Skift Recovery Index: Month of August

Overview

This report highlights the latest insights from the Skift Recovery Index. The index covers travel’s performance from December 29th, 2019 to August 29th, 2020 (weeks 1 to 35). This report focuses on the performance during the month of August.

The Skift Recovery Index is a real-time measure of where the travel industry at large — and the core verticals within it — stands in recovering from the COVID-19 pandemic. It provides the travel industry with a powerful tool for strategic planning, of utmost importance in this uncertain business climate.

Since the last update in July, we have added data from Aviasales and Onyx CenterSource to the index. Aviasales, a major travel search engine in Russia, offers us a better insight into search and booking behavior of Russian travelers. Onyx CenterSource, a provider of payment solutions for the hospitality industry, gives a better insight into hotel commissions. We also continue to work with Amadeus, Arrivalist, Collinson, Criteo, Duetto, Hotelbeds, Key Data Dashboard, OAG, RateGain, Shiji Group, SimilarWeb, SiteMinder, Skyscanner, Sojern, Transparent, and TrustYou as data partners.


Recovery Score Has All But Flatlined

August. Normally a summer bumper month; this year far from it. The Skift Recovery Index has stalled at 43 over the past month, against a baseline of 100 for 2019 performance during the same weeks.

Exhibit 1: Skift Recovery Index score has seen little movement

This is not to say that travel volumes and bookings have not grown. As the recovery index tracks the current performance against that of the same time last year, seasonality is taken into account, and a flat performance in the index means a growth in travel volumes like any other August for destinations in the northern hemisphere, including the U.S. and European markets. We can see this in many of the sources that are incorporated in the index.

In the U.S., where there are still major pockets of outbreaks, passenger throughput at major ports, as measured by the Transportation Security Administration has been increasing, although total volumes are still far from 2019 levels.

Exhibit 2: Passenger throughput at 25% of pre-COVID levels

Likewise, new flight bookings made in 2020 by Russian travelers through the Aviasales platform have increased by 6% CAGR since early June, after slowing down significantly during April and May. Weekly bookings are now at a higher level than at the start of the year.

Exhibit 3: Cumulative flight bookings shows healthy growth in Russia

The question now is whether the industry can stretch the summer peak into September and October, or whether demand will fall as it would do in normal times. If the industry manages the former, we might see strong increases in index scores over the coming few months. If the latter comes to pass, the index is cursed to remain between the 40 to 50 mark for the foreseeable future.

China might be providing some indication. The country has benefited from a strong domestic travel season, and has seen domestic flight capacity and hotel occupancy close to pre-COVID levels. The country has experienced an accelerating recovery over the past few months, but according to hotel booking data from Shiji Group, the pace of growth has slowed down in August. The end of summer holiday period and children returning to school might have contributed to this slowdown.

Exhibit 4: On the books reservation growth has sped up over the past months

Analyzing the Recovery by Travel Sector

Splitting the indicators by travel vertical, or sector, shows that drive remains a strong performer, and clearly a direct substitute for flying. Lodging continues the upward movement. In other words, no matter whether travelers drive or fly, travel accommodations seem to benefit from any growth in travel demand.

Exhibit 5: Skift Recovery Index breakdown by travel vertical

Air recovery remains slow

It has become clear that the airline industry particularly has a long road to recovery.

Skift Research tracks the performance of 100 public travel companies through the Skift Health Score. Part of the score is based on company revenues. Our Health score shows that in dollar terms, airlines in the top 100 public travel companies have lost more than $84 billion in revenue in the second quarter of 2020, compared to the second quarter of 2019.

Exhibit 6: Travel saw 70-90% Revenue Declines in 2Q 2020

IATA recently released an update which forecasts passenger demand to return to pre-COVID levels by 2024. This is largely in line with what airline CEOs have been saying during second quarter earning calls.

