One of the hardest hit industries from the Covid-crisis is the travel industry, for obvious reasons. While some observers have criticized the tendency of companies to securitize assets rather than keep them on the balance sheet, we believe that the shift in the industry toward an asset-light model will help to save many of its members during the Covid-lockdowns.
Capital-intensity haunts the industry
A common feature of much of the travel and leisure industry is its heavy use of capital. Some ancillary businesses such as restaurants or booking systems may be able to operate with lesser capital intensity, but generally, heavy investment is required. This, in turn, can cause serious financial difficulties if cash flows dry up during a recession.
