Skift Recovery Index: December 2020 Highlights

Overview

This report highlights the latest insights from the Skift Recovery Index. The index covers travel’s performance for all of 2020, broken down by weeks (weeks 1 to 53).

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.

We work with Amadeus, Arrivalist, Aviasales, Collinson, Criteo, Duetto, Hotelbeds, Key Data Dashboard, OAG, Onyx CenterSource, RateGain, Shiji Group, SimilarWeb, SiteMinder, Skyscanner, Sojern, Transparent, and TrustYou as data partners.


Happy New Year!

In this final highlights report of 2020, we focus on the performance of the travel industry in December, but also take a look back at how the year unfolded.

With vaccinations ramping up, 2021 is widely expected to be a more positive year, but it certainly won’t be back to business-as-usual any time soon. Just look at the happenings in the U.S. capital of the past week. For that reason, we will continue to track the travel industry’s performance in 2021. Together with our data partners we will provide monthly data updates and highlight reports as long as the turbulent times continue.

2020 Closes on Downward Trend

Performance improved slightly toward the end of November and during the first half of December, but fell back to how November started, at 42% of last year’s performance.

Exhibit 1: 2020 finishes at 42% of 2019 levels

December normally sees a bump in performance due to the holiday season, and a noteworthy increase in activity was seen in a few countries like the U.S., India, and Russia, with Russians in particular venturing out over the holidays as the ski slopes in Sochi can attest to. However, in most countries travel activity was down compared to a ‘normal’ December.

Exhibit 2: Only three countries registered positive growth in December

We need to take into consideration that this is a comparison with 2019 levels. Therefore, actual bookings made and trips taken can increase while still showing a decline in the Index, relative to the levels of increase in the same period of 2019.

For instance, we noted a considerable improvement in our November Highlights report for the United Arab Emirates, but in the final weeks of December the country nevertheless shows a decline in performance in the Index. The country started November at an Index score of 49, finished November at 60, but dropped to 53 by the end of December.

This is not due to a decrease in new bookings or actual visitors, but rather due to the high number of travelers to Dubai and Abu Dhabi during the holiday season in previous years. The Index, then, highlights that while numbers are up in the UAE, performance still falls short of previous years.

When taking a regional view, only North America registered a slight growth in December due to the relative strength of the U.S. travel market.

Exhibit 3: North America only region to register growth

And when looking at the different travel verticals, we see that both ‘Drive’ and ‘Lodging’ are seeing a significant slump in December, with ‘Drive’ falling below ‘Flight’ for the first time since the start of the recovery in April. Drive saw a strong bump at the beginning of the pandemic, as driving was seen by many as the only safe way to travel. The summer season, especially in Europe, kept the car rental sector relatively strong. However, as demand for vacations has slumped towards the end of the year, and with other mitigating circumstances like higher new and second-hand car sales, the Drive segment has fallen.

Flight remains extremely flat, while Lodging continues to be the best performing category despite its decrease in December.

Exhibit 4: Drive drops below performance of Flight

2020 in Ten Graphs

Below we take a brief look back at the year that’s just passed. Each chart is worth a thousand words.

We are still far from a full recovery, but the industry has registered some recovery since the trough in April. European destinations and the U.S. performed relatively well during the summer months as borders within the EU were reopened and states in the U.S. relaxed travel restrictions, resulting in the highest score of 47 at the end of August. Since then the index has been stable or slightly declining.

Exhibit 5: Little movement in the global index since July

In our reporting of the Skift Recovery Index we use a weighted average score, which takes into account the tourism output of each country. Countries with larger combined inbound, outbound and domestic travel expenditures, like the U.S. and China, are weighted higher towards the overall score than smaller tourism economies.

When comparing the weighted average with a simple average, we see that the former has been consistently higher than the latter. This highlights how on average larger tourism economies are overperforming, likely relying more heavily on their base of domestic travelers. For instance, China and the U.S., by far the largest tourism economies and given heavier weight in our global score, have been both performing strongly relative to many smaller markets.

Exhibit 6: Larger tourism economies overperform

China and Russia performed well during the initial recovery. By the end of 2020, Mexico, Brazil, and the UAE, all without strict restrictions to international arrivals, also performed strongly in relative terms.

Since the trough in early April, all countries have registered an improvement, although in the past months especially countries in Europe have seen performance fall again. Russia made the strongest gains since the universal low point of April 5th. Despite a strong summer, European tourism stalwarts have ended 2020 with the least improvement and have a long way to go to full recovery.

Exhibit 7: Russia has seen largest gains since April trough

The Skift Recovery Index tracks over 40 different indicators to determine the health of the tourism industry in each country. Some indicators focus on source markets of tourism, looking at the activity of travelers from each country, while other indicators look at the performance of tourism sectors in each country as a tourism destination.

When separating the source market indicators from the destination indicators, we see that both buckets went down equally in early 2020, but then a gap started to form, with source market indicators scoring higher than destination indicators. During the months of September and October, however, the two buckets came together, before the gap widened again towards the end of the year.

How should we read this? Our source market indicators consist of mostly leading indicators including travel searches and bookings. Destination indicators include more trailing indicators, like revenue passenger kilometers and load factors for air travel, and achieved revenues per available room for hotels.

When source market indicators score higher than destination indicators, this can mean one of two things: firstly, people are still searching for travel, but not booking, or secondly, made bookings are not converted into stays.

We have seen both throughout the year, with searches not as heavily impacted as bookings, as people continue to dream of traveling, and with cancellations rates high as stays are amended, postponed, or cancelled when local situations change.

Exhibit 8: Low conversion and high cancellations result in lower source market performance for most of 2020

In addition to travel performance indicators, we also built macroeconomic metrics into our recovery index because ultimately the travel recovery is closely tied to the health of the broader economy. You can clearly see how the overall economic performance saw a dip in April/May, but has since been relatively stable around 85% of 2019 levels. In contrast, none of the travel sectors has been above 50% of 2019 levels since March.

Looking forward, the IMF expects that emerging and developing economies will return to 2019 GDP levels in 2021, but that advanced economies will not get there until 2022. All this points to an uneven and slow travel recovery, as consumers and businesses need to feel financially confident before they start booking trips.

Exhibit 9: Economy remained relatively strong throughout 2020

That is not to say the travel performance has been flat everywhere. The domestic performance of the travel industry in China is showing the potential of a swift recovery when the virus is suppressed successfully.

Exhibit 10: China domestic performance back to pre-COVID levels

Short-term rentals have also been able to benefit from changing consumer behavior and expectations. Vacation rental occupancy rates moved above 2019 levels in October 2020, and the sector is considerably outperforming the hotel industry, although the U.S. hotel industry also reached over 70% of 2019 levels by the end of 2020.

A major hike in the length of stay in vacation rentals, as per data by Transparent, highlights how people have been looking at other places to stay and work during the pandemic.

Exhibit 11: Vacation rentals are highlight of 2020

As we move into 2021, we will continue to track how the travel industry performs, by country and by sector. It has become clear by now that it will be a long and slow road to recovery, but don’t forget that while an impact of this magnitude has not been seen before in modern times, the travel industry will rebound.

Exhibit 12: Long-term, the travel industry will recover


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.


Data Tables