Major events like COVID-19 completely stifled travel and tourism, and widespread fear of the virus upended the way people thought about traveling. The travel and tourism industry took a hit during the peak of the pandemic. Air travel dropped by 60% globally and hotel occupancy fell by 33% in 2019. When countries opened up and people began to leave their homes again, the way people traveled looked different. The way travel has changed during COVID-19 has generated a rise in the leisure and hospitality sector. Investors in travel-related companies as well as certain commodities like oil should continue to monitor these changes for trading in order to make more informed decisions
The Rise in Digital Nomadism and Working from Home
Digital nomadism, defined as establishing a remote office using digital communications technology, has been around for the past decade. Digital nomads work from temporary homes, libraries, and coffee shops, connecting to WiFi access or using their hotspots on their smartphones or laptops. They often have the flexibility to create their schedule.
The idea of digital nomadism gained traction as it became a possibility for more people when offices shut down indefinitely during the pandemic. Hospitality companies like Airbnb did exceptionally well, catering to the needs of nomads by offering longer-term stays. Airbnb ended 2020 by spearheading its initial public offering, gaining a whopping 112% on its first day of trading. Although travel stocks tumbled in late February, nearly bringing Airbnb to its lows since its public offering, Airbnb has rebounded, breaking out and seeing gains. Investors should continue to monitor Airbnb and other travel stocks for trading as changes during COVID-19 may increase the appeal of these companies and therefore could affect their share prices.
Studies have shown that the trend toward digital nomadism will remain post-pandemic. A poll of 1,105 conducted by Fast Company Harris indicated that 57% of people with a wide range of incomes plan to work remotely and travel out of town post-COVID-19. This statistic indicates that longer stays and flexible lifestyles continue to be the trend in the long run.
The Demise of Business Travel
With the advent of Zoom, business people who previously attended several business trips per month are no longer traveling. A plethora of executives is assessing the value of work trips given the ease, accessibility, and new normal of web conferencing. In a Morning Consulting Poll, the results from the data found that about 40% of people who traveled for business before the pandemic predict they will never return to business travel again.
Many companies expect aspects of virtual work to remain over the long term. People can attend events, conferences, and sales pitches virtually, reducing the need for in-person events. This situation will allow companies to save money and allocate their funds to improve different areas.
The Future of Air Travel
Although people are booking more flights and more passengers are expected to fly, air travel restrictions on international travel still persist into 2022. 100,000 health and travel restrictions remain in place, which is around the same number as there was a year ago. When people travel, they will need to be aware of the destination country’s latest requirements.
However, there has been an easing of restrictions. There has been a shift away from quarantines and outright bans of visitors. Instead, countries have been mandating vaccinations and COVID testing for entry.
The Pandemic’s Effect on Luxury and the Hotels Industry
While business demand has plummeted, leisure demand has been skyrocketing. Looking back historically, business travel has taken longer to recover than leisure travel. Major hotel chains are spending significant amounts of money on pivoting toward and capturing vacationers. Last August, Hyatt acquired luxury resorts operator Apple Leisure Group for $2.7 billion. Despite the positive trend, the travel outlook is volatile in light of economic conditions.
According to the “State of the Hotel Industry” report, published in January, the year 2022 is the year of the traveler. However, room revenue is down significantly. Over the two years of the pandemic, hotels collectively lost $111.8 billion in room revenue.
The Bottom Line
COVID-19 changed travel in several ways. First, there has been a spike in digital nomadism, which is when people find long-term temporary homes, coffee shops, or shared workspaces to conduct their work in a virtual setting. The continued trend has given companies like Airbnb a dominant role in the future of travel. Second, business trips have declined as a result of Zoom and other virtual platforms that enable conferences and events to take place virtually. Another bonus of fewer business trips is that companies can allocate this money elsewhere. Third, air travel has largely recovered from the shutdowns due to the pandemic. However, international travel restrictions remain in several countries given the prevalence of Covid-19 variants. Finally, leisure travel, unlike business travel, has seen significant gains as a result of the pandemic. Major hotel groups are increasing their attention on catering to consumers in this sector. Investors should consider the implications of these trends when creating their trading strategies.
