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In this future, the economic recovery plays out in similar fashion to the scenario described before. However, the emotional and social impact this crisis has on humanity is too deep for people to get back to the old normal.
Months of lockdown and new patterns in social distancing, bio-surveillance and our digital consumption will change travel at its core. Spending more time at home, a higher focus on hygiene and health and shunning away from crowded places will be the new normal.
These attitudinal shifts will also be reflected in policy changes in our daily life, such as health and safety regulations, data privacy and border controls. All of these trends have huge consequences on the travel industry
Urban-based crowded tourism will decrease in favor of outdoor and natural environments and long-haul destinations will be perceived as high risk compared to closer-to-home locations.
Tourist destinations will experience different fates. Countries that have traditionally been net tourist flow senders (Northern Europe, U.S., Japan, etc.) will win, while countries that enjoyed positive inbound numbers (Southern Europe, Thailand, Mauritius, etc.) will be on the losing side.
Beyond washing hands
In a rush to build confidence among travelers, hygiene protocols and labels have started being implemented across all destinations and companies from the early days of the outbreak.
Singapore was a pioneer in its announcing of a nationwide hotel audit scheme branded as the “SG Clean” label, regulating measures like temperature screening intensity at hotel entrances and disinfection frequency rates in common areas and guest rooms.
Hong Kong quickly turned its airport into its first line of COVID-19 defense by sending all incoming travelers to the AsiaWorld-Expo upon arrival for throat saliva samples, as well as providing tracking bracelets for visitors tied to a smartphone app.
Elsewhere, Emirates has launched on-site rapid coronavirus tests that take 10 minutes for passengers landing in Dubai. The city of Madrid, badly hit by the virus, has launched its own “Hotels COVID-Free” quality stamp.
In this scenario, this patchwork of protocols and certificates all over the world generates confusion and mistrust across travelers. In a coordinated effort by governments, international tourism organizations and major industry associations, a new universally accepted health certificate label will be established in 2021 for air transport and hotel accommodation ensuring consistent standards worldwide.
In aviation, discussions around the end of the loathed middle seat on aircraft will turn into reality, food services onboard becomes a distant souvenir of another era, indicators like cabin air recirculation rates will emerge and face masks will be a part of new standard safety measures on planes.
Hotels will focus marketing efforts away from the beautiful pool landscape towards features like disinfection standards, touchless technology for all types of physical interactions and larger spaces between sunbeds. Hotels will switch to room-only food services, transforming breakfast and other food-related spaces into spacious lounges.
What will hurt a hotel’s balance sheet is the need to keep hotel occupancy rates low, with a health buffer of over three nights between guest stays in the same room to eradicate any risk of contaminated surfaces.
The alternative accommodation industry will enjoy the advantage of being perceived as a less-crowded lodging option but will have a harder time building travelers’ confidence around hygiene and health standards.
Industry leader Airbnb will push hard amongst its hosts to establish a new set of cleanliness and disinfection protocols, but certain travelers will steer away from private accommodation for good.
The travel industry faces a soul-searching moment
All these measures will have a dramatic impact on the industry economy. In a world where maximizing occupancy rates or load factor has been turned upside down, travel companies will have to take a hard look at their cost structure and their pricing strategies.
Some companies will feel the punch more than others. Low-cost carriers will be forced to rethink their business model. Their strategy of squeezing as many passengers as possible on aircraft, which in turn stay as in the air as much as possible, will become unsustainable.
Network mega-carriers relying mostly on long-haul flights channeled through massive hubs will also face a gloomy future. Fewer long-haul trips and travelers shunning crowded places will trigger a significant downsizing of airlines with sky-high airplane orders and iconic airport projects coming to a screeching halt.
Short-haul flights, already under attack pre-coronavirus from the flight-shaming movement, will see the shift of travelers towards lower-carbon-emitting transport means like high-speed trains.
Corporate travel apocalypse
One of the most radical transformations in societal attitude will be around business travel, fueled by virtual meeting practices adopted during the lockdown period and new corporate travel policies implemented to curb expenses during the cash crunch.
