Skift Recovery Index: September Highlights

Overview

This report highlights the latest insights from the Skift Recovery Index. The index currently covers travel’s performance from December 29th, 2019 to October 3rd, 2020 (weeks 1 to 40). This report focuses on the performance during the month of September.

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 continue to 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.


Travel on a Diet

The current recovery is like a diet. Or so said Keith Barr, CEO of InterContinental Hotels Group, who used this analogy during the recent Skift Global Forum. He said:

“After the holidays when you realize you have to lose weight, the first five pounds come off really easily, and the recovery up to now has been those first five pounds. We suppressed demand because we didn’t allow people to travel, borders were closed, and hotels were closed. Now we’ve opened up, and every pound after this [initial recovery] is going to be hard.”

This is exactly where we find ourselves today, trying to lose that extra pound, but instead we have actually gained a little weight over the past weeks.

In other words, September showed a slight decline in performance of the Skift Recovery Index after a few months of healthy growth boosted by border reopenings and the summer season.

Exhibit 1: September shows reversal of previous 3-month growing trend

A Brief Look Back

Now that the summer season in Europe and North America has passed, it feels like a good moment to take stock of where the travel industry stands. We put together a visual to show the movement in performance of the 22 countries tracked in the index since the beginning of the year.

Exhibit 2: Rapid race to the bottom, and a slow climb out

(if viewing this in pdf, click here)

Looking back, even though it comes as no surprise that travel’s performance has fallen, it is still shocking to see how deep and universal the trough was at the worst point in April. Since then, the range between the best and worst performing countries has increased. September has seen a shrinking of this range again, particularly as top performing countries have seen their recovery reversed.

Exhibit 3: Difference between best and worst performers is shrinking in September

In this month’s highlight report we will dive deeper into the performance in each region and travel sector, and look at some key indicators and what they tell us about changing traveler behavior.

Which Travel Sectors Dropped in September

So where does the decline of the index stem from? We will first take a look at the performance of different travel sectors.

Exhibit 4: Travel sector performance show regional diversity

Overall economies not feeling pain like the travel industry

Macroeconomics, a bucket of indicators analysing the overall health of countries’ economy, is performing around 20% below pre-COVID levels in all regions, with Europe being the only exception. The economies of most countries have seen a dip in the second quarter, but have since recovered slightly and seem relatively stable.

However, September started showing some cracks in the broader economy as the continued impact of COVID, and a second spike in cases particularly in Europe, were eating away at the overall health of the country’s economies.

Unemployment, particularly in the travel and hospitality industry, remains high, and many countries have seen aid packages expire.

After a year-on-year drop of 9% in GDP during the second quarter, which is the worst drop seen since 1950, a Wall Street Journal survey of economists suggests the third quarter will see only a year-on-year decline of around 3 to 3.5%. Further north in Canada, employment grew strongly in August and September, although total employment was still down a quarter from before the pandemic.

The German economy remained the shining light in Europe, continuing to show growth in September, although this was mainly due to its strength in manufacturing, with the services sector remaining flat. Japan’s economy stopped contracting in August, while all major economic indicators were increasingly positive in China.

But recovery everywhere is far from certain. The latest results from the United Kingdom show that the economic recovery slowed down drastically in August to only 2.1% growth over the previous month, despite government measures to encourage consumer spending. Meanwhile, Spain has submitted plans to the European Commission setting out how it wants to spend its share of the EU recovery budget to get its economy back on track. Brazil is working itself in an ever-deepening debt crisis, providing emergency aid payments to its citizens, with no clear pot to take the money from.

Travel sectors’ performance vary greatly by region

The big story coming out of the pandemic so far is that car rental has benefited from the demise of air travel, as people look to take closer-to-home trips. However, our analysis shows that drive did not see a strong uptick in Asia Pacific at all, and that in most other regions, including Europe, drive has seen a strong decline in September. North America is the only region where drive continues to perform as the strongest sector.

According to a recent study by OAG, 69% of respondents planned to fly internationally in the next six months, and 79% would fly domestically. Admittedly, the company surveyed users of its flight app, with results therefore likely skewed at least somewhat towards a greater interest in flying than the sentiment amongst the general public, but these are nevertheless very positive numbers.

