Short term gain, long term pain expected for consumers in travel market

Short term gain, long term pain expected for consumers in travel market

Australian travels and tourism has taken an enormous hit as a result of the COVID-19 pandemic.

International and domestic flights have been grounded, with the country largely encouraged not to leave home unless it’s for an ‘essential’ reason such as to shop for groceries or visit a doctor.

And while there’s no sign of flights, certainly those going overseas, resuming any time soon, travellers could see a large drop in ticket prices once they do – according to a recent study.

Conducted in the US but applying globally, the study suggested that, following the analysis of data following previous downturns and the initial response from various airlines as the virus began to impact the industry, lower airfare prices were likely in the short term.

The report references two other significant events in the aviation industry over the past 20 years: 9/11 and the global financial crisis (GFC). Ticket prices dropped by 18% and as much as 24% in the immediate aftermath of these events.

It’s reasonable to assume that, in a post COVID-19 world, the public could have significant trepidation towards travel in general, and by lowering prices you avoid the possibility of a further reduction in demand.

But once that demand has been stimulated and is showing signs of stability, the report also suggests that prices will begin to rise again to match what the market will bear.

Over a five year period, according to the study, tickets could rise by as much as 25% on 2019 levels, in line with pent up travel demands picking up.

This reflects the rises seen in the years following both 9/11 and the GFC.

“In the short term, for travellers willing to book flights today for future travel, these industry shocks are decreasing flight prices significantly,” the report said.

“In the long term, the airline industry is about to get much smaller which is bad for passengers. Customers will have fewer choice of airlines, flight times, and available routes and markets.

“All of that means passengers will pay more when they return to the air.”