Travel Industry Fights Infection With Steep Discounts

Dining out without actually going anywhere has spawned the “ghost kitchen” phenomenon, which sparks the question of whether the coronavirus will produce something similar – “ghost vacations.” The travel industry, which has been hit hard by uncertainty, has embarked on deep discounting that might be hard to recover from.

As an example, say you want to go from New York City to Honolulu. The round trip on United is $458, which is $200 off the pre-virus price. Then you might stay at the Hilton Hawaiian Village Waikiki Beach Resort, which is selling rooms at 30 percent off.

“Almost every company is doing a review of what’s happening to booking pace and cancellations,” said Keith Vieira, principal of KV & Associates, hospitality consulting. “You’ll see bigger hotels put specials in the market. That’s good, it will drive business. On the other hand, if it continues for a long time, it could hurt our future rates and our ability to drive higher-spending visitors. There’s no way to escape what’s going on, but unfortunately, it can become a self-fulfilling prophecy. We’ll rebound. But the specials we are running now will affect us at least for the next three to six months.”

That’s the issue at hand. So many travel and hospitality companies are trying to salvage their Q2 or even their entire 2020 that the deals flying around the market are bound to reset expectations when the crisis abates. For example, Princess Cruises is loading up its cruise packages with free drinks and up to $95 in vouchers, even though top medical experts say people shouldn’t go at all.

“When I say ‘protect,’ I mean right now,” Dr. Anthony Fauci, director of the National Institute of Allergy and Infectious Diseases, told NBC’s “Meet the Press” on Sunday. “[Particularly,] if you are an elderly person with an underlying condition, you need to think twice about getting on a plane, on a long trip … and don’t get on a cruise ship.”

McKinsey has been generating reports with daily updates on the crisis’ impact on the business world. It considers three scenarios: a quick recovery, a global slowdown or a pandemic.

The global slowdown scenario assumes that in Europe and the United States, transmission is high but remains localized, due to strong countermeasures led by companies and governments. Those measures could include school closings and postponements of public events, as we’ve already seen with countless trade shows and SXSW.

For the United States, McKinsey estimates between 10,000 and 500,000 total coronavirus cases. The result cuts global GDP growth for 2020 in half, the report states, to between 1 percent and 1.5 percent, and pulls the global economy into a slowdown, though not a recession.

“Companies that navigate disruptions better often succeed because they invest in their core customer segments and anticipate their behaviors,” the McKinsey report says. “In China, for example, while consumer demand is down, it has not disappeared – people have dramatically shifted toward online shopping for all types of goods, including food and produce delivery. Companies should invest in online as part of their push for omnichannel distribution; this includes ensuring the quality of goods sold online. Customers’ changing preferences are not likely to go back to pre-outbreak norms.”