Sadly for the airline industry, this is not yet reflected in current travel behavior. While the air sector has picked up slowly in most regions during September, it still remains behind the other travel sectors, although it is conceivable that the drop in car rental performance can be tied to a growing return of air travel.

Lodging has shown the strongest rebound of the travel sectors, but it also showed some weakness creeping in during September, with performance declining in North America and Europe.

Which Countries Saw a September Slump

When looking at the evolution of total index scores by region (weighted based on tourism output of each country), again we see that particularly Europe and North America have seen a slump in performance during September. The Middle East and Africa (where we only capture the UAE and South Africa) has seen strong growth. Asia Pacific has seen a slight uptick, but the regional view is slightly distorted due to the weighted importance of the Chinese tourism market.

Exhibit 5: North America and Europe show strong declines in September

When breaking out the performance of each country separately, it is clear that countries in Asia Pacific have registered some of the strongest growth in September. European and North American countries are the clear losers.

Exhibit 6: Asian countries perform strongly in September

Asia Pacific

Asian countries remained largely closed to foreign departures and arrivals in September, and with the exception of China, which has a strong domestic traveler base, the performance of the tourism industry was impacted considerably by this policy.

Exhibit 7: Most Asian countries remain below global average

Despite new COVID cases dropping slightly since the middle of September, India has extended its ban on entry for foreign travelers from the end of September to the end of October. Japan, which has banned almost all foreign travel for its citizens, is set to remove this ban for 12 countries at the end of October, allowing Japanese travelers to visit countries including China, Taiwan, Australia, New Zealand, Singapore, South Korea, Vietnam, and Malaysia.

In the absence of foreign arrivals, many countries have ramped up their efforts to promote domestic travel. Governments, including in Singapore, Japan, and Taiwan, are handing out subsidies to citizens to encourage domestic tourism. India has seen major tourism attractions, including the Taj Mahal, reopen for domestic visitors.

In China, the government has promoted domestic tourism during the recent Golden Week, taking place during the first week of October. Data from the Chinese tourism board shows that 637 million people traveled during the 8-day holiday, spending nearly $70 billion in one week.

This type of report is in line with the news that is generally coming out of China. The domestic market is performing strongly, and when looking at certain indicators, the country’s tourism industry is performing even better now than it did last year. Indeed, hotel data from Shiji shows that hotel bookings and room nights have been above 2019 levels since July, with very strong performance in September. Occupancy rates also climbed above 2019 levels for the first time in September since March 2020.

Exhibit 8: China hotel bookings moved above 2019 levels

However, this is not the entire picture, and as our index highlights, there is still a major gap between today’s performance and pre-COVID levels. China currently tracks at just over 50% of its 2019 performance.

While Golden Week data is impressive, travel volume was still only 79% of those registered last year during the same holiday period. And there remains a complete lack of international travel. IATA shows encouraging data for domestic travel in China, but international passenger kilometers remain rock bottom in Asia Pacific.

Exhibit 9: Domestic flights in China close to recovered, international lags

This particularly impacts neighboring countries, as China has the largest outbound expenditure of any country in the world. This also boosts domestic tourism in China, as international travel dollars will be converted into domestic spending by Chinese travelers. China’s reliance on inbound travelers is furthermore miniscule in comparison to its domestic market, so the country is able to compensate for the absence of international travel. Other countries are not so fortunate, especially those relying increasingly on Chinese visitors.

As the total index score is made up of the total picture of travel performance in 2019, and because China had such high outbound volumes and values in 2019, the country’s score in our index will inevitably be suppressed as long as international travel remains low. Because domestic travel is performing strongly, the country tracks considerably above the global average, but until some form of international travel returns, it is unlikely that China will score much higher than it currently does.

In contrast, Russia performs stronger in our index as it has much lower tourism spending in normal times, and has been able to compensate for its dropping score in international travel by greatly outperforming its 2019-level domestic performance.

Exhibit 10: Chinese outbound spending head and shoulders above others

Europe

Europe, after a generally positive summer season, which we discussed in last month’s highlight report, has seen some strong declines in September. New COVID cases have spiked across Europe, although this second wave is so far seeing fewer hospitalizations and deaths than the first wave.

