After weeks of halting recovery that sparked some industry optimism that the worst of the Covid-19 crisis in the United States has passed, a dramatic surge of cases throughout the South and West has frustrated travel suppliers, muddled business travel demand forecasts and made the prospect of a U.S. recovery anytime soon much more tenuous.
The situation in the United States stands in contrast to those in most of Europe and parts of Asia, where Covid-19 cases as of late July remained low, some international travel restrictions have eased and tickets purchased through travel management companies have started to climb, if gently.
In the U.S., though, year-over-year declines in the volume of air tickets sold through corporate travel agencies and settled through ARC have hovered at about 90 percent, and was 89.2 percent for the week ending July 26. Given the variances by state in restrictions regarding use of face coverings and holding indoor gatherings, suppliers and analysts in July began to express new doubts about the United States' ability to control the virus and help business travel re-emerge.
Deutsche Bank airline analysts, meanwhile, in a July 13 research note wrote that recent booking trends are evidence that the recovery will be bumpy.
"Although we think we've marked the bottom with traffic gradually improving since mid-April, we expect the demand recovery to be uneven as spikes in Covid-19 cases and the emergence of new hot-spots dissuade travelers from returning to the skies," Deutsche Bank analysts wrote, according to The Beat.
They added: "Recent booking trends suggest that a patchwork of domestic quarantine restrictions recently imposed by various jurisdictions are suppressing travel and leading to a rise in cancellations. The concern among investors is that the nascent recovery in domestic demand is at risk, which is of particular concern given that the industry is in the midst of peak season and not expecting to see much improvement in international demand."
Meanwhile, Cowen airline analysts noted that "concerns of a second wave and quarantine measures is leading to a slowing in forward bookings and an increase in close-in cancellations," according to a July 10 research note, according to The Beat.
The Cowen research note added: "Peak demand traditionally ends in early August as people get ready for kids to return to school (which is now at risk). Corporate travel generally picks up in September, but with continued concerns about a second wave, demand may falter."
In fact, some suppliers and analysts have resigned themselves to the projection that there won't be a true U.S. business travel rebound until a Covid-19 vaccine—currently under development by many entities throughout the world—becomes widely available. United Airlines EVP and chief commercial officer Andrew Nocella, for example, during his company's second-quarter earnings call in July, said United didn't believe demand would crack even half of pre-pandemic levels until a vaccine was available.
In a July update to its annual U.S. lodging forecast, real estate firm CBRE noted that hotel bookings made through global distribution systems, typically corporate in nature, were underperforming versus bookings made through other channels. So were bookings made at luxury- and upper-upscale tier hotels, typically popular among business travelers, and CBRE didn't project a rebound there until a Covid-19 vaccine or treatment is available, which they don't foresee before mid-2021.
Without a vaccine, some suppliers are taking matters in their own hands to limit the spread Covid-19. U.S. airlines, in particular, in July strengthened policies concerning mandatory passenger face coverings, in some cases refusing medical exemptions, banning noncompliant travelers and extending the requirement to the entire airport.
But corporates too are playing a key role in limiting business travel demand, U.S. Travel Association president and CEO Roger Dow said during a July webinar. Dow said many corporations are limiting travel via policy for fear of litigation, a fear he and the CEOs hope to remedy via legislation.
"Right now, no matter what we do, until they change those policies, it's going to be very hard," Dow said, noting USTA is pushing the federal government for liability protection for facilities on a national level, at least through 2021.