The first reported case of the novel coronavirus (COVID-19) was confirmed in a wet market in Wuhan, China in November 2019. Since then, the virus spread throughout the world in a blur earning itself the enviable pandemic status. The COVID-19 pandemic has caused upheaval around the world, leaving a trail of devastation in the travel sector, seriously denting businesses for travel agents.
At the onset of the pandemic, the World Tourism Organization (UNWTO) warned that travel sector players could be staring at massive losses in revenue based on the “latest developments regarding quarantine measures, travel bans, border closures and the patterns of previous crises.” UNWTO also indicated that international travel could fall 60-80 percent by close of 2020 due to continued border shutdown by major travel destinations as a measure to curb the spread.
According to its report on COVID – 19 Related Travel Restrictions, UNWTO indicated that by April 20th, 2020; all worldwide destinations had introduced travel restrictions in response to the pandemic. About 45 percent of the world’s destinations totally or partially closed their borders for tourists, 30 percent totally or partially suspended international flights, and a further 18 percent banned entry for passengers from specific countries of origin. The resultant effect was total disruption and paralysis of international travel sector worldwide.
This grim outlook is also painted by the World Travel and Tourism Council (WTTC) which warned that the COVID-19 pandemic could cut a million jobs in the travel and tourism sector, as travelling was expected to drop by up to 80 percent worldwide in 2020 compared to 2019.
Issues Travel Agents in Kenya have dealt with amid COVID19 pandemic
Travel agencies in Kenya already took a big hit from the first wave of the pandemic stemming from the travel bans, shelter in place orders and surge in cancellation of flight and hotel bookings that saw a drastic contraction in their business volumes.
That’s not all. They also faced a lot of challenges in their initial effort to address cancellations, refunds and rebooking, with little or no compensation. Many of them complied with compensating their customers with the hope that – by intervening for their clients with airlines – they will have demonstrated their value to customers who will be eager to travel when restrictions allow it.
As the second wave of the virus continues unperturbed, the scale of the crisis on the travel industry has continued to worsen. The second wave of the pandemic has also resulted to aggressive lockdown measures in October/November and led to re-introduction of quarantine rules in some destinations. Many travel agency businesses are likely to find themselves in the woods after exhausting their financial reserves in keeping their businesses afloat during the first wave that lasted about 5-8 months.
There is also little prospect of a pick-up in overseas leisure and business travel this festive season, a streak that is projected to continue well into next year. Reasons include; the fear of travelers contracting the virus while traveling and uncertainty over the safety of destinations. Fears are thus growing that many businesses in the travel sector will not survive, if something is not done – and fast!
Revenue streams for hundreds of travel agents have, since early March, dried up. As the agents painstakingly watched their income grind to a halt, they were forced to take drastic cost cutting measures such as sending employees on unpaid leave and sustaining a skeleton staff on pay cuts. With this there is also a looming reality of job losses that is bringing real and profound worry to thousands of families in Kenya and the region.
It is important to note that the travel industry is an extremely labour intensive industry, and in a country like Kenya, it is an indispensable and significant source of employment. If the pandemic prolongs further into 2021, we might witness mass layoffs in the industry.
This has been an area of concern for travel agents as they have been caught in a catch 22. On one hand, they can barely afford to sustain their employee numbers, while at the same time, they cannot keep employees on unpaid leave forever. On the other hand, they cannot part with their employees on grounds such as redundancy because this is a costly exercise, and most of them currently struggle to even keep the lights on.
Another thorny issue for the travel agents has been the introduction of the 1% minimum tax expected to take effect for January 1, 2021. The Tax Laws (Amendment) Act, 2020 amended various tax laws and was aimed at responding to the COVID-19 pandemic that saw the introduction of the minimum tax. As stipulated in the Finance Act 2020, the minimum tax will be charged on the gross business turnover.
Here is why this is an issue for travel agents. Travel agents essentially sell on behalf of their principals! They simply earn service fees on services provided to travelers. The cash they collect for the air ticket sales is disbursed to the International Air Transport Association (IATA) less their service charge fees. So, the million-dollar question is why should travel agents pay a minimum tax on a gross turnover that isn’t a true reflection of their gross earnings?
Applying the minimum tax to travel agents without considering the nature of their business will drive many of them out of business even before their first payout.
Travel agents in Kenya have navigated multiple crises in 2020 that was a ripple effect of the pandemic. They watched as their businesses faced insolvency, their employees going for months without pay, and they faced evictions from landlords; but they have remained resilient through it all.
With the future of travel still cloudy, travel agents in Kenya are predicting that they may not be able to sustain their businesses past the first quarter of 2021 without government financial support. However, they are fully aware that this could be a far cry in Kenya and so they are formulating new ways and adjusting their business models for a post-pandemic recovery.
As the pandemic’s second wave sweeps across the world, studies show that travelers will even be more unwilling to travel in 2021. They are taking a “wait-and-see” approach before firming up any travel plans that they had for this festive season and for the coming year. Already, this “wait-and-see” approach has resulted in about 73 percent decrease in business volume in the fourth quarter of 2020.
The recent news about Moderna’s, and Pfizer and BioNTech’s COVID-19 Vaccine meeting all primary efficacy endpoints could be the silver lining for the travel industry to recover to the 2019 numbers, but it is not the magic bullet.
Even if the vaccine becomes freely available, travelers will most likely remain cautious of health issues going forward. This shift in traveler behavior calls for clever marketing strategies to get people to travel again. For the next few years, travel agencies must continue to openly promote their value through creative marketing.
Further on into 2021, travelers will be faced with uncertainty on how to navigate the changing landscape. Many travelers are still anxious about travelling again and will be looking to trusted travel agents for information on safety, destinations, which hotels have implemented enhanced hygiene measures, and how travel agencies will advocate for them if something happens before, during or after their trip.
The role of the Travel Agents will become even more valuable and vital in assisting them to make informed decisions.
In a nutshell
Going forward, for most travelers, safety will be the center-hold on whether or not they will travel again and therefore travel agents must ensure that they create enough awareness of good practices in health and hygiene. It is also important to note that in the next few months, travelers will remain wary about the possibility of future outbreaks and their containment measures.
KATA is confident that the power of human connection will not be washed down, even with this pandemic. We strongly believe that the prospects for travel agents in the long-term is more promising than ever; but travel agents must know and understand their clients’ needs and provide tailored support.
Contact KATA for any inquiries about travel trend for 2021 in line with COVID-19 protocols or dealing with KATA certified travel agent on firstname.lastname@example.org