SAS Group CEO Rickard Gustafson, for example, explained his expectations for the coming years, predicting that up to 2022 demand will increase in what he called a “ramp-up phase” and that it is “going to take another few years” after that for demand to return to 100% pre-COVID levels.

While flight performance has clearly been impacted, seat capacity data from OAG shows some bright spots. By the end of August, the amount of seats available on commercial planes was back up to 92.9% of 2019 levels. In Russia this was just short of 80%, and in the U.S. at around 53%.

Furthermore, monthly data from IATA (not yet available for August) shows that RPK (revenue passenger kilometres, a key metric in airline reporting measuring kilometres flown by paying customers) is starting to increase slightly for international flights, particularly in Europe, and has registered a strong rebound for domestic flights in markets like China and Russia.

Exhibit 7: Domestic RPK performance leading the way

However, a strong indicator of forward-looking travel demand in these uncertain times is consumer search behavior, and here the data looks less positive. The Skift Recovery Index tracks search behavior from some of the largest companies in airline search and distribution, including Skyscanner, Amadeus, and Sojern, and has registered a very flat performance since April. While there are some short-term spikes as countries change lockdown rules or announce travel corridors, there is little upward movement when viewing this longer term.

Exhibit 8: Average flight search only at a quarter of last year’s performance

With this in mind, it becomes clear why airlines CEOs and airline bodies like IATA are thinking in terms of years rather than months when forecasting a full recovery. The month of August showed very little signs of recovery for airlines. Instead it is more of the same since we reached the lowest point in April. Despite some bright spots, mostly in terms of domestic travel, the global performance remains depressed considerably, and it might not be until 2021 that we will start to see considerable growth.

Lodging relatively strong, but growth stagnated

There is no denying that hotels were hit as hard as airlines at the depths of April and May, although they seem to have been better able to benefit from pent-up travel demand since.

STR data — used in the index — shows that average hotel performance across most destinations is improving. In China, weekly occupancy rates have returned to 90% of 2019 levels, with RevPAR only trailing last year’s performance by 23%.

Exhibit 9: U.S. hotel recovery stagnated in July

The U.S. has seen performance improving steadily as well, although most of the gains were made before the summer months of July and August. As the above data from the U.S. hotel market shows, the largest jump was made before week 28 (start of July), and since then performance has slightly stagnated.

For full year 2020, STR and Oxford Economics expect U.S. RevPAR to decline by 52.3%. The companies expect that demand won’t return to pre-COVID levels until 2023, with ADR and RevPAR expected to take until at least 2024 to reach 2019 levels. So while things are improving, also for lodging there is a long road to recovery.

July and August certainly saw some steps in the right direction. Hotel openings is one area where things continued to improve. Data provided to Skift Research by OTA Insight shows that 62% of hotels in New York City that were operating pre-pandemic were still or again operating at the end of August, largely unchanged for the last couple of months. In London, however, 80% of pre-pandemic hotels are now open and operating, an increase of more than 10pp since the start of July.

Hotels in Chinese cities have been performing even better, benefitting from domestic travel returning to near normal conditions in China. 92% of hotels in Shanghai were open at the end of August, up from 87% at the beginning of July. In Beijing, open rates currently stand at 84%, 7% higher than at the start of summer.

This settling into some form of normality is also apparent from hotel interactions with travelers on social media. BCV, A RateGain Company analysis of social media interactions between hotels and guests shows that there is certainly a greater drive from guests to communicate with hotels, but the nature of the questions has moved on from questions about hotel closures or cancellations, to understanding the type of measures and restrictions that are in place at the hotel.

Exhibit 10: Social media interactions are up, nature of questions changed

While hotels saw mixed performance over the summer months, with key performance indicators on average still below 50% of pre-COVID levels, vacation rentals have seen a much stronger rebound.

