While the UK is currently amidst a third national lockdown, there’s reason to believe that this time is slightly different. The mass rollout of two approved vaccines has begun, with a third on its way, emphasising that the end of the pandemic is surely on the horizon.

VisitBritain estimates that international arrivals to the UK in 2020 were down -76% compared to 2019, reaching 9.7 million. Over the same period, UK hotel occupancy averaged a year-on-year decline of -60%. Evidently, the current lockdown and ongoing travel restrictions will further hinder demand in Q1 2021, whilst a great deal of hotels are again forced to temporarily close. However, inbound visitor numbers are expected to pick up through the year, to reach 16.9 million by year-end, with the vast majority (c.80.5%) generated by short-haul trips from Europe.

Is a staycation bounce imminent?

From an economic point of view, the sharp increase in precautionary household saving over the last 10 or so months coupled with a low inflationary environment points towards strong household spending power and therefore domestic spend, when possible. The frustration of extended lockdown measures is likely to further amplify demand.

What’s more, the UK boasts an enormous domestic source base. In 2019, over 73 million international outbound departures were made from the UK, as well as 122.8 million domestic overnight trips. Collectively, this creates a huge source base from which to kick-start domestic tourism in the first instance, particularly whilst international travel restrictions remain in place.

VisitBritain’s latest forecasts suggest overnight domestic tourism spend could increase by 81.8% year-on-year in 2021, reaching £18 billion, albeit still down approximately 27% compared to 2019 levels. This assumes a step change to recovery in Spring in line with the slight easing of restrictions followed by a gradual recovery through the remainder of the year. Staycation bookings for the summer are already in motion, driven in part by growing 'vaccine confidence'. For example, National Express experienced an increase of 185% in coach holiday bookings made by those aged 65 and over, during the first two weeks of January.

Looking further ahead and sources such as Tourism Economics are forecasting global domestic tourism to return to near 2019 levels by 2022. However, it is worth noting that this is an annual average and it’s likely that some submarkets will exceed pre-Covid levels through the height of the summer months. Glimpses of this were experienced during periods of less strict restrictions in 2020, with key UK coastal and country staycation markets reaching hotel occupancy levels in excess of 90% through periods of August and September. During these months many UK hotel operators also experienced considerable year-on-year EBITDA growth as Government support (VAT, business rates and furlough) reduced operating costs considerably. The same level of support is unlikely to remain during summer 2021 (despite pressure from the industry) however operating costs have been re-based and owners should expect a good season ahead.

A multi-year recovery for international demand, with leisure to outpace business travel

Exact timing for a return to usual cross-border travel patterns is very difficult to estimate at this point, with the expectation that recovery to long-haul travel will be somewhat delayed, dictated largely by the pace of vaccination programmes and travel restrictions across key source markets. A full recovery to international arrivals could therefore be a four-to-five year process on average. Leisure markets are likely to respond in the first place, while corporate travel remains hindered by post-pandemic cost-cutting and questions raised over the necessity for frequent business travel.

Responses emerging from various sentiment surveys do, however, point towards a willingness to return to regular travel soon after the threat of the virus has been removed. For example, the latest IATA (International Air Transport Association) travel survey asked respondents when they would feel comfortable travelling regularly again, with a promising 80% suggesting this would happen within six months of the pandemic subsiding. This suggests the pent-up appetite to travel, when possible to do so, remains strong for the vast majority.

A great deal of the recovery process, therefore, depends on the speed and efficacy of the vaccination roll out globally, but what’s promising for the UK is that this journey is firmly underway, hopefully leading to the easing of restrictions within the first half of this year.