Technology and Recovery in the Travel Sector Post-COVID

22/04/20
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By Max Zhdanov
VP Travel & Hospitality
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Technology and Recovery in the Travel Sector Post-COVID

The outbreak of the Corona pandemic caused a major standstill in the travel industry, creating huge revenue losses and massive layoffs. The World Travel and Tourism Council has warned the pandemic could cut 50 million travel and tourism jobs worldwide and have a severe impact on the global economy. The situation continues to evolve day by day.

Everyone understands that travel will continue to play a large role in our everyday lives and remain an integral part of global business. However, the evolving challenges will bring major transformation to all sectors of the industry. Analysts unanimously agree that technology will play a huge role in this process because of an ever-growing dependence and reliance on technology in all aspects of modern business. But how? Let’s explore possible scenarios for select industry sectors in the post-COVID world.

Recovery of Domestic Travel

Domestic business and leisure travel (drive-to, followed by fly-to) will be in the first wave of industry resurgence after quarantine restrictions are lifted. Overland domestic travel will be possible even while interstate borders remain closed; regional destinations will follow next.

This will primarily be the case for the U.S. and European countries, including France (17%), Italy (103%) and the UK (60%), which all show a very early indication of year-over-year increases in domestic travel searches for January 2021.

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Image 1: Domestic Flight Searches Made to Key European Destinations Throughout the Second Half of March 2020.
Source: Sojern

Most countries, in fact, will encourage domestic tourism as a way to rebuild their economies.

Over a quarter (27%) of readers polled by Fodor’s Travel said they would immediately start traveling domestically when they are able, while more than half (52%) are ready to resume domestic travel six months after travel restrictions are no longer in force. At the same time, heading overseas is on the table for only 13% of respondents immediately, and 33% after six months.

The overall consensus is that people tired of long lockdowns will eagerly explore their native countries. The proportion of domestic tourism is expected to significantly increase, up to 60% compared to last year’s 47%. For instance, in China, the first country to curb the virus outbreak, the two biggest online travel service providers have already resumed bookings for domestic travel packages and attraction tickets.

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Source:Flightradar24

Transformation in Business Travel Sector

As a part of quarantine measures, many businesses have switched to telecommuting. The vast majority (83%) of companies recently polled by GBTA indicated they frequently host virtual meetings. Increasing comfort with online communication and video-conferencing -- Skype, Zoom, Google Meet, Webex and comparable products -- may virtually eliminate non-essential business travel. Once companies start to appreciate the benefits of telecommuting, they are likely to question the utility of spending hours on the road to a partner’s office if the e-contract can be signed after a 30-minute Skype call and a virtual handshake?

Once the pandemic is curbed, some companies may remain cash-strapped, which means they will try to save on travel expenses and focus on rebuilding their teams. Each business trip will be questioned for necessity (“can we avoid travel?”) and closely monitored for cost effectiveness (“can we afford to travel?”).

Advanced software applications, powered by machine learning and Big Data, will help companies manage corporate travel policies and greater demands for a duty of care, while monitoring the effectiveness of travel spending. For instance, machine learning algorithms may help distinguish “highly risky” business trips versus those that should sail through easily, suggesting refundable (or insured) or non-refundable travel options. At the same time, machine learning algorithms will identify the highest number of low-fare options for corporate trips and daily hotel rate caps depending on seasonality and location.

While the business travel industry does not have an immediate solution for these use cases, technology will help reveal changing patterns in business traveler behavior and allow managers to experiment with such variables as costs, risk mitigations, and traveler preferences.

Trends in Leisure Travel Sector

Bans on large public gatherings will leave a mark on leisure trips. However, the recovery of the leisure sector will be much faster compared to business travel. Travelers will likely prefer individual and family tours and activities to group tour packages due to the lingering effects of social distancing. Car rentals should expect a boost as, to reach their destination, travelers may be more likely rent a car than take public transport (bus or train). Similarly, many travelers are more likely to stay at smaller properties or vacation rentals as opposed to large hotels. They may also prefer longer-term apartment rentals rather than multiple short-term trips to large hotels and resorts. Other travelers may favor known brands that they trust for hygiene and safety.

Looking to enhance the technology in your travel business?

As an indication of the market’s belief in the trend toward small accommodations, Airbnb, with a private market valuation of $31 billion, is reported to have received inquiries from venture capitalists and sovereign wealth funds who choose to see past the near-term coronavirus risk, assuming Airbnb will be able to recover in the wake of the outbreak.

Once the air travel ban is lifted, travelers will be more likely to purchase flight insurance to be eligible for a refund in case their flight is cancelled, they are not able to fly, they get sick or there is another outbreak. Some travelers may even take microloans and pay for leisure travel in installments. To meet such demand, travel providers will need to integrate new types of payment and loan products.

Transformations in Travel Providers’ Business

Due to the economic crisis, travelers’ purchasing power will decrease. Travel providers would need to adjust their pricing policies, which means tours, cruises, and flights will cost less compared to typical market rates. Some providers may balance between services traditionally offered for dense urban / resort areas and new ones, for remote locations and ecotourism.

Hotels could be pressed by authorities to qualify for COVID-safe certifications, and the distribution chain will have to adopt these changes, effectively reflecting these in search and booking processes. Low-cost airlines, including the budget versions of major carriers, will be on the rise, unless major carriers match their fares. In partnership with medical and healthcare bodies and travel risk management companies, service providers will likely launch new features to meet a duty of care for all travelers, which may expand to include the ability of carriers to introduce a new cleaning and sanitizing process. Increased flexibility around cancellation, change fees, and refunds is likely to continue or expand.

Within this context, travel service providers will try to maximize revenue from each booking and offer highly personalized options for every traveler. Travel operators will collect and analyze data on customer behavior at all touchpoints: on the web, in mobile apps, and in offline communication with an agent. Using advanced data analytic insights, they will adjust digital marketing strategies to target fly-in markets free of bans as well as domestic and drive-to markets.

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Sooner or later, the travel industry will see a rebound. But things won’t be the same. We should prepare now for drastic transformations and plan for the future. We should plan new travel security regulations, such as restrictions on travel for passengers with severe cold symptoms or without vaccinations, and express health checks at borders, based on newly introduced policies. Authorities will need to carefully balance the risks of potential social discrimination among representatives of a new class - “world travelers” who acquired vaccination and health certificates prior to traveling - and everyone else.

On the positive side, these changes will undoubtedly bring opportunities for many players across the industry, and many of those will be enabled or powered by technology. Although there are risks for the majority of global industries, this is a time when information technology can become the main tool for overcoming the consequences of industry upheaval. We should plan for new technologies, like touchless interfaces in public places, voice/facial recognition at hotels, and robotic check-in at airports, as well as healthcare/lifestyle applications to support and entertain travelers.

After months of lockdowns and social isolation, we can’t imagine a better way to celebrate our victory over the virus than to start travelling again!

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