5 factors that will promote high growth in the travel industry
Never before has the travel industry witnessed such high growth. Furthermore, analysts expect this velocity is will continue for at least another 10 years.
To predict the future of the travel industry, there are five key factors that require attention. Despite the new capabilities these developments will bring, they will arise at such speed that they are likely to manifest as disruptors as well as improvements. Therefore, in order to sustain high growth, it is paramount that businesses are aware of the variables that are likely to shape the future of travel distribution.
1. Increased consumer expectations
A principal disruptor in the growth of the travel industry is consumer expectations. As capabilities evolve in the wider retail sector, consumer expectations will become higher. When other retailers provide greater choice, inspirational marketing, frictionless purchasing, and personalized service, these expectations will translate into the travel industry. As such, the travel sector must keep in step with these customer service developments.
For example, it is becoming clear customers are far more committed to meeting their own needs than they are to a particular brand. Across sectors, brand loyalty is waning, with 88% saying they would simply switch to another site or app if their digital experience did not meet their expectations. Now, consumers expect the digital experience they receive in the retail sector; therefore, to stand out in a crowded market, travel brands must deliver a digital service which captures attention.
However, there is a marked gap between consumer expectations and travel companies marketing strategies. While 67% of people want travel providers to personalize their communications, only 44% believe that the content they receive is good. Meanwhile, 80% of CEOs believe they deliver superior customer experience, but only 8% of their customers agreed. To attempt to close this gap, travel companies need to ensure their communications are of the highest quality. That means they have to be well written, strikingly illustrated, and highly personalized.
2. Mobile devices and micro-moments
Cell phones and tablets are already shaping today’s consumer market. Mobile is displaying particularly rapid growth in emerging markets, where it is becoming the booking device of choice. Consequently, their role as a major disruptor in the travel industry will continue to grow. Their portability is modifying the way customers interact with the industry, driving demand for 24-hour service. Micro-moment searching and booking is projected to grow, with high-speed content consumption and snap decision-making becoming an integral feature of a customer journey.
However, the shift to mobile should not compromise quality on other platforms. A challenge marketers face is determining how much money to allocate to mobile platforms. On average, travel companies spend about 44% of their digital marketing budget on mobile solutions. However, while 40% of consumers research flights and accommodation on their mobile, this drops to 21% when it comes to booking. As such, the average spend on mobile solutions is very high, considering most transactions happen on a desktop. Ultimately, brands need to ensure this omnichannel experience is completely consistent.
3. Big data and AI
Big data already plays a significant role in the travel industry; for example, predictive airplane maintenance already reduce expenses connected with the transportation of parts, overtime compensation for crews, and unplanned maintenance. Equally, airlines use big data to optimize fuel efficiency; built-in machine learning algorithms capture and analyze flight data, including route distance, altitude, aircraft type and weight to estimate the optimal amount of fuel needed for a flight. Now, more brands are applying this technology to the sales cycle, using feedback analysis to determine in real-time if there are opportunities to positively intervene in the customer journey.
Moreover, this enhanced computer processing power is extending across the industry, allowing agents and OTAs to conduct real-time analysis of consumer preferences and search behavior. Virtual assistants are already a ubiquitous feature of mobile devices. Increasingly, tech companies are integrating artificial intelligence into messaging apps to interact directly with customers. As such, the growing sophistication of virtual assistants is shifting greater power towards AI developers and big data analysis interpretation. After all, Gartner predicts that by 2021, 15% of all customer service interactions will be completely handled by AI, an increase of 400% from 2017.
4. Industry regulation
National and international legislation determines the regulations governing competition across the industry. For example, display neutrality and content parity are aspects of the online landscape that are currently legislated. A significant disruptor in the coming years will be the extent to which states and transnational organizations intervene in the market. For example, three significant regulatory changes took place in 2018 – a ban on credit card charges, General Data Protection Regulation (GDPR) and the introduction of revised Package Travel Regulations in the UK. Further legislation such as these could limit the influence of large airline corporations, aggregators, OTAs and travel management companies. In addition, the role of ‘gatekeeper’ websites like Facebook, Google, and Twitter that profit from biased advertising will be determined largely by state legislation – especially in light of recent ‘fake news’ scandals.
5. Travel risk
As implied above, news media is influencing customer behavior in a manner never seen before. For instance, consumers are becoming increasingly aware of travel risks, such as natural disasters or terrorist attacks. However, in recent years, the impact these reports have on holiday travel seems relatively small. According to research, only 5% of Europeans changed their plans following terrorist attacks or threats in 2015. Nonetheless, in Spain, consumers avoided planning summer holidays to Turkey and Egypt in 2016 due to the fear of terrorism. Immediately following the Brussels terror attack in March 2016 for example, flight bookings and flight searches to Brussels inevitably dropped.
Staying in step with high growth
Alongside these five disruptors, other drivers within the travel industry will promote high growth. These include shared economy models; developing advertising strategy; product differentiation; and industry consolidation. As a result, it is crucial that organizations develop sustainable operations and marketing strategies to keep up with competitors in a rapidly evolving market. If one thing is certain, the future holds many exciting and unexpected developments in travel. However, one thing businesses can expect is that the trend of high growth will continue.