Exhibit 11: Downward trends all around in Europe

As reported by the Financial Times, according to analysis from UBS, restrictions to movement in Europe are now almost at the same levels as they were in June when most countries were in lockdown. In most countries, at least partial restrictions on the hospitality industry have been reinstated, although country borders remain open. Compulsory quaranteening for international arrivals is an ever-increasing measure implemented by governments, to the chagrin of tourism bodies which call for better testing instead.

Russia has been a strong performer, as mentioned earlier, but by the end of September it was showing strong declines. As in much of Europe, new coronavirus cases at the end of September equaled the previous peak in May, and have since surpassed this. This has tempered a continued recovery.

Throughout Europe, new cases are continuing to rise into October, likely meaning that the strong recovery in July and August were a temporary respite which might be followed by a weak winter.

Americas

The terms of first and second waves, as used in Europe, do not apply to the U.S., where the first wave has never really ended. In September, cases continued to increase, and the political climate remained volatile. Mexico and Canada, U.S. neighbors normally relying significantly on U.S. travelers, were impacted by this continued instability.

Brazil, despite continued high levels of new cases and deaths, has continued to open further for tourism. In mid September, bars and restaurants in Rio de Janeiro were allowed to reopen, and international flights have been allowed since the end of July.

Exhibit 12: Mexico strongest performer in Americas

Middle East and Africa

As international flights slowly start to return, the United Arab Emirates, with major airport hubs in Dubai and Abu Dhabi, has benefited during September, seeing improving performance.

South Africa opened its borders to foreign travelers (from low-risk countries) at the beginning of October, and the country saw its performance picking up in the run up to this date. The country still performs below the global average, but has gained almost 10 percentage points in the past two months.

Exhibit 13: South Africa seen performance increase as borders reopened

What To Expect Over the Coming Months

China’s Golden Week will boost China’s absolute performance, although initial indicators are that this year’s performance still remained some way below last year’s levels of travel.

Europe saw performance declining in September, and it is likely that October will be even worse as new COVID cases continue to rise and the peak hasn’t been reached yet.

In Asia Pacific countries are getting ready to open their borders to more international visitors some time in October, but in Europe it is currently more likely that borders will be closed again after a summer where internal EU travel was promoted.

Countries in Asia Pacific showed more positive performance in September, and with more country borders set to open in October, this might continue. International flights might finally see some uptick in the region.

That said, 2020 will remain the year of domestic trips, many within driving distance. It is also likely that vacation rentals will be able to continue to outperform hotels as COVID cases remain high, impacting travel advice and halting most corporate travel.

As we move towards the end of year holiday season, travel providers still have little indication as of yet how the season will pan out. A number of recent studies have shown how booking windows have shrunk considerably.

Data from Skyscanner Travel Insight shows how searches for travel within a week have gone up considerably since June, and are around 10% higher than last year. Travel within a month from the initial search is similarly around 10% more popular. As pointed out by hotel marketing expert Martin Soler, generally speaking people that book less than 7 days ahead likely have some need to travel, whereas searches for up to 30 days might indicate some return to confidence that borders will remain open and that circumstances will not change.

Exhibit 14: Flight search window has shrunk considerably

Similarly, Trivago has reported similar trends for hotel stays. The company now sees the majority of clickouts (user moves from Trivago to booking site) at between 8 and 28 days, with clickouts that are 41 days or more ahead of the stay down globally, and by as much as 50% in the EU.

A report by InterContinental Hotels Group showed that 63% of U.S. residents make reservations at the company’s hotels within two days of arrival, while this was 39% last year. In the UK, 40% of travelers book within the two-day window, around half in normal times.

The shorter booking window is combined with a continued higher level of cancellations compared to last year. Data from revenue management system Duetto shows that cancellations in U.S. hotels are still at around 35% of new booking levels, compared to a largely stable 25% last year. KeyDataDashboard sees cancellations in U.S. vacation rentals continue to be around 60% higher this year than in 2019.

Exhibit 15: Hotel cancellations remain higher than normal levels

Analysis by BCV, a RateGain company, shows that chatter about end-of-year travel hasn’t picked up considerably yet, while this would normally be the time for travelers to start booking this. This means that it will be an uncertain few months ahead, meaning more months of headaches around costs and staffing for travel providers. While we know travel will remain domestic with shorter booking windows and higher cancellations for the foreseeable months, the question is whether further COVID outbreaks will suppress leisure demand, and when corporate and group travel will start to return.


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