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Demand may exceed supply when CEO of one of the world’s largest hotel groups sees bookings ‘skyrocketing’.


Travel and tourism will begin to recover in the second half of 2021, according to data from Keith Barr, chief executive of Intercontinental Hotels, owner of Holiday Inn.
IHG,
+ 1.13%

(IHG).

However, the boss of one of the world’s largest hotel groups warned of capacity limitations across the industry, in an interview with MarketWatch and said the COVID-19 launch was original. This led to a “skyrocketing” in bookings at hotels, airlines and travel agencies.

“If a market is open to tourism, we will see a surge in demand for entertainment,” he said. “Talking to the CEOs of the airline and looking at our industry data, you will see a rapid demand for luxury resorts, casual resorts, hotels and destinations. entertainment. It will obviously be an entertainment-based recovery bolstered by essential business trips. “

Read: Holiday Inn owner said it was over the worst, supported by US and China domestic tourism

IHG’s Six Senses resort in the Seychelles just opened and Barr says it is operating at 80% capacity at a record average rate, prompting him to warn of capacity constraints.

“I think the demand for entertainment may outweigh the supply in some markets in the short to medium term,” he said. “Talking to some airlines, they are concerned about being able to reach capacity fast enough, if things really unfold.”

Bookings are increasing in parallel with vaccinations, and he says a significant portion of the tourism industry’s recovery will be seen in the second half of 2021 and much of 2022.

Over the past year, London has listed the FTSE-100
UKX,
+ 0.66%

The stock rose 44.71% to £ 49.52 ($ 68.31) ahead of rival Hyatt
H,
+ 1.83%

(29% increase) and Accor
AC,
+ 0.87%

(25%), but behind Marriott
MAR,
+ 1.62%

(57%), Hilton
LDS,
+ 0.77%

(49%) and Melia
MEL,
+ 3.13%

(sixty one%). Airlines have also risen on vaccine optimism, with Delta
FROM,
+ 1.48%

90% increase, American Airlines
AAL,
+ 0.54%

increase 86% and the southwest
TO LOVE,
+ 1.20%

98% increase.

Before 2020, the travel and tourism sectors outperformed global economic growth for a decade. In the past five years, one in four new jobs globally has been created by this sector, contributing nearly $ 9 trillion, or 10 percent, to the world’s gross domestic product in five years. 2019.

But the pandemic hit hard and a study of the economic impact of the World Travel & Travel Council, representing the sector, found its contribution to global gross domestic product decreased. 49.1% of the global economy fell 3.7% last year. The March report showed that the sector lost $ 4.5 trillion last year.


“China is a prime example of when the virus was contained. . . and consumer behavior returned to normal. You see travel back with a staggering increase. The plane is full, the train is full and the meetings and events are happening.


– IHG CEO Keith Barr

To get an idea of ​​the shape of the upcoming revival, Barr points to China, which he describes as post-COVID.

“China is a prime example of when the virus was stopped, because the virus was effectively stopped in China and consumer behavior was back to normal. You see travel back with a staggering increase. Planes are overflowing, trains are overflowing, and meetings and events are going on. In a post-COVID environment where customers feel safe while traveling, or because vaccines or regimens or viruses aren’t there, people naturally want to be connected. “

Travel restrictions vary around the world, with much of Europe still tightly locked. By mid-May, international travel will continue to and from the UK, as part of the rules loosened by the UK government. A ‘traffic light’ system will be introduced, which will view the countries ranked based on their COVID-19 risk.

Read: Airlines and travel stocks rose as the UK envisaged a lockout exit plan

Barr says that around the world he is seeing signs of customers feeling more confident when traveling and that this is closely related to the vaccine rollout.

“We’re seeing, and this is US data, as vaccines continue to ‘fall’, pre-orders have literally increased,” he said. “The first is over 65 and now we’re in our 50s. And when you think about the trillions of dollars savings consumers have deposited in the past year, they want to spend on travel. travel. People are calling it revenge tourism and I’ve heard of ‘vaccination.’

“We think business will return, but it will be directly related to vaccination rates, and government restrictions are being lifted and travel corridors open up, so here it is. will be a journey for many years. The travel industry has clearly seen the greatest existential challenge it has ever faced in our lives, if not unprecedented, ”he added.

IHG data shows that 50% of its frequent travelers re-registered a trip they canceled last year.

The business, which also owns the Kimpton, Even, Crowne Plaza, Staybridge Suites, Regent and Six Senses hotels, has demonstrated resilience during the pandemic. It has done some considerable refactoring before the COVID, making it more flexible as it eliminates some business costs and can absorb pandemic shock better than some of its competitors. its.

Read: Holiday Inn owners are hoping for the COVID-19 vaccine but are cautious about restoring travel

“We have a very good relationship with our banks, so we have got the best banking contract waiver in the industry because they believe we are in an extremely good position,” he said. To recover.

The pandemic has also caused changes in the way hotels operate – food menus and info cards have been replaced with details provided online and potentially permanently changing – savings costs are substantial. Customers will be able to book room service using an app, online check-in and check-out, and stream content from their mobile phones to their in-room TVs using a secure network.

But the biggest trend, Barr predicts, will be driven by a decrease in office space and an increase in the number of people working from home.

“We think we will be able to attract more customers to our hotel who want to work and meet more than before – we will definitely see a trend in it,” he said. to speak. “We think that basically people with smaller offices will be more likely to find other places to work.”

Similar to the spaces seen in the WeWork office, IHG is installing pods in corridor areas where individuals can work and pods where four people can meet. “We redesigned Crowne Plazas and Holiday Inns to have more functional workspace in the lobby than with your traditional lobby design for the local community and the hotel guests as well.

“It’s another way for us to generate revenue from the space that can be left empty only during good times of the day,” he said.

Read: InterContinental hotels have been assembled. UBS says It’s Time to Sell.

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