The pandemic has had a severe and long-term impact on the travel and hospitality industry, leaving experts in this industry less optimistic about new prospects and swift recovery from the pandemic. COVID-19 has drastically changed the customer behavior and patterns. Digital transformation seems to be the main pillar for the survival of the industry.
The travel industry that accounted for 10% of the global economy before the pandemic is now forecasting annual losses of up to 80% which could further inflate exponentially, according to a report by the United Nations Conference on Trade and Development. COVID-19 has severely impacted global travel and brought the world to a standstill. Air travel demand recovery back to 2019 levels will likely not take place until 2024 globally, according to some recent statistics published by the International Air Transport Association (IATA). Reports suggest that only 67% people would feel confident traveling once vaccinated.
Airlines, travel companies and the tourism sector as a whole are among the most affected businesses. Between five- and seven-years’ worth of industry growth will potentially be lost as it continues to face an unprecedented challenge from the coronavirus pandemic. For the industry to recover, travelers will need to feel safe and confident that their health is protected.
The travel industry has now started to show some signs of recovery, with the relaxation of the regulations and markets opening up. With a focus on providing hassle-free and seamless experience to customers, countries have now opened their borders, allowing international and internal movement to take place. But for those hoping the worst of the pandemic had passed and were eagerly looking forward to a revival in the travel industry, the new COVID-19 variant has come as a harsh blow with many countries implementing new restrictions or extending existing curbs for international air travel.
While the World Health Organization (WHO) does not recommend flight bans or other forms of travel embargoes, it emphasizes prioritizing vaccination, hand hygiene, physical distancing, well-fitted masks, and good ventilation.
Key areas and digital transformations that are likely to shape the future of travel
Post COVID-19, the travel industry has seen a massive technological disruption specially in reservation and refund processing areas. Companies are now transforming the processes to provide contact-less service experience, with a shift to touchless travel and a new health safety regime, supported by digital tools and technology.
Customer desire for flexible options
Personalized solutions and policies that provide choice and control to customers offering flexibility in terms of refund guarantee and change of dates and/or destination will be extensively desired.
Evolving travel trends
It’s expected that as the pandemic subsides, the rise in leisure trips will outpace the recovery of business travel. The newly coined term – revenge travel – heralds a new phenomenon, where people are beginning to travel more extensively, after the lockdown and other restrictions in the new normal.
The most immediate visible change is a shift to touchless travel from airport curbside to hotel check-in, while automation across the entire sector is expected to become the new norm. The use of biometrics along with several other touchless options such as contactless fingerprint, iris and face recognition are expected to become predominant as physical fingerprint and hand scanners are phased out.
Digital health passports
With contactless technology being deployed throughout the customer journey to address health and safety concerns, automated health screening, digital health IDs and e-passports; organizations will have an opportunity to engage with a new audience and support loyal customers using digital platforms.
How business process services companies can help the travel industry
For business process services companies servicing clients in the travel industry, the need of the hour is to leverage their capabilities and customer relationship to warrant minimal ramp downs and continued revenue yielding projects. Customers now demand personalized experience which can be promoted by the emerging technology. Some of the areas which may spike a renewed interest and growth opportunities include:
- Customer service – With travelers seeking more flexible travel options in terms of ticket changes, refunds etc., there is scope to offer comprehensive, superior and hybrid model of customer experience to cover end to end services
- Marketing campaigns / Airline ancillary sales – Airline ancillary revenue is essentially the revenue from sales that are made beyond the core product. For airlines, this is anything above and beyond the sale of a seat on a particular route. With restrictions on seating capacity on an aircraft, ancillary sales have definitely become paramount to airlines. However, the key to increasing ancillary sales effectively without damaging your relationship with customers is real-time personalization and using AI to increase upselling and cross-selling opportunities.
- Cargo services – With the global air cargo market projected to grow at a CAGR of 10.25% by 2025, the surge in cargo business is an area to be capitalized. With ecommerce on the rise and the pandemic approaching a second year, air cargo operations could definitely help to build a more resilient aviation industry.