The positive performance for vacation rentals meant that Vrbo, the vacation rental brand of Expedia Group, went from black sheep to priced horse in a matter of months, as the brand became “the largest contributor to the improved booking trends” registered by the company during May and June, with gross bookings of the overall company up from -85% to -45%.

Data from Transparent which is used in the index shows that occupancy levels have returned to pre-COVID levels in many markets. Particularly in the U.S. and major European markets, performance has recovered since the beginning of July.

Exhibit 11: Occupancy levels have almost completely recovered in major markets

Yet, the recovery here is also not as straightforward as it may seem. Companies focused on predominantly urban rentals, which includes Airbnb, have suffered more than those focusing largely on rentals in more rural and secluded destinations. Vacation rentals in the centre of Amsterdam, for example, still registered occupancies of only 25% of 2019 levels in the summer months.

And when looking at booking data for future dates, it is clear that vacation rentals were in a strong position to benefit from the crisis when recovery started in April, but data from the index shows that in August new rental booking levels have dropped, and now track at around 50% of 2019 levels, similarly to hotel bookings.

Exhibit 12: New vacation rental bookings have dropped since their initial peak

There is no doubt that vacation rentals will remain a popular accommodation option, but with the majority of hotels reopened, it seems that August might be the start of a return to some form of normality in the hotel vs. vacation rental dynamics.

Drive remains ahead of the pack

The car rental segment is interesting as it conceivably would have benefited from the strong performance of the Drive vertical, as tracked in the index. However, the trough for this sector was as deep as that of the other verticals, and with a high reliance on car rental at airports, not all companies were able to deal with the downturn. Publicly traded Hertz was forced to file for Chapter 11 bankruptcy in May, and reported that airport rentals were down by 82% during the second quarter.

Data from RateGain shows that average car rental rates in Europe have steadily increased towards the summer months, and in July 2020 were around a third higher than in July 2019. If we use pricing as a proxy for demand, this tells us that demand for car rental is indeed high. Updated analysis by Technavio expects the car rental industry to grow by 16.5% in 2020 compared to 2019, despite the downturn at the beginning of the year.

Skift Research’s Travel Tracker, which survey’s U.S. residents about their travel behavior, also shows the car as the main form of transportation for current trips. When asked what their next trip will look like, 60% or respondents in August said it would be a trip by car.

Exhibit 13: Majority of U.S. residents looks to take next trip by car

This of course, does not only benefit car rental players, as many families will travel with their own car or decide to purchase one. Indeed, 82% of respondents said they would travel with their own car on their next personal trip, with 13% looking to rent a car.

Undoubtedly, road trips will remain popular for the rest of 2020, which should aid the recovery for the car rental industry. All in all, it seems that car rental companies have opportunities to get out of this crisis ahead of the pack, although it is undeniable that their fortunes are closely linked to the airline industry recovery. On the one hand, a return of flights will decrease the demand for road trips, but on the other hand will significantly boost demand for airport rentals.

Regional Insights from the Index

Below we will have a brief look at the performance of regions and countries in the index.

Exhibit 14: Latin America shows strongest growth in August

Latin America

The standout region in August was Latin America, which has seen strong growth in travel performance. Where performance growth in other regions flattened or declined, Latin America saw a 14-percentage-point growth in its index score between week 32 (Aug 2-8) and week 35 (Aug 23-30).

Exhibit 15: Latin American country performance

The index covers the performance of Mexico, Brazil, and Argentina. Brazil reopened its borders to all international visitors on July 29, with a rise in travel performance as a result. Mexico also saw a strong rise in August, despite the land border with the U.S. remaining closed for non-essential travel. Mexico reached a peak in cases at the end of July, and new cases have since started to drop slowly. There seems to be a correlation with travel performance, as especially vacation rentals have seen a strong uptick in August.

Exhibit 16: Mexican lodging bookings up as COVID cases decline

North America

It is well documented that the U.S. is struggling with a unified response to the COVID pandemic. The country registered an initial strong recovery, as it had fewer strict lockdowns and a strong traveler base looking to travel domestically. However, over the summer months recovery has largely stalled.

