Saturday,  September 26, 2020  6:24 pm

70% of travel agencies will close without additional federal aid, ASTA says

  • Other
  •   08-07-2020  10:23 am
  •   Pax Global Media
70% of travel agencies will close without additional federal aid, ASTA says
Pax Global Media

According to The American Society of Travel Advisors (ASTA), more than 70 per cent of travel agencies will be out of business in six months or less, without federal aid.

Zane Kerby, ASTA's president and CEO, released a statement that reports more than 90 percent of its members have reported revenue down 75 per cent or more versus 2019. That's also amidst layoffs and furloughs spread wide throughout the industry and a projected three-to-12 month lag time in business income returning after bookings resume.

U.S. agencies currently receive federal aid under the CARES Act, but without it, Kerby says that 71.3 percent of travel advisors will be out of business in six months or less without additional relief. 

This would leave travel suppliers’ main distribution channel crippled, and the traveling public left without access to the critical services that travel planners provide.

"We view this outcome as unacceptable, and call on Congress to include in the next COVID-19 relief bill provisions to prevent it, including the inclusion of travel agencies as eligible recipients in any airline payroll support funding, the RESTART Act to provide long-term forgivable loans to the hardest-hit businesses and an extension at least through the end of the year of expanded unemployment benefits for laid-off agency employees and independent contractors," Kerby said. 

Survey results reveal impact of COVID-19

Between Aug. 4th and 5th, 2020, ASTA surveyed its membership on the impact the coronavirus pandemic is having on their businesses and the steps governments to help restore them to health. According to the nearly 1,200 respondents:

Of respondents with W-2 employees at the start of the crisis, 75 percent have laid off or furloughed at least one employee, including:

  • 43.1 per cent who laid off or furloughed three-quarters or more
  • 16.4 per cent have laid off or furloughed between 50 and 75 percent
  • 16.4 per cent have laid off or furloughed between 50 and 75 percent
  • 16.4 per cent have laid off or furloughed between 50 and 75 percent

These layoffs come despite the fact that respondents reported availing themselves of the various relief programs in the CARES Act, including:

  • Paycheck Protection Program (46.3 percent)
  • SBA Economic Injury Disaster Loans (34.9 percent)
  • Enhanced unemployment benefits (38.2 percent)

Ongoing uncertainty with respect to business conditions and the prospect of additional federal relief risks widespread business failures. Given this uncertainty and factoring in current cash reserves, respondents report being forced to close their doors within:

  • Six weeks or less (15.8 per cent)
  • Three months (24.3 per cent)
  • Six months (31.2 per cent)
  • 12 months (15.1 per cent)
  • More than 12 months (13.6 per cent)

Due to industry economics (i.e. commission payment schedules), there will be a substantial time lag between a return of travel bookings and a corresponding return of business income. In this regard, respondents report the following:

  • No lag time (1.2 percent)
  • A lag time of between one and three months (8.8 per cent)
  • A lag time of between three and six months (27.5 per cent)
  • A lag time of between six and 12 months (43.8 per cent)
  • A lag time of 12 months or more (18.8 percent)

Beyond financial relief for struggling businesses, governments here and abroad can take steps to help the travel agency industry recover. Respondents ranked the following steps in order of importance:

  1. Develop and widely distribute a viable COVID vaccine
  2. Lift State Department/CDC guidance against all international travel
  3. Lift European Union travel ban on American citizens
  4. Lift CDC "No Sail" order on cruising
  5. Mandate masks on all flights
  6. Lift Caribbean region country restrictions on U.S. travellers
  7. Lift U.S. state-by-state quarantines

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