- More sustainable solutions focused on reductions in greenhouse-gas emissions - Sustainability is the future; it’s about myriad initiatives and projects, across every location or site, and in any number of places beyond the office and factory walls. While most of the attention of the travel industry is currently focused on getting through COVID-19, travel companies should not lose sight of pre COVID-19 focus areas—sustainability in particular. COVID-19 has provided countless examples of how changes in our behavior can make a huge impact on climate change. A study in April 2020 found that global carbon dioxide emissions fell 10 to 30 % as the world sheltered in place and businesses operated at a reduced capacity.
- Extensive digital transformation offerings in the automation and transformation space - Profound changes in the way customers research and purchase travel products and services digitally have long been under way but the recent trends in reaction to COVID-19 are implying an increasing shift to mobile and digital. Even companies which function based on traditional business models are increasingly shifting to an automation-driven value chain. The use of automation is growing. A McKinsey survey conducted just before the pandemic hit found that two-thirds of organizations are at least piloting the automation of business processes in one or more business units or functions, compared with 57% two years ago. Keith Barr of IHG observed that customers have gotten more digitally savvy in the last six months than ever before. We have to continue to accelerate investments in technology and step-change the utilization of technology as a company.
- Increase in IT investment
A relook at support services, especially contact center and loyalty management services: Move away from traditional channels and focus on resilient self-service and collaboration driven models.
Global Distribution System (GDS) cost reduction via direct inventory management: Adopt a holistic approach that addresses leakages in the booking system, inventory abuse, and complements revenue integrity and revenue managements systems, so as to reduce costs and optimize revenue.
Data privacy as well as service obligations have become high priority: With work from home during the pandemic, clients had to make rapid decisions on highly important and sensitive topics such as security, data privacy as well as service obligations, without having full visibility of the impact of these decisions. With things slowly getting back to normal, outsourcing partners must provide transparency on the mitigation of cybersecurity and data privacy risks in future remote working solutions.
New areas of diversification
To stay relevant and competitive in the market it is important to invest in digital transformation of the existing and new processes. Adapting to the new technological trends will help companies to not only be resilient but battle out the competitors/ swim through this red ocean and create the new blue ocean. With an aim to maximize returns by investing in different areas that would react differently to changes in market conditions, here’s a list of suggested diversification areas to reflect upon -
- Innovative payment models - Models such as ‘outcome-based support’ or ‘as-a-service’ offering the flexibility needed in uncertain times. This would involve redesigning the innovation schedule whereby obligations are tracked and measured, with financial penalties for non-compliance and business outcomes that are contractually linked to pricing and the transformation roadmap.
- Online Travel Agencies (OTAs) and Travel Management Companies (TMCs) - While online travel agencies globally have faced several challenges, this sector is faring better than other travel segments, given its variable cost structure, which allow them to respond quickly to market downturns and preserve profitability better than other industries. According to a report by McKinsey, major OTAs such as Expedia Group and Booking Holdings have grown to become two of the most valuable companies in the travel industry.
- Low cost language locations – better language capabilities and flexible delivery models
- Shared offshore delivery centers (ODCs) as cost saving approach
- Inorganic growth by acquiring domain capability
These areas of diversification will yield faster results as compared to organic growth from expanded assets from purchasing another business, adding a location, increased market presence in existing or new markets, increased market share etc.
While travel is projected to normalize more quickly in safer zones that cope well with COVID-19; in developing countries struggling to manage the pandemic, recovery will be particularly slow. Travel is expected to gradually and slowly pick up pace with all the right measures in place that have now become the norm - reduced personal contact, enhanced sanitization, temperature checks, and social distancing. The emerging trends and technologies can help support long-term strategies for travel companies to improve overall resilience and competitiveness.
Ultimately, the pandemic is likely to speed up two trends that have been on the anvil for a while. One is seamless travel, where your face and body are your passport. The other is the idea of a decentralized identity - the individual is in possession of and controls their identity attributes. Combined, these trends will ensure travel is enjoyable, efficient and safe in the new normal!