Countries that were previously leading the tourism industry have been forced to adapt to a new reality in an effort to salvage travel sector earnings this summer season. Many of these countries have recently discussed taking concrete steps that incorporate safety and security measures in response to the current health crisis.
This article discusses:
- The decline of the tourism industry in general and airlines in particular.
- Chinese domestic travel trends.
- Insights regarding the future of the Chinese travel industry and what that may mean for the rest of the world.
- Concrete steps airlines, OTAs, and other travel industry providers can take to strategically position themselves.
Airlines are fighting to keep themselves above the clouds
According to research conducted by Statista, many airlines around the world, now find themselves in a precarious state of liquidity. This liquidity, for most air carriers, is comprised of pre-sold ticket revenue that may need to be refunded to unserved customers, creating a risk of bankruptcy.
One such company is Flybe, a British carrier responsible for 40% of U.K. air traffic which is now on the brink of collapse. Similarly, many more airlines will be forced to shut down globally, according to International Air Transport Association (IATA) director-general Alexandre de Juniac, in a statement he made to Business Insider. This includes several American carriers, despite a Trump-backed $60 million bailout plan.
Liquidity balance of major airline companies worldwide as of March 23, 2020, by type (in days)*
Image source: Statista
Insights from a recovering Chinese travel sector
At first glance, China's travel industry does not look promising - in Q1 of 2020 alone, domestic travel dropped an estimated 69%, with an anticipated 20.6% drop over the course of 2020.
Forecasted loss rate of domestic tourists and travel revenue in China affected by COVID-19 in 1st quarter and the whole year 2020
Image source: Statista
Let's take a closer look at Chinese travel patterns throughout the pandemic. The travel ‘re-awakening’ was gradual, largely due to a mandatory 14-day quarantine following domestic flights, which lead potential travelers to think twice before making travel plans. The cumulative costs of flying simply outweighed the benefits.
However, TripStack, a travel company that is closely watching the developments in China, noticed an encouraging change in consumer behavior once the need for the domestic travel quarantine was lifted.
Pia Vemmelund, industry veteran and deputy CEO of TripStack, explains that:
If you look at Beijing, once the travel-related quarantine policies there were canceled, with regard to flight destinations, we heard from a partner that the search volume for flights on major Chinese OTA’s shot up 15 times within a 30-minute slot!
If the Chinese market serves as an indication for the rest of the world, the conclusion is clear:
People want to travel!
What data should airlines keep an eye on?
A dynamic reality requires an equal measure of agility in data collection and decision-making based on real-time market movement.
That is why it is important for airlines to understand the data trends currently coming out of China which may serve as an indication of future global shifts:
- Looking at the Chinese travel industry as a whole, the average spend per traveler has decreased by over 20% since the onset of coronavirus.
- 70% of online travel agencies reported that reservations were at least 20% lower than originally projected for 2020.
- A majority, or 65% of travel industry respondents predicted that industry sales will fully rebound within a 3-6 month period, while 17% cited the time frame as closer to the 6-12 month mark, and the most pessimistic group comprising of 13% of respondents believed the travel industry in China would only begin to rebound after 12 months have passed.
- As far as which type of travel will recover first, 32% of industry experts believed outbound travel would be first to make a comeback, while merely 1% believed in inbound travel's ability to bounce back.
(Source: Chinese Travel News)
Carefully following open-source data is becoming the engine that powers travel companies and is paramount to their strategic positioning, both in the present and future. This should include:
- Understanding current customer sentiment
- Anticipating future consumer demand
- Performing dynamic competitive pricing analyses
- Staying on top of competitor offerings
- Owning the ad retargeting space
- Building accurate customer travel profiles
- Cross-targeting and selling destination activities, transportation, and accommodations
The return to pre-corona operation levels will be gradual. Airlines that are agile, fast to react, and most importantly, data-driven, will be able to capture their fair share of the market.
I think that in order to answer these dynamic consumer needs and the new reality that we anticipate, airlines will need to address data in their market analyses, which will allow for a more dynamic and flexible readiness.
Suggests Vemmelund when asked about airlines’ plans for the future.
When a market as fragile as the tourism industry enters a new phase, the necessity for a customer-first approach will only grow. To fulfill current as well as future consumer needs, airlines, hotels, and the travel industry as a whole will need to keep up with changing demands by creating:
- and attractive offers.
Many consumers are reentering the economy just as badly financially hit, if not more so, as many industry leaders. Data intelligence will be the north star that guides, and ultimately decides which companies thrive and which are erased by a storm, as if they had never existed in the first place.