Travel industry’s tentative revival stalls as Omicron takes its toll

The tentative revival in the travel industry has stalled as airline and hotel bookings have fallen over the past two weeks because of new border restrictions following the emergence of the Omicron variant.

Although travel bosses say it is too early to gauge the impact of the variant on the sector, new data suggests the worst of the crisis may not be over almost two years since the first coronavirus outbreak.

Areas hit include the lucrative transatlantic airline routes, according to research group ForwardKeys, while data from hotel industry tracker STR shows a drop-off in occupancy of rooms in Europe.

The impact on transatlantic routes has been particularly severe. After rapidly recovering since the Biden administration announced it would open its borders to travellers in November, the revival in demand for these long-haul flights has been snuffed out by Omicron.

Indeed, the recovery had been so rapid that by November 24, the day Omicron was reported to the World Health Organization, bookings between the UK and US had risen 2 per cent above 2019 levels, providing a lifeline to airlines such as British Airways and Virgin Atlantic.

But ForwardKeys says flight bookings issued between November 25 and December 7 were 26 per cent below 2019 levels.

Bookings from the EU were also hit, moving from 22 per cent to 50 per cent below 2019 levels over the same period.

The impact has also been felt on shorter flights and leisure trips, as several airlines and travel companies have publicly warned of a hit from the new variant and travel rules.

Inbound flight bookings to the UK for the last week of November were down 63 per cent versus the same week in 2019, compared with a fall of 49 per cent in the previous week because of an increase in cancellations, Visit Britain said on Friday.

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Heathrow airport has also warned of a “high level of cancellations” by business travellers concerned about being trapped overseas by UK travel rules.

Tui, Europe’s largest tour operator, this week said that fears about Omicron had started to affect bookings, while easyJet has also reported “some softening of trading” for the rest of 2021, but noted that the hit had been less severe than when travel curbs were introduced earlier in the pandemic.

Airline bosses are hoping the variant will prove to be a shortlived shock that has come during one of the industry’s quieter periods.

The winter months are rarely profitable, particularly in Europe, but the situation would be more severe if the disruption bleeds into bookings for next summer.

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For the hotel industry, the impact of falling room occupancy has been most severe in countries such as Austria and the Netherlands where there have been stricter curbs. In Austria, a strict lockdown was introduced for unvaccinated citizens.

But all countries have suffered a decline as consumer confidence has waned.

Forward bookings for hotels in London, Paris and Madrid have all dipped in the past week, the STR data show.

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Figures from Guesty, a short-term rental management company, show US bookings in the first week in December dropped 22 per cent compared with the week before.

Travel company shares have been volatile since the emergence of the variant, initially tumbling but then partially recovering amid hopes Omicron does not cause severe disease among the vaccinated.

“I think all of us are optimistic that governments will quickly review these restrictions,” Willie Walsh, director-general of the International Air Transport Association, said this week.

Another lifeline for the industry is that while bookings have slowed, particularly from the UK, which has reintroduced a stricter testing regime than its European neighbours, many customers are moving reservations into next year.

“In terms of cancellations, where restrictions mean airlines don’t fly, it’s a simple refund to the customer. If airlines are still flying, it tends to be moving customers to another date,” said Simon Cooper, chief executive of package holiday company On The Beach.

Much depends on the virulence of the Omicron strain and how governments react to its spread, but customer booking patterns suggest there is confidence that travel next year will be easier.

Operators have said that the pent-up demand for holidays abroad that began with the easing of restrictions across Europe and the US this year has continued unabated.

Fritz Joussen, chief executive of Tui, said this week the company was receiving bookings for the summer season next year with prices up and margins strong.

The group said that at the end of November it had 2.1m bookings for summer 2022, although this was down 3 per cent compared with the number of summer bookings it had at the same point in 2019.

Prices were up 23 per cent, however, due to customers wanting to spend savings accrued during lockdowns on higher grade hotels and longer breaks.