Travel restrictions and strict social distancing measures in the UK will create pent up demand that may lead to short-term price increases.

UK travel companies have seen a major decline in bookings, impacting revenues and their ability to provide accurate performance guidance. Uncertainty around the future state of the economy and job security has damaged confidence among usually frequent travelers and caused them to shy away from booking future trips.

Operators are not familiar with this situation as holidaying is seen as an essential part of life for millions of Britons. GlobalData figures show that Brits made 72.2 million trips abroad in 2019, with Spain topping the list of most popular destinations (15.8 million).

However, Brits will not suddenly become averse to holidaying; it would take years of problems to bring about that kind of sea change in behavior. They are simply not comfortable travelling at the present moment and this will create pent up demand.

Pent up demand will engender short-term price increases for travel

Given the nation’s love of holidays, there will likely be a sudden surge in demand for hotels, airlines and package holidays once restrictions are lifted and holidaymakers are satisfied that it is safe to travel.

The UK government banned all unnecessary travel on 23rd March 2020 and limited movement domestically and this will help create even greater demand. Due to the current limitations on daily life, citizens will suffer from ‘cabin fever’, so the desire to travel will be higher than ever.

Dynamic pricing methods will be utilised

Hotels and Airlines use dynamic pricing methods, where a sudden increase in demand over supply will cause prices to climb. Travel companies using dynamic pricing methods may see pent up demand as an opportunity to compensate for the loss of revenue during the COVID-19 outbreak.

Package holidays with protection through schemes such as ATOL will see an increase in demand, as these usually confident travelers will demonstrate a need for secure holidays in case any incidents occur. Travel insurance will also see a growth in demand, with more complex policies covering further epidemic/pandemic developments growing in demand.

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