What is Pent Up Demand? | TravelResearchOnline


What is Pent Up Demand?


Among all of the phrases I want to banish from the COVID-19 travel lexicon, the top one would be “pent-up demand.” It’s an amorphous term that often leads to a false sense of security, that “everything is going to be alright.”

I hear it on quarterly investor calls from executives at the top publicly-traded travel companies. CEOs and CFOs spread it around in their prepared remarks and rely on it when they are asked direct questions about what future bookings look like.

You hear it on television news programs, when corporate executives are trying to convince the public that we all should see things as rosy as they do. And industry webinar panelists dabble in it, trying to boost each other’s morale.

Don’t get me wrong. I do believe travel will return. And I understand the importance of trying to be positive in this incredibly depressing period in our global history. This has been an extremely painful time for me personally, financially, and professionally.

But what I don’t appreciate is the lack of facts supporting these “pent-up demand” quotes. Most executives whom I follow offer some loose trend data to back up their claims. They never go into detail (because, you know, that would be giving away some kind of corporate secret.)

Meanwhile, updates are so irregular, it’s impossible to piece together a strong narrative of which consumers have this pent-up demand, and when they will be acting on it.

I worked in Public Affairs with large corporations for over 15 years. So, I’m not saying this naively. I fully understand how material information works for publicly-traded companies.

But we are in the middle of the worst economic downturn, perhaps in all our careers. My concern is that all of this “pent-up demand” talk is giving some advisors false hope. At best, it’s vaguely misleading.

That’s why I want my travel advisor friends to have all of the information they require to make educated decisions about the return they can expect on the money they have invested in their businesses. I want to help them maximize their return between now and when all of that “pent-up demand” starts rolling into their bank accounts.

Help is on the way?

That’s why I’ve been closely following the weekly airline ticket data coming out of Airlines Reporting Corp. (ARC). ARC processes tens of millions of global airline transactions a month, so they’re a pretty good barometer for consumer travel intentions, especially the kinds of trips that make travel advisors an income – people visiting a place that requires a plane trip.

Well, an interesting thing has happened over the last 30 days that makes me feel slightly more bullish about the near-term future. I’ve been taking ARC’s weekly airline tickets sold data for U.S.-based online travel agencies (OTAs), traditional leisure agencies and corporate travel management companies, and plotting that data in an Excel spreadsheet.

As I have reported elsewhere, like on my personal LinkedIn page and over at the Travel Business Mastermind Facebook page, the OTAs have been leading the return back to “normal.” According to ARC, during the week ending Oct. 4, they were processing nearly 50% of the airline ticket volume of the comparable week in 2019.

Retail travel agencies (focused on leisure travel) were booking about 29% of their 2019 volume for the corresponding week, while corporate travel was stuck at around 14% of their 2019 volume.

[NOTE: ARC results are based on weekly sales data from 11,537 U.S. retail and corporate travel agency locations, and online travel agencies. Results do not include sales of tickets consumers purchased directly from airlines, and are not a net of refunds or exchanges.]

TRO, Utilizing Airlines Reporting Corp and the Transportation Security Administration data

Like so many prognosticators, I was worried that leisure travel demand would drop off after Labor Day, because schools were reopening around the country and parents had less mobility to take a vacation that included an airline trip.

But according to ARC’s numbers, leisure travel air bookings have actually increased by about 1.5 percentage points. If you look at the Transportation Security Administration’s (TSA) boarding figures, you see a similar steady climb. Over four weeks of August and the first week of September, TSA boarded an average of 4.9 million airline passengers a week.

For the four weeks since Labor Day, the TSA has boarded an average of about 5.07 million passengers a week, an increase of about 3% versus the August/September figures.

To think this through, I recently spent some time on the phone with Chuck Thackston, ARC managing director, data science and research, to ask him what he thought about ARC’s September numbers. Like me, he was encouraged by the continued, albeit small, climb for OTA and leisure travel agency bookings.

“If you look at the recovery trend since the depth of the trough since April, we’re recovering around one percent week over week,” Thackston said. “It’s not going to be dramatic, but that one percent puts us into a pretty steady recovery.”

Thackston is tracking to see if, perhaps, the recent move by the airlines to eliminate change fees may be impacting travelers’ decisions to purchase airline tickets right now.

“Historically, in the U.S., the number of days in advance of traveling has averaged around 36 days,” he said. “Towards the end of March, when things started going sideways, the average jumped to 63 days. In August, that advance purchase average dropped down to 23 days.”

Are Americans eager to travel and seeing less financial risk in booking in advance? “People are saying, ‘I’ve been sitting in my house for six months and I really need to go somewhere,’” Thackston mused. “As more destinations open up, and the airlines offer good deals, maybe that trend continues.”

Domestic air bookings are, of course, leading the way. Thackston noted how those bookings are at about 40% of the volume we would have seen this time of the year, last year. International bookings are at about 30% of past years’ volume, with Caribbean destinations making up a good portion of that recovery.

He explained that, typically, airline bookings outbound from the US to the Caribbean and Europe average around 20% of international bookings, for both regions. But during the COVID recovery, “we have seen that shift fairly dramatically, to the low 30% to the Caribbean, with Europe dropping into the low teens,” Thackston said.

Finally, Thackston also shared with me a chart showing ARC’s airline transactions trend line for the 2020 holiday season versus previous years. In 2018 and 2019, bookings for the holidays started to show up as early as May, leveled off over the summer, and then started a steep climb around the first week of July.

Airlines Reporting Corp.

This year, purchases for the holiday season didn’t start to climb until August. “But it’s there again,” Thackston said. “It’s starting to climb.”

However, we are far from cruising altitude. Congress didn’t act on a new stimulus bill prior to this story being filed and, as a result, tens of thousands of airline employees were laid off Oct. 1. Other companies, who had depended on stimulus funds to keep people employed, also were talking about large layoffs.

Layoffs and their corresponding headlines could ground all of that “pent-up demand.” So, we’ll report back to you here later this fall. Stay tuned.


Richard D’Ambrosio is a master storyteller who, for more than 30 years, has helped leading brands like American Express, Virgin Atlantic Airways, the Family Travel Association (FTA), and Thomas Cook Travel tell their stories to their customers, the media, and employees. A professional business coach and content marketing consultant with his own firm, Travel Business Mastermind, Richard most recently has worked with The Travel Institute, Flight Centre USA and a variety of host agencies and tour companies, helping entrepreneurs refine their brands and sharpen their sales and marketing skills. Richard writes regularly about retail travel agencies, social media & marketing, and business management.

Share your thoughts on “What is Pent Up Demand?”

You must be logged in to post a comment.