Economic impact

As the effects of COVID-19 continue, businesses must ask firstly: “where are customers spending now?”, with one in five continuing to stay at home following government regulations and recommendations. Meanwhile, the long-term effect is largely unknown. Many believe it will be shaped by permanent changes in consumer habits. For example should commuters return to their offices, but even just one day less per week, this would represent a 20 percent decline in footfall affecting the fundamental premise of many business models.

Forty-one percent of consumers already feel overwhelmed or vulnerable, and as governments limit or stop their financial support, more consumers are expected to face job losses and struggle financially, affecting spending power still further.

Nonetheless, where organizations can weather the storm, those in the hospitality industry have taken comfort from the speed at which consumption picked back up when consumers were able to go back to cafes, restaurants, pubs and bars. And the latent demand for holidays, with a significant proportion not willing to give up their travel plans in the coming year, also provides hope for the travel sector. There is still demand if businesses can adapt quickly.

In China, leisure behavior is now back to normal. There have been lots of closures, but new concepts are now stepping up and taking the opportunity.

Li Fern Woo,
Head of Internal Audit, Risk and Compliance
/ Head of Life Sciences, KPMG China

Night time venues are still solvent largely because of government’s stimulus… as long as these business are in hibernation. But, how long can they do that?

Will Wright
Partner, National Markets
KPMG in the UK

Erosion of trust

Businesses are working hard to demonstrate they are safe and acting under government guidelines, reacting quickly, with innovative solutions and adapting their operational models. However, customers are still unsure of the service they might receive and how they will be looked after, disrupting confidence in the sector.

As we approach the winter season in the northern hemisphere, the future is very uncertain, and many businesses will need to continue adapting their operational processes as the situation develops. Clear communications inspiring trust and providing visibly safe environments will likely be key for the industry’s survival.

For the travel industry, trust has been severely affected, driven by the airlines’ refund process. The system is now broken, with many strong historical brands facing reputational issues, as they try to implement changes in policies, with fully flexible and cancellable options.

Businesses oriented towards staycations and domestic travel have benefited during this difficult time, such as online house-rental agencies, as own transport is becoming even more popular. Those who are operationally flexible and adaptable will win.

Brands will need to be aware of the "theatre of cleaning" - clear communication of the measures they are taking in order to build up consumer trust and confidence.

Will Hawkley
Global Head of Travel and Leisure
KPMG International

Nobody is likely going on sale next year, everybody is expected to be pushing safety.

Richard Aston
Director
KPMG in the UK

Rise of digital

As with other industries, digitalization has been accelerated as a consequence of COVID-19. This represents a challenge but also an opportunity for the Leisure and Travel industry.

Many leisure venues have begun to adapt their operational strategies and implement a hybrid model to be where the customer is: at home. Digital menus and delivery have been highly used in the industry, as venues offer new options to customers. For other businesses, providing an in-home experience is the new opportunity to engage with consumers: TV, social media, messaging services, video games, all on the rise.

There are huge opportunities in the online entertainment space, from live performances, with online concerts, theatres and live broadcasts becoming more available; to streaming services such as Netflix or Disney Plus, seeing huge demand growth.

There is also an opportunity to use digital as a marketing platform, offering consumers personalized experiences based on their own personal circumstances. In the travel industry, intermediaries, such as Expedia, have enhanced their digital investment.

Connectivity, especially amongst younger generations, is becoming ubiquitous. There will be an increasing discrepancy between players able to reinforce their online presence with innovative tools such as augmented reality and other independent brands.

Régis Chemouny
Partner, Head of Real Estate and Hotels
KPMG in France

Trends in the US toward online wagering (sports and casino games) accelerated during COVID-19. These trends could accelerate given the likelihood of additional states legalizing online gaming and sports betting to fill budget gaps caused by COVID-19.

Rick Arpin
Travel and Leisure
KPMG in the US

Home is the new hub

The hospitality sector will need to reorganize around regional hubs, allowing regions to make independent decisions based on the local economy and local restrictions. While the leisure industry reinvents itself with a re-adaption of their business models into delivery and take away, a few questions remain for the travel industry: How will business travel be affected? In many cases, business hotels will need to rely on staycations to survive. In other cases, they will need to implement innovative solutions, such as extending the use of day rooms, whilst office workers intend to use hotel rooms as offices. Most of the big chains now offer that. Will staycations help the industry?

As rules evolve, the industry faces challenges. Many customers are cancelling reservations as traveling is banned, or big groups are not allowed. However, 35 percent are willing to book local holidays between October and December 2020 whilst 37 percent plan to do so between January to June 2021. This latent appetite to travel, offers the industry a ray of light at this uncertain time.

There were 630 million trips still being taken during China's Golden Week, representing about half of the population moving around. There is a strong desire to move around and travel.

Li Fern Woo
Head of Internal Audit, Risk and Compliance
/ Head of Life Sciences, KPMG China

Many businesses are going for local, suburban sites. There is a change in the business model and companies are also now relying on delivery.

Will Hawkley
Global Head of Travel and Leisure
KPMG International

  

Connect with us

Will Hawkley

Global Head of Travel & Leisure
KPMG Interntional

Connect with us