COVID-19 has caused global impacts across many industries, but most remarkably on the travel segment. China was the initial epicenter of the COVID-19 outbreak, so the most immediate implications to travel were realized in China. This has had the positive impact of China being one of the first markets in recovery, while other markets are still in decline or bottoming out. Koddi partnered with Shiji Distribution Solutions, a leading hotel distribution technology provider to the Chinese market from the Shiji Group, in order to dive into the domestic demand trends happening inside of China. Overlaying the Chinese demand decline over the U.S. demand gives a glimpse into what the future could hold.

China is beginning to see a small uptick in their domestic travel activity as the confirmed COVID-19 case counts come to a stop. The U.S., on the other hand, is at the beginning of its exponential growth period in confirmed COVID-19 cases but has approached what appears to be a new floor for search volume. The recovery in the U.S. is likely to be delayed for several more weeks compared to what is present in China.

The above chart shows data provided by Shiji Distribution Solutions for hotel demand in China overlaid with the number of confirmed cases of COVID-19 in the country as reported through Johns Hopkins University.

Initially, China saw a huge drop in demand for hotels while confirmed COVID-19 cases grew exponentially at the end of January and through mid-February. As the curve for confirmed COVID-19 cases flattened in China, hotel demand started to increase. Some of this growth is facilitated by new government measures opening up markets and reducing restrictions on certain travel. For now, the hotel demand in China is increasing for domestic travel only due to the restrictions on airlines flying internationally, but this increase provides a positive outlook for the Chinese market that should continue as restrictions are lifted.

Currently, the U.S. is at the beginning of the exponential growth in confirmed cases of COVID-19. Interestingly, the U.S. demand for hotels has already begun to flatten at the current volume even though confirmed cases continue to rise. The U.S. reached this new bottom significantly quicker than China (10 days vs 14 days), which could indicate a market dynamic that is more sensitive to large swings and may result in a swifter upturn when the confirmed cases of COVID-19 in the U.S. begin to flatten. While the number of cases in the U.S. is expected to continue to rise in the coming weeks, the degradation to travel volume is likely to slow significantly and continue at the current pace that has been seen this week.

Overlaying U.S. and China Trends

Overlaying the confirmed COVID-19 cases and travel demand for both countries (with a 59-day lag), we get a glimpse into a possible future. Assuming the U.S. hotel demand follows a similar pattern to what we are seeing in China, we can estimate that it will continue to flatten for 3-5 more weeks. Looking at this data, there are three possible scenarios in front of the U.S. travel industry shown on the chart above:

1. The U.S. recovers at a faster rate than China since the U.S. decline was not as rapid as it was in China and demand for hotels picks up in mid to late April and continues to increase in May, with a near-full recovery in time for summer. We view this scenario as optimistic.
2. The U.S. recovers at a similar cadence to China and demand starts to pick back up slowly at the end of April and continues to increase throughout May, with a near-full recovery going into Q4. This currently appears to be the most likely scenario based on the continued case growth rate in the US.
3. The U.S. recovers at a slower rate than China due to less aggressive and proactive quarantine measures. This would result in recovery being delayed an additional four or more weeks. Demand for hotels could begin to recover in mid-to-late May, which could put full recovery deep into Q4 or later. This is our most conservative view based on the latest data.

Regardless of how the U.S. and the global travel industry recovers, here at Koddi we will continue to monitor the trends closely and continue to provide insights about projected implications. This data should be monitored closely over time to ensure that your marketing efforts are best situated to maximize potential future demand. Please contact us if you have any questions, or subscribe to our blog for future updates.