Economist: You are going to see domestic travel recover more quickly

Barclays Investment Bank Regional Economist, Brian Tan, joins Yahoo Finance to discuss the travel industry, countries' new travel policies post-pandemic, and America's continued recovery efforts ahead of the summer tourism season.

Video Transcript

MYLES UDLAND: And speaking of momentum, let's talk about the set up for the economy here, and specifically the state of global travel, how that plays in to the picture here. For more on that, we bring in Brian Tan. He's a Regional Economist over at Barclays.

Brian, thanks for jumping on this morning. So let's just start with how you're situated here thinking about the future of the economy in this post-COVID world. You guys at Barclays out with an extensive report on pretty much any possible dynamic that is going on, and you looking specifically at how mobility is-- is playing a role or not playing a role quite yet in this economic rebound. What's sort of the lay of the land, as you see it here, as we begin June of 2021?

BRIAN TAN: Well, it's clearly going to be a very challenging situation still for global travel. I mean, as we saw last year, air travel completely collapsed all around the world, much more so for the international routes compared to the domestic segment. But overall, look, it's a situation which is still quite challenging. And we think that it's worth being cautious going forward on the outlook for global travel.

We do think that the COVID situation is still going to persist in one form or another. We may still be required, for example, to get testing, which in some jurisdictions is not exactly something that you can get very easily or cheaply, for that matter. And as we've all been hearing as well, there's a lot of talk about vaccine passports, whether or not you can get the right vaccines to enter certain countries, for example.

That is also going to be continuing to challenge the global travel segment. So overall, if we're looking at a situation where just to get onto a plane and go to another country you need to get the right vaccines, you may need to get the right testing that's done, you may have to wait for it, you may even have to quarantine before-- before they allow you in through the borders, that means that we are still looking at some difficulties going forward.

JULIE HYMAN: Brian, as you talk about in your note, for all of these reasons that you outline, you think the travel sector, internationally specifically, will be sort of the last to recover when you look at the various economic sectors. Do you think that some portion of it will never recover, that there will be just some travel that doesn't come back? And is there a way of quantifying that?

BRIAN TAN: It is-- I think in the next few years, I think there will be a certain amount of travel that will face difficulties coming back. I mean, never say that it doesn't go back to pre-COVID levels just from, say, population growth. We may just get there eventually. But certainly that last mile, that last gap that we have to cover, that may be very difficult to-- to get through.

Because at the end of the day, if some countries, for example, especially those in the emerging markets, many of these economies are facing terrible challenges in trying to get their people vaccinated. They either can't afford vaccines or even when they have all the vaccines they're facing supply disruptions, the inability to import them and get them through the borders. So in that kind of a situation, you're still going to have some countries which will face a lot of problems trying to open the borders and relax quarantine measures and restrictions on travel. There just will be that segment which just doesn't come back for a really long time.

BRIAN SOZZI: Brian, which sector of global travel will return to pre-pandemic levels quicker than others?

BRIAN TAN: It's most likely going to be domestic travel. So when-- when you look at the breakdown between the international side and domestic, last year the numbers were pretty stark. I mean, global travel, by some estimates, more than halved last year. But within that, you find it's probably about-- within the domestic segment, it halved, dropped about 50%. But then on the international side, travel probably fell by about 3/4 last year.

Going forward, I think that-- that trend is going to persist. You are going to see domestic travel recover more quickly. In some countries, you've seen domestic travel completely recover to pre-pandemic levels. In places like China or India, for example, domestic travel is just back to normal.

But for the international market, that's where it gets a lot trickier. Because as long as you've got some countries which are a lot more worried about COVID and they're not willing to allow international travelers to get through their borders without some form of quarantine, without some form of testing, and in the future without the right vaccines, that's going to be a much slower recovery there.

JULIE HYMAN: So Brian, specifically what are the countries where we're seeing sort of the intersection of heavily dependent tourism business and economy with high COVID restrictions? Where are those countries where we're going to see the most pain from this continue?

BRIAN TAN: I think a lot of these countries are going to be in Asia. So when we look at the-- the global restrictions on travel, Asia has tended-- the Asia-Pacific region has tended to be a lot harsher in terms of allowing people in and who gets to-- to come in. In some countries, for example, foreigners are not-- foreign nationals are not allowed to come in, only citizens can go home, for example.

In other places, the quarantine requirements are very long. For example, even here in Singapore, we've raised the quarantine requirement to 21 days. How on Earth is anyone going to be willing to travel if you have to spend close to a month in a hotel room? That's going to be very difficult.

And yet it's also Asia and the specific countries within Asia, for example, Thailand, Malaysia, for example, where they're just very dependent on tourism. And you're seeing entire segments of the economy just under so much pressure right now because of the COVID cases, because of the inability to vaccinate quickly, again, a lot of it because of supply disruptions, but they need the tourism money. It's a tough spot for them.

MYLES UDLAND: And Brian, I know it's kind of the unanswerable question, but reading your report I was just sort of thinking about it this way for myself is, was travel a learned behavior, that we were all marketed for decades and decades of this is how you should spend your time and your money? And is there a real risk that we've all kind of lost that muscle and said, you know, actually, my local community is just fine, I'm happy here, and that maybe we never go back to that default setting of I make this amount of money, and I'm going to spend a set 20%, set it aside for some big trip, maybe that never comes back?

BRIAN TAN: You know, I have a huge amount of sympathy for that view. And the sentiment people have right now is that look, the closure of borders has made a lot of people reassess what's important in life and whether that's going to another country and spending your money over there and hiding in a hotel room for weeks before you come home, is that really the way to live, right? But look, it is a learned behavior in some ways. And some part of that-- look, if the travel restrictions remain for a long time, at some point people cope. People just adapt. And they'll just learn to spend their time in other ways.

MYLES UDLAND: All right, Brian Tan, Regional Economist over at Barclays. Brian, really appreciate you taking some time to talk with us this morning, this evening for you. Appreciate you dealing with the time gap there, and hopefully we'll be in touch soon.