A combination of government advice not to travel, new quarantine rules and a lack of clarity over when travel can resume will see failures and redundancies in the sector, experts have warned.
In the latest Travel Weekly lockdown webcast, panellists described this week’s confirmation of a 14-week quarantine for people returning to the UK as “crushing” for the industry.
As well as job losses, despite the extension of the furlough scheme to October, mergers were predicted, as well as the emerging of new business models that will shape the future of travel.
All three experts on the webcast agreed that the announcements this week about quarantine dashed any hopes that firms may have had of making any profit in the crucial summer period.
PR expert Paul Charles, chief executive of the PC Agency, said: “The quarantine measures are crushing for the sector, there was hope before these measures were announced.
“What quarantine does is take away from the sector any visibility. What it’s doing is saying to consumers we’re, in effect, closing our borders.
“We’re not going to see any overseas travel to speak of for some months yet. And indeed, the FCO advice is you can’t travel.”
Alan Bowen, legal adviser to the Association of Atol Companies said the group had an online meeting last Thursday at which it decided there would be very little travel until the fourth quarter of 2020.
“The quarantine issue has really stymied and any realistic early start-up. The whole issue is there is no clarity at all.
“We don’t know when it’s starting although we’re given notice it’s probably going to be at the end of the month or the beginning of June. We have no indication of how long it’s going to go on.
“I suspect September may well be the earliest we will see any departures.”
Giles Hawke, UK chief executive of Cosmos, agreed saying it had already taken the decision to cancel all departures in July and August before this week’s announcements.
He said the only positive is that if restrictions on movement are being relaxed within the UK there might be a chance of some domestic travel returning, but he said consumer confidence was low.
“We’re going to focus on Q1 2021 for departures because we just can’t see any clarity or any chance of anything realistic before then.
“Where is the customer confidence for making a booking to travel somewhere for longer than for a day or for a few hours as things stand today?
“If we’re going to start opening schools, if we’re going to start opening outdoor public places, gradually we might see other places opening.
“That’s assuming we don’t see another spike, and my sense is people are just assuming we’re going to see another spike in several weeks and we’ll have another full lockdown.”
Hawke described the government’s move to impose quarantine as “too little too late”.
“This should have been done months ago, it should have been done at the start of lockdown. Other countries were doing it way before we even thought about it. We’re way behind the curve.”
Bowen warned many people who deferred travel when the COVID-19 crisis hit are now going to want to cash in their credit notes putting more financial pressure on firms.
“One of the big issues that’s arisen because of the refund credit note is people have been very reluctant to pay final balance.
“And that’s become a real problem for travel agents. Some operators have been very good and they’ve made it clear exactly when they will be in a position to refund.
“I fear some of them said it will be July 31, because that was the first date Abta proposed. Now, by the July 31, there’ll be virtually nothing operating, if anything at all.
“Therefore, the cash flow that they probably would have hoped would have started by then may well not have begun.”
He added: “Clearly the big problem is that for most operators the 12 weeks of summer keeps them going for the other 40 weeks of the year.
“They need to make profit in July and August in order to survive November and December and the reality is there’s no profit going to come in July, probably no profit in August, maybe very little in September.
“So it’s really going to be a question of looking to see where the cash flow is. Unless you’ve already got money in the bank, or you can get access to money, you’re going to be in some difficulties at the end of September, assuming you survive that long.”
Hawke said while the government furlough scheme is helping many firms with reducing costs the future looks “very challenging”.
“Even before furlough was introduced, we’ve seen a number of companies were making redundancies.
“If the big companies with deep pockets are seeing these issues, smaller companies are going to find it pretty challenging the longer we go without money coming in.
“It’s a big, big challenge we’re facing and we haven’t yet seen the size and scale of what’s coming.”
Charles said there was a glimmer of hope that in some market sector like the over 60s people are storing up money during lockdown that they may spend on travel once the crisis is over.
But he said: “You’re going to see consolidation among major players and small players, especially who are desperate for any form of cash.
“It won’t just be a sorry tale of redundancies, it’ll be a tale of substantial restructuring and consolidation in order to create new business models.
“What will come out of this that could be quite positive are new business models which define how we’re going to travel the future.”