Canada, which has had a stricter lockdown than its southerly neighbors, and has had a very controlled way out of lockdown, continues to see below-average performance. The country remains closed to all foreign tourists with no reopening date known as yet.

Exhibit 17: Slow upward slope in U.S. and Canada

Europe

Also in Europe, recovery has been dampened during July and August, despite an initial surge in performance in June when borders reopened. Recovery has been patchwork in Europe, with internal EU borders theoretically open to visitors, but with many exceptions and last-minute changes in travel advice as the COVID situation keeps changing. This has resulted in uncertainty amongst travelers, many of whom will opt to stay in their own country. For a region so reliant on international arrivals, this is felt particularly during the summer months.

Countries that fall outside the European Union are taking slightly different approaches. Turkey has reopened to international travelers from almost all countries. Russia reopened to a few countries, including the United Kingdom and Switzerland, from August 1, and is set to open to more countries in September. The UK has its own list of safe-travel destinations.

Exhibit 18: Most countries’ performance remains level

July and August are normally bumper months for countries like France, Spain and Italy. These countries have all shown a slight decline in their index score, because they were unable to register the same growth as they would normally do in the summer months. France and Spain have also struggled with increasing new COVID cases as they opened their borders to summer vacationers, which has led to some countries changing their travel advice.

Russia is the standout performer in Europe. It is the strongest performer globally of any country we track in the recovery index, standing at over 60% performance. The country is seeing an above-average score for both flight and lodging, with domestic flight RPK back to 83% of 2019 levels as mentioned before. What particularly stands out is the strong traveler activity score, which captures Russian residents’ travel searches and bookings, and makes up a quarter of the total score. At present, Russians really want to travel!

Exhibit 19: Russians’ traveler intent is high

Asia Pacific

In Asia Pacific, China remains the only country tracking above the global average, largely thanks to a largely successful response to the spread of COVID initially, and a strong domestic traveler base to boost its performance. Most countries in this region remain closed to international tourists.

Australia saw some consistent declines in July as cases flared up, but its performance has now flattened out. Country borders remain closed for foreign travelers, so the Australian travel industry needs to rely on domestic tourism only.

Exhibit 20: Asia Pacific country performance

Middle East and Africa

The index tracks two countries in the MEA region – South Africa and the UAE. Both countries have seen slow progress over the past months, although this seems to have stalled in the UAE in the second half of August. While the UAE has opened up to tourists, South Africa remains closed to all foreign tourists.

Exhibit 21: Middle East and Africa country performance

The UAE reopened to foreign travelers at the beginning of August, requiring a negative COVID test result upon arrival at the airport. The relatively strong travel performance, which is above the global average, is predominantly down to a surge in hotel demand.

Exhibit 22: UAE hotels boost travel recovery

Country by Country Performance

Exhibit 23: Travel performance in August by country


Data Partners

We would like to thank the following partners who are collaborating with Skift Research by providing their data which shapes the Skift Recovery Index.

Amadeus is a global travel technology leader that delivers the most trusted, critical systems across the travel industry to airlines, airports, hotels, travel agents, and car rental and railway providers. Amadeus is providing insight on travel search trends and behavior for the Skift Recovery Index.

Arrivalist uses mobile location datasets to provide actionable insights on consumer behavior, competitive share, media effectiveness, and market trends, and has been tracking driving behavior of U.S. residents, which we have included in the Index.

Aviasales was launched as a blog on bargain air tickets in 2007 and grew out to become the world’s biggest independent travel search. Aviasales serves 20 million monthly active users from Eastern Europe & Central Asia, and provides flight and hotel booking data for Russian travelers for the index.

Collinson is a global travel services business, creating traveler experiences, loyalty strategy and programs, travel insurance, and travel and medical assistance. Priority Pass is operated by Collinson and provides frequent travelers access to over 1,300 lounges, with Collinson providing aggregated customer lounge visit data for the index.

