The investment outlook for domestic travel

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With international travel restricted, George Moss spoke to Travel Weekly about the opportunities closer to home in domestic travel: 

The Covid-19 pandemic has brought a wide range of disruption to the travel industry: ever-evolving government restrictions on movement, shifting positions surrounding quarantining and disagreements over air corridors has meant that international travel has faced severe challenges over the last year that look set to continue. 

While the entire travel sector has been affected, much of the staycation market has experienced a surge in demand, as shown by the number of domestic travel bookings following Boris Johnson’s recent roadmap announcements. 

Given the uncertainty of the last year, many consumers are nervous about international travel, out of fear that they will increase their risk of contracting Covid-19 or have to navigate operational changes or cancellation. While international travel prospects are uncertain, there are good opportunities for the domestic travel market, both now and in the long term.

Future investment 

With ongoing restrictions in international travel, it remains difficult to invest in businesses specialising in overseas travel at the moment. Domestic travel businesses have shown considerable resilience during this crisis, as well as through previous recessions, and those that can demonstrate this will likely see higher valuations.

However, that is not to say that all domestic travel will benefit from the surge in investor interest. Those operators that allow people to ‘keep to themselves’ are in prime position to thrive, for example holiday cottages and caravan parks.

Similarly, those companies with positive customer engagement during the last year, with customers feeling they have been treated fairly – for example with transparent refund policies – are likely to see enhanced customer loyalty going forwards. Those that struggled to adapt at pace to changing customer demands, might see the opposite.

Constantly-changing government advice has left many companies on the back foot, having to address ever-changing restrictions and related operational challenges. During lockdown periods, many travel companies have had to expand their customer service offering to look after customers, addressing valid concerns around whether holidays can go ahead and the applicability of refund policies. Funding this in a period where revenue was impacted has been difficult for many operators and, in some cases, has pushed some domestic businesses to the brink – and some to collapse.

Expectations for 2021

With the pace of vaccination rollouts varying quite significantly between countries, and fears over new overseas variants, I would expect to see the domestic travel market to continue to grow. 

The market was growing steadily pre-pandemic, and the behavioural changes that have been brought on by it are likely to bring a long-term boom for the sector as the UK reacquaints itself with the joy of holidaying at home. As a result, we would expect to see increased levels of deal activity in the future.

Despite challenges, the domestic travel sector has proven once again its resilience, and we can expect to see high levels of growth from it in 2021 and beyond. Now is the time for operators to continue to enhance their customer proposition and keep up with the changing regulations to thrive now, and in the years ahead.

Click here to read the original article.

George Moss, ECI

About the author

George Moss

"I’m a Partner in the Investment Team and really enjoy leading investments into and working at board level with high growth tech-enabled businesses across a number of subsectors, for example travel, digital marketplaces and healthcare tech."

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