Flight Centre's New Zealand boss is forecasting more consolidation in the travel industry but says there are reasons for some optimism in the sector devastated by Covid-19.
David Coombes says with the prospect of travel corridors the industry was on the "cusp of exciting times", with a survey revealing strong pent-up demand to go overseas. However, in the meantime, there was still an "oversupply" of travel firms.
Both traditional travel agents and online travel agents (OTAs) have been badly hit by the crisis, with hundreds of jobs going in this country. Flight Centre's staff numbers have fallen by more than half from 1200 at the start of the year.
"To say travel has had a tough year would be an understatement. Flight Centre has been here for over 30 years, I've been with the company for 20 of them and the decisions that we've had to make this year to preserve our business have without a doubt been the most difficult," he said.
In August the global travel group reported a A$662 million net loss ($718m) for the 12 months to June 30, compared to a $264m profit the year before. It was its first loss since being listed on the Australian sharemarket 25 years ago.
The group, however, then had A$1.1 billion in available liquidity, boosted in April by a $700m capital raising and $200m debt.
Coombes said his firm was "quietly confident" about the future but the industry would get smaller in the meantime.
"There's a lot of players in the market, there were a lot of bricks and mortar, there were a lot of OTAs. And we don't need, in the short to medium term, the capacity to transact the amount of travel that we do."
His firm had been moving more of its business online before the pandemic struck and this would accelerate. Coombes said the difference between traditional agents and OTAs was that there were trained staff supporting clients.
"There is a person backing you up. You can talk to people. So that's the vital element of the bricks and mortar and I think that the blended proposition, which we're very focused on at the moment is a winner."
Flight Centre research showed that booking flexibility, strict hygiene practices and knowing that a refund will be attainable and easy if needed are major priorities for Kiwi travellers.
While domestic leisure travel was a small part of Flight Centre's business, this had increased by up to 200 per cent this year as more travel credits were being redeemed.
Coombes said more Kiwis who may have booked a motel or rental property in the past, they're now leaning towards a more upmarket hotel where they can be assured of both cleanliness and flexible booking options.
"We think this trend will carry over to international travel," said Coombes.
Flight Centre has launched a new range of packages that are entirely flexible and allow for fee-free cancellation up to seven days prior to travel and dropped in-store and online domestic booking fees.
It was also working with CoverMore Travel Insurance to launch packages that cover a customer if they were to contract Covid-19 before or during travel.
Corporate travel booked through the firm was running close to pre-pandemic levels.
Coombes said Kiwis' enthusiasm for domestic travel was providing clues into how global travel could roll out - when it resumes.
"We have customers itching to leave right now, they would travel tomorrow and travel anywhere if they could return without a hotel isolation, but there is a flipside to that - we know there are customers who have had their confidence knocked, they'll want others to test the waters first.
"Kiwis are taking on domestic travel like never before, exceeding pre-Covid domestic sales, and it's providing valuable insight into how we see a return to global travel rolling out. They're buying more package deals with flights, accommodation and sightseeing all in one."
An online survey of 5226 clients found that when the time comes for an overseas break, 43 per cent of customers would like a beach holiday and one in three would like to visit friends and family.
More than 70 per cent say that they plan to book with a travel agent.
As for where Kiwis will be flying, Coombes said visits to family and friends would be first on the list once international travel resumes.
"We'll no doubt see Kiwis flocking to the Pacific Islands, Australia, UK, India and South Africa to visit relatives. These continue to be highly requested destinations."
The top five leisure destinations are likely to be:
Flight Centre expects that Kiwis will travel across the ditch like never before, extending their stays and travelling deeper into the country. More than a fifth of customers say they are interested in visiting Queensland.
Fiji and Cook Islands
The firm says it has had "non-stop" inquiries for both of these close-to-home island destinations. A fifth of those surveyed wanted to go the Cook Islands.
Thailand and Vietnam
Both nations have had very low levels of reported Covid cases and would be popular when travel restrictions are lifted.
Known for its cleanliness and with low Covid-19 rates, Singapore was "the perfect spot for Kiwis to dip their toes back into city travel".
One of the first destinations to trial quarantine-free travel, Dubai has been successfully welcoming tourists from all countries since July.
Coombes said Covid hotspots - such as Europe and the United States where the pandemic is raging - would be more difficult for some time given the likelihood that quarantine here would be in place longer.
However, there were still a limited number of people who had to travel for family events such as weddings and funerals who were prepared to travel there.
"They're prepared to come back and do two weeks in a hotel. But for a holiday you're probably not prepared to do that."
He said airlines would likely be interested in deploying planes to any market where people were able and keen to travel. This would keep competition sharp and keep a lid on airfares, which for repatriation flights and the limited number of scheduled services for the past six months had been high.
"We're on the cusp of exciting times. Imagine the euphoria when we're all getting on planes again and going and seeing family and friends or going on holiday."
While domestic operators had benefitted from Kiwis being forced to stay at home, resumed travel abroad supported air links that brought in overseas tourists leading to a more sustainable tourist industry.
Coombes was part of a travel industry group that successfully pushed for a government scheme that will pay agents up to $47.2m to recover an estimated $690m that New Zealanders have spent on travel overseas. The agents will be paid 7.5 per cent of the value of all cash refunds they are able to successfully recover for their customers and 5 per cent of the value of all credits successfully secured or rebooked for international travel.
He said the Ministry of Business Innovation and Employment was still working through the mechanics of the scheme which he hoped would get underway as soon as possible.
The ASX-listed firm has been paid more than $11.5m in wage subsidies in this country. Its shares fell from a 12-month high of A$40.77 to $8.50 in April but yesterday were trading at more than $14.34.