Impact on Travel & Tour Companies with New Advisory and Quarantine Rule in Place

Summary

• New health measures announced for people entering the UK
• Stringent measures to abide by; Some categories are exempted
• Impact on Travel & Tour companies: TUI AG & Carnival Plc

The British Prime Minister, Boris Johnson in a public announcement stated earlier that UK has passed its peak amid coronavirus and rolled out a three-step plan as an exit strategy from lockdown induced by the novel coronavirus. This was followed by new public health measures announced for all UK arrivals last week. The Home Secretary announced these measures to guard against the second wave of coronavirus infections by keeping the reproduction rate (R) of virus less than one.

The unseen enemy has already claimed more than 37 thousand lives in the United Kingdom. The British Government and the NHS have left no stone unturned to keep the reproduction rate (R) in the range of 0.5 to 0.9. As the UK witness a decline in R of the virus, the number of people entering UK is expected to rise. The people entering UK might pose a bigger threat of Covid-19, as they could be asymptomatic carriers of the virus which can increase the overall number of infections in the UK significantly and may trigger a second wave of the novel coronavirus. It has been learnt from the history of pandemics that the maximum carnage happens when the pandemic strikes back.

Suggested measures for the people entering the UK from outside

The Home Secretary outlined several measures for the people entering the UK. It is imperative of the people entering the UK to provide their recent travel history and local contact details through the new online locator contact form. If a person does not have a local address, he would be required to self-isolate in facilities arranged by the government. If someone in touch with them is tested positive for Covid-19, they can be traced easily. In addition, all people entering the UK would have to comply for a 14-day period self-isolation and could be contacted anytime, if necessary.

Any instance of breach of compliance with the mandatory conditions is likely to face enforcement action along with unlimited fine depending upon the level of risk, which may arise out of the breach. Spot checks would be done at the border crossings or port of entry. Non-residents would be denied entry in the UK on non-compliance of the security measures. The British authorities would conduct random checks in England to ensure self-isolation compliance. Deportation would be considered as a last resort for people who do not comply with the newly introduced measures. These newly introduced measures would be effective from 8^th June.

The incoming travellers would be informed about the government’s social distancing guidelines through posters and leaflets on arrival, and through messaging and announcements in-flight. The incoming travellers have also been advised to make arrangements for their personal transport to commute to their self-quarantine location. They must self-isolate for 14 days at the local address. The travellers should avoid meeting friends and family or visitors other than essential service providers. The travellers must avoid the use of public transport or public areas during the initial 14-day period of self-isolation. The travellers are requested to rely on others to buy food or other essentials and refrain from going out.

The incoming travellers must download the NHS Covid-19 application on their mobile devices at the port of entry and must keep it active during their stay in the country. Once the 14-day quarantine period is over, the people are required to follow the social distancing measures in line with the current government guidelines.

However, there are some exemptions as well, people involved in the supply of goods & services such as road haulage and freight workers are exempted from these measures and might have a different specific guideline. Medical persons entering the UK to bolster the support against the novel coronavirus are also exempted from these measures. In addition, to farm workers would have to self-isolate on the property where they work.

Travel and Tourism scenario

The UK has always been a great travel destination. Due to the novel coronavirus washing up its shores and lockdown restrictions, the confidence level of travellers has already gone down. The pandemic has wreaked havoc in the Travel & Tourism space, and the businesses might continue to suffer from the social distancing guidelines in place. The 14-day period of a mandatory quarantine imposed on the travellers coming to UK would be the final nail in the coffin for the Travel & Tourism sector. The stringent guidelines would deter travellers coming into the country. This would also impact the businesses in the Travel & Tourism space, which is already on the verge of a shutdown and might even collapse.

Travel companies start responding to the advisory

Germany-based tourism group, TUI AG (LON:TUI) has reportedly cancelled all its foreign holidays until the beginning of July. Due to ongoing travel restrictions, the company has dropped the plan of recommencing operations, which were earlier scheduled on 12^th June. For all cancellations, the company is supposed to refund the booking amounts to customers. However, along with refund option, TUI AG has also offered exciting alternatives. The company has offered 20 per cent discount on rescheduling another trip. This is a great initiative to avoid immediate dent of the liquidity of the company. The turnover of the company dipped by nearly 10 per cent quarter on quarter to €2,787.9 million in 2020 as compared to the previous year. The company is currently facing severe financial challenges.

On 29th May 2020, at the time of writing (before market close, GMT 11:35 AM), TUI AG shares were down by 11.68 per cent against its previous day closing price, trading at GBX 459.80. The pandemic struck the markets in the last week of February, and the TUI shares created a new bottom at GBX 218 on 16th March. Since then the stock has returned a price return of 110.92 per cent. The annual dividend yield of the company stood at 8.70 per cent.

Travel & Leisure group, Carnival Plc (LON:CCL) owns many cruises. Aida, one of its cruises has halted sailings until July. The cancellations would be refunded. In addition, the customers would be eligible for a travel credit which can be used for future bookings and would remain valid until December this year. In a similar move, Carnival owned Costa, cancelled operations until July. Both cruises are planning to recommence operations from August. There is a lot of uncertainty in terms of safety guidelines when it comes to reopening of ports to cruise ships due to the COVID-19 global pandemic.

On 29th May 2020, at the time of writing (before market close, GMT 11:52 AM), Carnival Plc shares were down by 8.49 per cent against its previous day closing price, trading at GBX 1,083.50. The pandemic struck the markets in the last week of February and he CCL shares created a new bottom at GBX 581 on 2nd April. Since then the stock has returned a price return of 103.79 per cent. The annual dividend yield of the company stood at 13.29 per cent.

Comparative share price chart of TUI and CCL

(Source: Thomson Reuters)