Lufthansa Innovation Hub: How will the travel industry recover?
There’s a single question on everyone’s lips in the Travel and Mobility Tech industry today: how will we recover from the Covid-19 pandemic that has slammed travel in ways we’ve never seen before?
At the end of March, we took a first shot at this question by analyzing several indicators for travel demand, particularly week-over-week app download trends across various travel-related segments in China (see the full article here). We saw that China had quickly overcome the initial Covid-19 panic phase and was gradually entering recovery mode following a return of interest in travel. This was an encouraging sign. One that we hoped could apply to the global travel industry.
Our rationale at the time was that China could be an example of what the future might look like in two months for us here in the West, thereby providing a possible path forward.
Two months later, we are now able to draw a much more comprehensive picture with more data at hand to outline some major future scenarios on how the travel industry might recover over the next few years. Again, we look at China to observe how travel demand has developed over the previous weeks to speculate what this might mean for the global landscape.
We want to base our best-educated guess on real-world observations that we can measure rather than theoretical spreadsheet models, which all of the big management consultancies have been excessively mapping out to describe the scenarios for what the new, post-coronavirus world will look like (see latest scenario reports by BCG, McKinsey, Bain, Deloitte, and Roland Berger).
The concrete task we set ourselves was to come up with an educated guess on the likelihood of a V-curve vs. U-curve vs. L-curve progression in the future.
Some technicalities before we start
A couple of remarks to set the stage:
- As an airline-affiliated company, we are certainly biased in our opinion since we have “skin in the game.” We want the travel industry to recover as soon as possible. What follows in this article is simply our best attempt at finding a silver lining.
- We would also like to stress that we are not basing our analysis on the latest Covid-19 case numbers, or data suggesting how the pandemic is being contained through an increasingly effective medical and political response. Of course, the future progression of the travel industry is closely intertwined with how fast the overall economy can reboot, which is driven by how aggressively governments are able to react and come up with a comprehensive and effective plan to guide us into the post-lockdown world. We leave this debate up to the experts in their respective fields. Instead, our focus is on travel-related early indicators only – so we stay within our playing field, even if this means we’re not considering all relevant variables.
- Last but not least, generalizing future scenarios across all the different regions of the world is perhaps a futile task. The Chinese context is unique. Therefore, it is arguably a stretch to build analogous future scenarios for other countries based on data from a single region – especially one that is so unique on various dimensions such as the People’s Republic. We recognize that our findings for China may not be directly transferable to other markets. Still, we hope they offer some value in providing a real-world example of recovery.
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