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The biggest challenge for the online travel sector in 2021 is the shape of the travel recovery, and the myriad issues that flow from whatever scenario takes hold.

Whether a travel recovery gets under way in second half of 2021 after a significant number of people got vaccinated, assuming the shots are as effective as advertised, or there are further setbacks and delays in a potential rebound will affect the liquidity of all the major online travel companies.

Having chopped expenses and products, laid off staff, and taken various steps to attract new funding or debt financing, the question looms whether online travel companies have enough cash to get them to the other side of the pandemic, or whether they would have to make deeper cuts or seek additional funding again.

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At the end of the third quarter, the latest statistics available, Booking Holdings had $11.1 billion in cash and cash equivalents available, China’s Trip.com Group had $9.7 billion in its coffers, Expedia Group had access to $4.3 billion, a pre-IPO Airbnb had $2.7 billion in cash and cash equivalents on its books, and Tripadvisor trailed with $446 million.

When you consider these companies’ total expenses for the first nine months of an admittedly topsy-turvy 2020 compared with their cash on hand at the end of September, then China’s Trip.com Group ($9.7 billion in cash versus $1.75 billion in operating expenses) and Booking Holdings ($11.1 billion in cash versus $6 billion in operating costs) were looking especially cash-rich while Expedia and Airbnb appeared more challenged.

But this doesn’t take into account companies’ additional fundraising after September 30. For example, although Airbnb had operating expenses of around $3 billion during the first nine months of 2020 and only $2.7 billion of cash and cash equivalents as of September 30, Airbnb raised about $3.5 billon in its December IPO earlier this month.

And, looking ahead as far as operating expenses in 2021, all of the companies reduced them in 2020.

Not Abstract Numbers on a Balance Sheet

The timing of any travel recovery and the relevance of each company’s liquidity status are of course not mere balance sheet entries but have huge strategic implications.

For example, does Airbnb have enough cash to restart investing in its hotel business, which it paused in the spring?

Can Booking Holdings, which laid off 25 percent of its workforce, as did Airbnb, bring back any of these now-former employees in late 2021 or 2022 on the back of a travel recovery?

Can Trip.com Group, which saw an earlier travel recovery than its Western peers, pull the trigger on a major acquisition if it is confident that the travel recovery in China is solid?

Rest assured that the CEOs and chief financial offices of all of these major online travel companies have gamed out various fundraising scenarios based on the timing and strength of a travel recovery.

The shape — and not just the timing of a recovery — has huge implications, as well. If hotels come back strong and push direct bookings, then that could adversely impact online travel agencies.

If short-term rentals maintain their edge over hotels in a recovery, then Airbnb could potentially eat further into Booking Holdings’ business.

If U.S. travel bounces back faster than the European or Asian markets, then Expedia could be a beneficiary as compared with Trip.com Group and Booking.com.

If the recovery in 2021 spikes and then dips as a tentative travel comeback did in 2020, then many of these companies will either have to reach out to lenders again next year and/or make deeper cuts in expenses.

Their companies’ survival depends on it.

Photo Credit: Travelers explore Zhangjiajie, China in Hunan Province on June 14, 2020. The timing of a travel recovery will impact all sectors, including online travel. Catherine Poh Huay Tan / Flickr.com