There are brighter spots in the international sector. There is also continued development in domestic travel but there are, without doubt, at least as many major uncertainties in this month’s analysis as there were in last month’s.
For Travel Retail a key uncertainty, the central uncertainty, must be when the Chinese authorities will allow the resumption of international travel. A recent feature in the Wall Street Journal, much re-quoted in the press, opined that the travel embargo will remain in place for some twelve months. The newspaper’s source is anonymous and none the worse for that. But even prior to this data release it was looking increasingly unlikely that the conventional wisdom of an international travel resumption at the start of next year could happen for China. The present working assumption is now for some easing to begin around the middle of next year but with the same recovery curve in place thereafter. It may be that this assumption is optimistic.
This China uncertainty trips over into other countries in the region but has little effect elsewhere. But there is, of course, increasingly good news from Macau. The Chinese are travelling again but because this is Travel Retail, information is pretty evenly balanced with mis-information. The May increase in international arrivals by air has been described as slow. It rose by 25% points month on month but the majority of Chinese visitors choose to travel by road and on arrival their preference is for one of the resort’s many five star hotels. They are not staying longer: the hotel data does not support claims based on ticketing data.
There is uncertainty in Europe. Certainly there is summer growth: vide Germany and there is the potential, the untapped demand, for further growth and growth elsewhere. The impediment, as ever, is governmental dictat fed by two factors: fear of the Delta variant and slowness in vaccination programmes. Thus, the greatest uncertainties attach to tourist departures from the UK which is one of the main feeders of the regional summer season. The present forecast accepts the proposition that there will be an upturn. However, it does not factor in the possibility that a further wave of Delta variant led infections will lead to more travel restrictions in the late Autumn and therefore a dip in travel demand.
Vaccination slowness is of further concern in the Asia/Pacific region. This is not new and this is not the first time the issue has been put before subscribers. The question is to what extent governments within the region will accept unvaccinated visitors. And then there is the question of whether there will be specific vaccination requirements. It is worthy of note that the EU is presently considering the exclusion of specific batch numbers from its passport scheme.
Subscribers know that they are having to deal with the fact that the month on month forecast changes are substantial, which they often are. When times were better there was a provable connection between past and present travel numbers; some may recognise the ARIMA model here. In other words projections were constrained by their histories. In present times this does not work because next month’s forecast is so heavily dependent on last month’s actuals and last months actuals do not conform to historical patterns. In May, the last month for which there are true actuals as opposed to actuals confected from ticketing data, Paris Orly registered an 80% point increase over April. In these circumstances it would be helpful, though probably impossible with any degree of certainty, to know when the next big turning points are likely: these are unknown unknowns. Thus for the rest of this year and concentrating on the international time series:
✓ the USA may be safely set aside: it is growing but growth will obviously be constrained by destination shortages
✓ Asia/Pacific waits on higher vaccination levels to drive government confidence; the proposition that it is possible to forecast future vaccination levels by country is on the absurd side of fraudulent
✓ Europe is still the only market which has the potential to change Travel Retail fortunes in the last quarter of this year and the first quarter of next and the present forecast is far from exciting.
An important European turning point could materialise on 19 July when the UK may move to a lifting of internal restrictions. If it does then following from that there will be a further acceleration in the rates of infection, though not necessarily in mortality rates. This will in turn enable “destination” countries to model the impact of arriving UK residents. and the sorts of spread rates that they are likely to experience as they vaccinate in the face of the Delta, and other as yet unknown, variants.
For subscribers the advice is that they will have to become accustomed in the short term to large forecast to forecast movements. But it is the reality added to the further difficulty of defining the short term.