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The threat of spending drought on travel agents, trade

With their financial performance almost entirely dependent on the direct spending of consumers, a leading data firm believes that all travel intermediaries are at risk during the coronavirus crisis.

“From the traditional in-store travel agency to the leading OTA”, UK-based GlobalData says that a lack of consumer spending generally is one of the greatest threats facing global travel businesses. 


According to the company, in 2019, US$166 billion was spent on travel intermediation in 2019, equal to 8.7% of the US$1.9 trillion spent on travel overall last year. 



“Companies with a steady financial performance, operating through a multi-branded strategy and high cash reserves are more likely to survive in this war-like period,” GlobalData Travel and Tourism Analyst Johanna Bonhill-Smith said. 


“But ultimately, lack of consumer spending is the greatest threat faced by all travel intermediaries and travel sectors. 


“Travel intermediaries act as the direct link in the chain of distribution between a company and the consumer base working in tangent with airlines, hoteliers, cruise operators and insurance providers. 


“Therefore, the financial performance and downfall of any travel-related sector will have a dramatic effect on intermediaries”. 



GlobalData says that although significantly more was spent on transportation (US$472bn), retail (US$461bn) and accommodation (US$325bn) last year, a lack of expenditure across these sectors would still have a “roundhouse effect on travel intermediaries”.


“As travel restrictions continue to impose on the freedom of movement the slump on consumer spending is not likely to lift anytime soon,” Ms Bonhill-Smith remarked.


“It does remain clear however that the travel marketplace will be a lot less crowded as all companies struggle, with many on the verge of collapse”.


According to a new Roy Morgan poll, nearly nine in ten Australians (85%) say the ‘Worst is yet to come’ over the next month in regards to the COVID-19 coronavirus pandemic. 


In the survey of nearly 1,000 Australians adults, only 43% of Australians agreed that the Australian Government was handling the Coronavirus well. 


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Written by: Mark Harada
Published: 31 March 2020

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