PLANNING FOR THE RECOVERY - Adam Sacks President Tourism Economics January 2021 - South Dakota Tourism ...
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
PLANNING FOR THE RECOVERY
Adam Sacks
President
Tourism Economics
adam@tourismeconomics.com
January 2021
“It is said that the darkest hour of the night comes just before the dawn.” Thomas Fuller, 1608-1661 English churchman and historian Penned within a travelogue of the Holy Land Died at age 53 of epidemic infectious disease
The worst of times
US COVID Deaths and Hospitalizations
Deaths Hospitalized
4,000 140,000
3,500 120,000
Deaths (7-day MA)
3,000
Hospitalized (right) 100,000
2,500
80,000
2,000
60,000
1,500
40,000
1,000
500 20,000
- -
3/1 4/1 5/1 6/1 7/1 8/1 9/1 10/1 11/1 12/1 1/1
…but the best of times may be in sight
US: Estimated vaccine distribution
Millions of doses % of population vaccinated
200 100
Vaccinations (doses)
Optimistic case (%)
80
150 Base case (%)
Pessimistic case (%)
60
100
40
50
20
0 0
January February March April May June
Source: Oxford Economics/CDC
Vaccine diffusion will be gradual in 2021
US: Covid-19 vaccination doses administered
Daily doses %
700,000 3
Daily doses administered
600,000 Percentage of population 2.5
500,000
2
400,000
1.5
300,000
1
200,000
100,000 0.5
0 0
12/2112/2312/2512/2712/2912/31 1/2 1/4 1/6 1/8 1/10
Source: Oxford Economics/Our World in Data
Three snapshots of the travel landscape
Travel performance
Year-over-year % change
40%
20%
Hotel room demand (+3%)
0%
Auto trips (-2%)
-20%
-40%
Air pax (-54%)
-60%
-80%
-100%
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan
Source: TSA, Arrivalist, STR
After a steep drop, SD travel has begun its ascent
South Dakota monthly sales tax collections
Y-o-y growth, by month, 2020
20.0%
10.0% South Dakota visitor spending ($ billions)
0.0%
Jan Feb Mar Apr May Jun Jul Aug Sep Oct
-10.0%
-20.0%
-30.0% +3%
-40.0%
Accommodat ions
-50.0% Rest aurant s
-60.0% Recreation
-70.0%
-80.0% $4.1
$4.0 -18%
$3.8 $3.9
Source: Tourism Economics, South Dakota Department of Revenue
$3.4
2016 2017 2018 2019 2020
Source: D. K. Shifflet, Tourism Economics
…placing SD among the best performing markets in the country
Annual travel spending losses by state
Year-over-year % change
0%
-20%
-40%
Best 10 markets
-60%
Worst 10 markets
-80%
Source: U.S. Travel Association, Tourism Economics
Travel confidence remains low but is trending… up!
And intentions to travel remain steady
How will the economy influence the travel recovery?
After recovering about half of losses, jobs fall
US: Nonfarm payroll employment
Millions
155
150
145
Dec: -140k
Feb-Apr: Nov: +336k
140 -22.1mn Oct: +654k
Sep: +711k
Aug: +1.5mn
July: +1.8mn
135
June: +4.8mn
May: +2.7mn
130
125
Jan-18 Jul-18 Jan-19 Jul-19 Jan-20 Jul-20
Source: Oxford Economics/Haver AnalyticsUnemployment rate still near recession peaks
US: U3 unemployment rate
%
16 Apr:
14.7%
14
12 10.8%
10.0%
10 9.0%
7.8%
8 7.1%
6.1% 6.3% Dec:
6.7%
6
4
2 Average of 7
prior recessions
0
1960 1970 1980 1990 2000 2010 2020
Source: Oxford Economics/Haver AnalyticsParticipation rate at its lowest since the 1970s US: Labor force participation rate % 69 67 65 63 Lowest since 1977 61 59 57 1949 1959 1969 1979 1989 1999 2009 2019 Source: Oxford Economics/Haver Analytics
Fed policy acting as wind in the sails
Housing activity remains very buoyant
Large and rapid fiscal stimulus without precedent
Policy upside risk shouldn’t be discounted
▪ Congress will likely pass, on a
bipartisan basis, additional
stimulus checks totaling $1,400/
person on top of the $600
checks passed at the end last
year.
▪ President Biden will attempt to
pass some of his spending and
tax proposals via the budget
reconciliation process requiring
only a simple majority.
❑ 3rd round of stimulus checks
should lift GDP by 0.7%.When will travel recover?
Assumptions: Baseline
• 2021 Q1
• Difficult start to year. Concerted efforts to get disease under control
• Vaccine distribution accelerates in earnest
• 2021 Q2-Q3
• Vaccination programs make a meaningful impact
• Through ramp-up of vaccination programs, compliance with public health guidance, and improved testing,
disease prevalence declines, immunity rises, and cases decline
• Assume by the end of 2021 Q2, Covid-19 infection rates are low
• Leisure travel picks up headed into summer
• 2021 Q4
• Post-Labor Day, context for business travel and group events has normalized substantially. Corporate travel
restrictions are eased. Group events are permitted in most areas, though certain restrictions continue.
• With US perceived as substantially “safe from COVID”, group and business travel returns strongly (group
demand recovering to about 20%-30% below 2019 levels in 2021Q4)Will higher income households support recovery?
Share of leisure lodging spending by
income
40%
39%
Households earning $100k+
account for 24% of
households… but 59% of
leisure spending on lodging
21%
20%
Unemployment rate (October):
14% 15%
13% 14%
13% • High school grad: 8.1%
11%
• Bachelor’s or higher: 4.2%
Less than $40k $40k to $70k $70k to $100k $100k to $150k $150k and
more
Share of households Share of spending
Note: Lodging spending is based on recent three-year average (2015 to 2018). Consumer
spending represents leisure trips. Pre-tax annual income, in thousands.