The irreversible decrease in business travel, by any measure the most profitable clients of the travel industry, will hit the balance sheets of travel companies like a sledgehammer.
The implosion of meetings and events activity during the crisis was a watershed moment for the industry. The unstoppable rise of virtual conferences and webinars during the lockdown period and the perceived danger of large crowd gatherings will transform major convention centers into indoor leisure spaces or city landmarks of a past golden era.
The rise of a new distribution landscape
Two types of travel intermediaries will suffer a Darwinian process of natural selection.
Traditional offline travel agencies that were behind the digital curve will slowly fade into extinction in this hyper-connected world.
The few travel management company survivors will be the ones rapidly adapting to a significantly smaller market and to a change in paradigm in servicing and duty of care.
On the online travel agency front, there will also be major changes in play:
Servicing and connecting with customers during the darkest moments of the crisis will turn out to be the most powerful loyalty program any marketer could conceive. Speedy refunds for cancelled bookings, transport and lodging rebooking alternatives for clients stranded overseas and an ongoing and candid communication strategy will win the hearts and pockets of customers.
Deploying bots and machine-learning algorithms, allowing for automation of back-office processes and customer service interfaces, will make the most successful players future-proof for disruption in the years ahead.
Many will integrate a traveler’s health data across the entire industry’s service chain, in an ecosystem where health information will become a mandatory data field for all actors.
Faced with our rapidly increasing digital life, where tech giants try to keep users locked into their ecosystem, the most successful travel players will start to integrate daily users’ services like inter-urban mobility, local entertainment booking facilities and food delivery services, in order to remain relevant in the customer’s mind.
This trend towards Asia-like super apps in the Western World will spark a frenzy post-crisis, with merger activity between travel tech giants and mobility and food delivery tech players, whose valuations suffered a massive downward correction during the economic deadlock due to their weak balance sheet.
* Check scenario 1 here, then 3 and 4 when they are published next week.About the author…
Travel companies are fighting for their lives. Being at the bleeding edge of the storm has violently thrown us from a predictable risk environment into the deep uncertainty of uncharted waters.
Nobody has a playbook, and only with a clean-sheet mindset and the proverbial “out-of-box” thinking will we manage to find our path out of this mess. We might not come out stronger from it, but hopefully faster, leaner and a little wiser.
This piece aims to forward-engineer four possible scenarios for how the travel industry will emerge once this pivotal crisis is over.
A peek into the future
The potential scenarios that unfold are narratives of four plausible outcomes in travel of the current COVID-19 catastrophe. Each future substantially differs from one another, highlighting profound trends this crisis has unleashed and that might play out in very different ways.
To bring the scenarios to life, I created a matrix that addresses the uncertainties around traveler behavior and economic recovery.
Y axis: “to which degree will travel behavior change after the pandemic?” This axis reflects a wide range of collective shifts in societal attitudes about the why and how we travel.
X axis: “how long will the economic crisis last and how fast will the world recover?” This axis illustrates the depth and length of the economic downturn and the degree that it will impact companies across the entire travel industry.
Depending on how the economic recovery and the changes in travel behavior play out, a very different travel industry landscape will emerge out of this crisis. The different outcomes can be distilled in four distinctive scenarios:
Game-changing trends that will dictate the outcome
Among all the moving pieces unfolding in the current seismic shock, a number of consumers, health protection, regulatory and macroeconomic trends stand out.
They will all shape either the economic recovery on the X-axis or the travel behavior on the Y-axis.
Let us look at these potential game-changers:
Consumer shifting towards online shopping and experiences
Virtual becomes business as usual
Health and hygiene standards go mainstream
Social distancing while traveling
Health and economic drivers impacting travel
With the entire world was brought to a crashing halt to help control the spread of the virus, there was simply no historical precedent on when and in which shape the economy will rebound.
Economists traditionally sketch three broad possible recovery scenarios, which are described as V-U-L:
How long it takes the world economy to get back on its feet will profoundly shape the future of our travel industry.
Virus severity and spread
Government economic policies
Border barriers and travel restrictions
The scenarios, beginning with the first below and in further articles, outline four ways the interplay between the economic crisis and travel behavior shifts might unfold and its ripple effects on the transport, accommodation and travel distribution sector.
