While few sectors escaped the wrath of the COVID-19 impacts, none of them were impacted by the pandemic like the travel sector. Before the outbreak, the travel sector was uninterrupted by market forces for decades. History shows that the travel industry is one of the most sustaining sectors.
The industry has weathered some of the most catastrophic events globally, including the great recession and 9/11. After every situation, the industry has climbed back and flourished. But with COVID-19, the problem is different as it is unsure for how long the virus will be a threat to the economy. But the good news is, despite the pandemic, consumers have been trying to find ways to travel under changing circumstances. This behavioral change has created some different waves in the travel industry.
Travel Industry at a glance
During the pandemic:
- The travel and tourism industry suffered a loss of almost US$4.5 trillion, a significant drop of 49.1% over its GDP contribution.
- Its global GDP contribution was nearly halved from 10.4% to 5.5% due to the pandemic travel restrictions.
- Nearly 62 million jobs were lost as domestic travelers also decreased by 45% and international travelers by a staggering 69.4%
- The overall global revenue from the pandemic dropped to $447.4 billion, while the original projection estimate for 2020 was $712 billion.
Post pandemic:
- The US travel sector is anticipating a hike to generate $2 trillion to the US economy by 2022.
- The jobs are expected to rise by 26.2%, increasing more than 2.9 million jobs in the US alone.
- The average length of the vacation stay period increased from 5.2 days to 5.4 days.
Not only is the travel sector continuing to recover, but instead taking another direction of growth. Families started discovering the benefits of vacation rentals over hotels amid the pandemic restrictions. There has been a rise in family travelers seeking space to enjoy each others’ company beyond the confines of a hotel room and enjoy extended weekend getaways fueled by continuing remote work.
While hotels are still the top choice for most short-term travelers, vacation rentals grew in popularity in 2020 and 2021. The trend is also expected to extend beyond the pandemic as concerns of COVID-19 still linger around. The Q4 of 2021 showed a spike in global accommodation bookings by 50% year-over-year for hotels and vacation rentals.
Statistics of the hotel industry
The global hotel market
Overview:
- The industry’s revenue hit $198.6bn in 2020, after a drop of 46%. The occupancy rate for the US hotel market in 2020 was just 44%.
- On average, hotels operate at a 30% profit margin. However, during the pandemic peak, the profitability reduced to a mere 18%.
Hotel Booking Trend:
- More people are planning more extended vacation stays well in advance.
- The occupancy rate of hotels in the United States was 40.3% in 2020.
- In 2019, the Online hotel booking market valued 38,693 million, which faced a steep decline to 15,714 million in 2020.
- But later in 2021, the market value increased to 21,260 million, which later grew to 28,552 million in 2022
- 42% of the bookings were made in rural destinations.
Employment:
- Even though there has been an increase in the employment rate post-pandemic, there is still a dip of 14% in workers – with 1.3 billion employees in the hotel industry in 2021.
- In 2019, almost 2 billion employees worked in the hotel industry in the US, which was nearly halved to 1.1 billion in 2020.
The global vacation rental market
Overview:
- The US vacation rental industry’s total revenue is estimated at $13.3 billion in 2021, with an approximate 10% year-over-year rental market growth rate.
- The industry is projected to get close to $20 billion in 2025.
Vacation rental booking:
- The user rate increased to 13.1% in 2021, reflecting an increasing trend in the coming years.
- Before the pandemic, 80% of the bookings done for vacation rentals were for one week or less. This was reduced to only 30% post-pandemic.
How vacation rental industry impacted the hotel industry
Despite the recovery positively impacting the accommodation sector, vacation rentals are jumping back more robust than the hotel sector.
Quick Facts:
- The vacation rentals recovered better than the hotels during the COVID-19 pandemic. The occupancy drop recorded in hotels was 77%, compared to 45% recorded in vacation rentals.
- Hotels lose $450 million per year to vacation rentals. There is also a proportional revenue loss for hotel bars and restaurants, room services, spas, and other services.
- The top reason people choose vacation rentals is to access the kitchen and more privacy and space.
- Vacation rental ADR increased during 2020, hitting an all-time peak of $202.50 in June 2020.
- The vacation rentals are relatively cheaper than hotels and cater to travelers who want to feel like a “local.”
- More than half of the individuals said they preferred staying at vacation rentals while traveling in the US in a reported survey.
People have been exploring more personalized and budget-friendly ways to vacation for a longer time. Short-term vacation rentals that were initially niche specific to family and friends reunions have become mainstream. It is ideal and perfectly matches the demand for more extended stays and more privacy.
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