How might Covid-19 affect the travel sector?

Armstrong’s note of March 19th (‘Covid-19 - impact, support, and opportunities’) gave examples of sectors & subsectors that Armstrong believe to be categorised as either resilient, pressured, or snap-back opportunities during the ongoing pandemic.

This note looks at key themes for investors to consider in the travel sector during this downturn, and the recovery to come. It follows those on Business Services, Financial Services, Technology and the Industrials sector.


The travel sector, whilst cyclical and currently under significant stress, has proven to be resilient in the past. This is in part due to people’s deep-seated desire to explore and discover new places – every survey of retirees we know of lists travel as their number one priority. In addition, travel is a broad term, and sub-sectors will behave very differently in the recovery. The key for PE is to understand nuances within subsectors and individual companies.

Recommendations for investors – how investors can generate value from travel during/after Covid-19

  • Potential customers may not be able to travel, but they will still want to explore potential destinations for future holidays. A strong online presence is key, and those that are considering website upgrades should accelerate any plans now, whilst websites do not have to deal with online bookings.

  • Short/frequent/low-cost breaks will give way to longer/annual/higher-cost/short-haul breaks, due to the perceived health risks associated with transport (air in particular) and higher transport unit costs.

  • Consumers’ desire to ‘cocoon’ – control their immediate environment – will be heightened. Self-contained holidays will benefit; lodge parks, small-group escorted tours, self-catering cottages, campervans, canal boats.

  • These types of holiday often appeal for secondary reasons; environmental friendliness, local economic benefit; so marketing should be updated to reflect this.

  • Given movement restrictions and customer sentiment, ‘staycations’ will be the first area of travel to recover. Destinations reachable by car-ferry and Eurostar will rebound more rapidly than those requiring a flight.

  • There will be significant pressure on domestic hotels, both in terms of customer demand and new ways of working (which may reduce numbers of available rooms).

  • As the fly-to market opens up, there will be a pivot to fewer but higher-quality holidays (reversing the trend of previous years). ‘What can I do’ will become as important as ‘where can I go’, as travellers will want to maximise the return from their spend.

  • High-quality/price ex-UK cruise operators will be the first of their industry to recover. They will need to demonstrate (i) comprehensive health and safety protocols, (ii) itinerary creativity and flexibility (to avoid Covid-effected destinations), (iii) emergency re-patriation plans if required, and (iv) flexibility for early birds.

  • Sales consultants should be able to work from home, continuing after the lockdown has lifted, if they wish. This should be encouraged, particularly for high-performers. Investment now in the appropriate tools, technology and incentive restructuring for home-working will be money well-spent.

  • Committed capacity, once a potential strength, is now a liability. Re-balancing relationships with suppliers, flexing payment terms whilst maintaining their financial viability, requires a long-term view and delicate management (the Thomas Cook situation will have accelerated this in any event).

  • Significant supply of low-quality/cost/margin will be lost permanently.

  • Supply-chains will shorten. Strong DMC relationships, and in-country supply, will become a key differentiator, both in terms of available product & profitability, and ‘fair’ business practices. New relationships should be established whilst these types of suppliers are not focused on servicing existing business.

Analytical framework - how we modelled the likely impact of Covid-19

The Armstrong Framework model accounts for the likely impact of Covid-19 by grading a sector (and then subsector or company or a portfolio) across a range of key metrics. This allows us to generate an initial categorisation of pressured, resilient, or snap-back. From there, we take a more detailed look at a sub-sector or a company’s dynamics, to generate recommendations which maximise opportunities and minimise risks. For the travel sector the key metrics are:

Risks and opportunities - how selected subsectors might respond to the challenges

The results of this analysis for selected travel subsectors are as below.


1 Red is likely most affected (“underweight”).

3 Mid green is likely most resilient (“neutral”).

5 Dark green is most likely to snapback quickly (“overweight”).

Note: we are happy to run specific subsectors and companies through our model and share the output and our insight with you. Please get in touch with our industrials sector experts below.

Next steps – do you need support?

Armstrong is working with PE investors and portfolio companies to understand the new normal, identify risks and opportunities, and support management teams navigating this crisis.

If you would like to discuss the themes in the article in more detail and understand their impact on specific companies or sub-sectors, then please contact one of our travel sector experts:

Peter Cookson, Head of Travel, +44 7871 425 467,