Source: BLS; Tourism EconomicsHigh income earners least impacted by the crisis
US: Share of workers who can telework by wage
level, in %
Earnings greater than the 75th
61.5
percentile
Earnings from 50th to 75th
37.3
percentiles
Earnings from 25th to 50th
20.1
percentiles
Earnings less than or equal to the
9.2
25th percentile
0 25 50 75 100
Source: Bureau of Labor Statistics/Oxford EconomicsRebound in consumer spending driven by low-income families
With spending on goods outpacing services
US: The K-shaped consumer spending recovery
Feb 2020 = 100 Durable goods 14% *
120 Nondurable goods 23% *
Services 64% *
110
100
90
80 * Pre-Covid share of total
consumer spending
70
1/1 2/1 3/1 4/1 5/1 6/1 7/1 8/1 9/1 10/1 11/1
Source : Oxford Economics/Haver Analytics$1.4tn cash stash for households
Major reshuffling of the deck
Leisure travel will fuel the recovery
Business and leisure trips
Index (2019=100)
120
100
100 100 101
105
99
108
Leisure back to 2019 levels
93
80 90
85 in 2022
76
60
40 49 Business nearly back in
40
2024
20
0
2019 2020 2021 2022 2023 2024
Business Leisure
Note: Only domestic trips
Source: Tourism
Source: Economics
U.S. Travel Association, Tourism EconomicsApproximately three years to recover room demand levels
Room demand: US
Quarters relative to trough, level relative to prior peak
20%
8 quarters to
10% recover prior peak
Prior peak level
0% Room revenue is
12 quarters to
-10% recover prior peak
expected to recover
Next year: 2021 Q4 to its prior peak level
-20%
in early 2024, about
-30% four years after prior
peak.
-40% Today: 2020 Q4
-50%
-60% 2020 Q2
-70%
-4 -2 Trough 2 4 6 8 10 12 14 16 18
◼ Global Financial Crisis ◼ Global Coronavirus Recession
Source: STR; Tourism Economics…but the second half of next year will look very different
Room demand
Quarterly, relative to 2019
10% 2023 Q2
0% 1% 0%
0%
0% 0%
-3% -3%
-10% -5% -4%
-9%
-12%
-14%
-20%
-23%
-30%
-32%-33% Strong recovery in 2021H2 to
-34%
-40% demand levels about 10%
below 2019
-50%
-60% -57%
-70%
Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2020 2021 2022 2023
Source: STR; Tourism Economics
* Total room inventory RevPAR is calculated without removing temporarily closed hotels. On a
standard RevPAR basis, growth is forecasted as -47.0% in 2020 and 25.0% in 2021.Recovery after a pandemic: 14-17 months
2003 SARS outbreak in Hong Kong 2003 SARS outbreak in Singapore
International arrivals (thousands) International arrivals (thousands)
1,500 800
14 months from crisis to recovery 12 Month Average 17 months from crisis to recovery 12 Month Average
1,362,000 lost arrivals Lost Arrivals 1,472,000 lost arrivals Lost Arrivals
700
1,000
600
500
500
0 400
Jan-02 Jul-02 Jan-03 Jul-03 Jan-04 Jul-04 Jan-05 Jul-05 Jan-06 Jan-02 Jul-02 Jan-03 Jul-03 Jan-04 Jul-04 Jan-05 Jul-05 Jan-06
Source: Tourism Economics Source: Tourism Economics80% of travellers indicate return within six months of virus containment
How long to return to travel 'as usual' after the pandemic has subsided?
50% 47%
February Survey April Survey June survey September survey
45%
40%
34%
35% 32%
30% 28%
25%
20%
15% 15%
14%
15%
10% 8%
5%
4%
5%
0%
Not wait at all Wait 1-2mths Wait ~6mths Wait ~1yr Not travel in foreseeable
Source: IATA futureHow do we advocate for
the industry during this
crisis?Reminder: the travel sector was a leader of SD job growth
L&H employment in South Dakota Employment in South Dakota, by major industry
Index (2010=100)
Amounts in number of jobs
112 Heal th and social assistance 72,790
SD L&H +10% Retail t rade 67,980
110 Manuf act uring 47,350
Accommodat ion & food svcs 46,420
Finance and insurance 40,060
108 SD + 9%
Construct ion 36,970
Tourism 33,210
106 Other svcs, exc. public admin. 33,080
Wholesale trade 25,850
104 Real estate & rent al/leasing 25,690
Professional and t echnical services 24,540
102 Admin. and waste services 20,530
Transportation & warehousing 18,210
Arts and recreation 12,220
100
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Educat ional services 10,420
Source: BLS Source: Tourism Economics, BEAIndustry in crisis: no sector has been hit as hard at travel
South Dakota employment loss by industry
% of industry lost since February
Leisure & hospitality 16%
Information 7%
Other services 5%
Education & health services
Manufacturing
Government
Trade, transportation, and utilities
Professional & business services
Financial activities
Mining & logging
-5% 0% 5% 10% 15% 20%
Source: BLSTravel must be our focus for an economic recovery
Share of total SD employment loss by industry
% of all jobs lost since February
Leisure & hospitality 50%
Education & health services 20%
Government 13%
Trade, transportation, and utilities
Manufacturing
Other services
Information
Professional & business services
Financial activities
Mining & logging
-10% 0% 10% 20% 30% 40% 50% 60%
Source: BLSThis should not be controversial
Will there be an enduring
legacy of this crisis?
Gratitude.THANK YOU!
Adam Sacks
President
Tourism Economics
adam@tourismeconomics.com
January 2021You can also read