Criteo is a global technology company powering the world’s marketers with trusted and impactful advertising. The company provides indexed data from various OTA, airline, and car rental partners. Criteo provides data for airline and car rental web traffic and sales.

Duetto delivers a suite of cloud applications to simplify hospitality revenue decisions and allow hoteliers to work smarter, increasing organizational efficiency, revenue, and profitability. More than 4,000 hotel and casino resort properties in more than 60 countries have partnered to use Duetto’s applications. Duetto provides hotel bookings and cancellations data.

Hotelbeds provides over 180,000 hotels across the globe with access to high-value, complementary distribution channels that do not compete with the hotelier’s direct distribution strategy. The company provides data on hotel bookings and source market performance.

Key Data Dashboard is a provider of real-time, direct-source vacation rental data for the short-term rental sector, aggregating data sourced directly from more than 30+ reservation systems of 700+ professional property managers around the world. Key Data provides bookings, RevPAR and cancellations data for the Skift Recovery Index.

OAG collects and analyzes data about every journey, every booking, every take-off and landing, departure, and delay, totalling over 110,000 flights, 100,000 schedule changes daily and over 4 million flight status updates. OAG provides flight capacity data for the Skift Recovery Index.

Onyx CenterSource is a leading global provider of business-to-business payments and business intelligence solutions to the hospitality industry. With a legacy dating to 1992, the company facilitates in excess of $2.1 billion in payments annually, and partners with more than 150,000 hotel properties. The company provides hotel stay, cancellations, and commission data.

RateGain helps travel and hospitality companies with cognitive revenue management, smart e-distribution, and brand engagement. RateGain supports over 250,000 hotel properties globally by providing 240 billion rate and availability updates, and powering over 30 million bookings. For the Index, RateGain provides hotel bookings and cancellation data.

Shiji Group provides software solutions and services for the hospitality, food service, retail, and entertainment industries, serving over 74,000 hotels, 200,000 restaurants and 600,000 retail outlets across the world. Shiji Group provides China hotel bookings and room night data for the Skift Recovery Index.

SimilarWeb gathers digital data from multiple sources, including first-party direct measurement, public data sources, anonymous behavioral data, and external partners. For the Index, SimilarWeb provides unique visitor data to the top 10 travel websites per country.

SiteMinder works with over 35,000 hotels as their guest acquisition platform to generate in excess of 100 million reservations worth over US$35 billion in revenue for hotels each year. SiteMinder provides hotel booking data for the Skift Recovery Index, pulled from its World Hotel Index.

Skyscanner has 100 million peak monthly active users, over 100 million app downloads, and more than 1,200 partners across flights, hotels, car rental, and more. Skyscanner’s Travel Insight product helps companies guide their COVID-19 recovery plans, and the company contributes flight search data from Travel Insight for the Skift Recovery Index.

Sojern provides digital marketing solutions for the travel industry, helping to drive direct demand for more than 10,000 hotels, attractions, tourism boards, and travel marketers. Sojern contributes flight and hotel search data for the Skift Recovery Index.

Transparent provides business intelligence serving the vacation rental industry, including insights around supply growth, demand patterns, rate changes, and property manager activities. Transparent contributes occupancy and bookings data for the Skift Recovery Index. The company draws on data from the 34 million vacation rental listings they track worldwide, in every geography.

TrustYou provides a guest feedback platform that makes listening to customers easy, powerful, and actionable. In response to the current crisis, TrustYou has put together a Travel Health Index, using hotel reviews managed through its platform as a proxy for hotel occupancy. TrustYou’s Travel Health Index is integrated in the Skift Recovery Index.

We would welcome more partners who want to join this effort, especially in the drive (car rental) and tours and activities space. Please get in touch to talk about a possible collaboration.


Data Tables