Scenario 1: Travel swings back to normal in 2021
If history is any lesson, recent epidemic outbreaks have enjoyed a classic V-shape GDP recovery, as these charts from a Harvard Business Review paper clearly illustrate:
Containment efforts in all countries made the outbreak peak in April 2020. The rapid drop in new cases and mortality from May onwards is allowing governments to gradually start relaxing social distance measures following the successful playbook of Asian nations. And now, it appears public sentiment and business confidence starts moving up again.
On the economic front, governments and central banks across the world opened up the financial floodgates, pumping a jaw-dropping $8 trillion of fiscal stimulus into the global economy.
This unprecedented effort in postwar history allows industries to absorb most the shock of the economical shutdown for both businesses and workers hit by the COVID-19 sledgehammer, preventing larger structural damages to the economy.
Looking forward, the fear of a second wave in the fall of 2021 does not materialize, thanks to a world much better prepared to selectively contain the virus.
In Q4, most of the world enjoys a strong economic rebound reaching pre-crisis metrics in early 2021 and triggering a new growth cycle for years to come.
The miracle of traveling
Recent crises have shown us that travel is one of the world’s most resilient of sectors – and this time will be no different. The industry’s underlying demand economics of a growing global middle class, with the financial means and the desire to discover the world, remains untouched.
Glimmers of hope can already be spotted in China, where four months after the initial outbreak, with the easing of movement restrictions, traveler confidence bounced back.
In April 2020, Chinese airlines added approximately 600,000 seats back each week into scheduled services, mainly on domestic routes.
Even if the shock-recovery time takes longer in the Western world, travel bans are gradually being lifted from May onwards and consumer travel sentiment is starting to rise again.
The pent-up demand during the lockdown period, the eagerness to visit friends and family and millions of credit vouchers issued by airlines in exchange for cancelled bookings are strong drivers to bring travelers back to road.
Most nations focus on bringing domestic travel back to life for the summer season to protect themselves from potential second-wave outbreaks from overseas and to support their local tourism infrastructure.
Tourism levels during the summer peak season are still a long way from pre-crisis levels, but it sows the seeds for a progressive ramp-up of most of the worldwide transport and accommodation industry.
During fall and winter, with seasonal outbreaks under control thanks to laser-focused social distancing measures, travelers’ confidence keeps growing and business travel swings back to pre-crisis levels.
What back in the darkest moment of the global lockdown looked more like a miracle than a credible reality, has happened: travel is back, and the scars left by the downturn have healed in record time.
Some coronavirus side effects will certainly stick around for some time, mostly around hygiene and safety concerns. Health screening and stricter vaccination controls translate into longer queues in airports and at border checks.
Green shoots everywhere
Across the travel landscape, all sectors see green shoots emerge between Q3 and Q4. Players with a weak balance sheet before the virus outbreak stumble and fall, but most transport, accommodation and distribution players, heavily backed by financial aid during the crisis, manage to get out of the dark tunnel in reasonably good shape.
Ground transportation, notably high-speed trains, enjoy a strong boost from early Q3 thanks to the rapid increase in domestic travel.
Similar to previous crises, online travel agencies take the lead on the recovery front by capturing the rising online demand thanks to their edge on search engine marketing and metasearch traffic.
But airlines and hotel chains are not willing to repeat the 9/11 errors, where a new breed of tech travel distributors, such as Expedia and Booking.com, capitalized on the huge distressed inventory from suppliers and the online shift of consumers to become the new travel giants in today’s world.
They are now stronger, faster and smarter on the digital front and will fight for their share of the direct business. As a result, 2021’s growth momentum in travel will be evenly shared between suppliers and OTAs.
Google Travel, which in the pre-coronavirus world already dominated the travel sector like no other thanks to its market-crushing search engine and neatly integrated travel ecosystem, sits in the front row of the recovery phase, harnessing the ever-increasing shift towards hyper-connected consumer behavior.
* Check scenarios 2, 3 and 4 when they are published in the coming days and next week.About the author…