & Leisure sector has been impacted the worst.

The jet makers saw a reduction in the orders of newer aircraft. The airline carriers are struggling for their survival, seeking aid from the British Government. Experts believe that days of cheap air travel are over. The industry will see major consolidations in the airline sector, while some of the airlines might collapse. According to the International Air Transport Association (IATA), the overall revenues for the industry are likely to decrease by 50 per cent in the fiscal year 2020. When the skies reopen, the airline industry would be burdened with increased the cost of implementing new safety standards regarding the novel coronavirus. Pubs, restaurants, entertainment zones, high street retailers and other avenues of mass gatherings are severely impacted amid the lockdown imposed on 23^rd March, induced by the Covid-19 outbreak.

On 30^th April 2020, Boris Johnson, the British Prime Minister, said that the UK has now passed the peak of this deadly pandemic. The British PM, therefore, announced a resurrection plan to reboot the economy once the lockdown is eased. But the plan would only come into effect once some key conditions are met. According to these conditions, NHS must be protected. The death rate should decline in the UK. The rate at which people are getting infected by Covid-19 should decline as well. Testing should be carried out across UK. All the risks must be mitigated, which can lead to a second wave of the deadly pandemic.

All these conditions are useful in keeping down the reproduction rate for the virus less than 1. The reproduction rate, denoted as R, represents the rate of an average number of people falling prey to the deadly pandemic by one infected person. This helps in tracking the rate of reproduction of new patients and eventually containing the spread of the virus to new people. Ideally, R should be in between 0.5 to 0.9 if the UK has to fight back. As far as the companies operating in the Travel & Leisure space are concerned, they are in dire need of government support, tax relief and access to easy loans.