“There’s no place like home” seemed to be the motto for 2020. In fact, many consumers are still wary about returning to once-normal activities. As a result, travel, transportation and hospitality (TTH) companies saw a 20% drop in overall revenues during the past year, according to PwC analysis.
Industry forecasts project that it may be two to three years before airline and hotel revenues reach pre-pandemic levels, despite COVID-19 relief from the American Rescue Plan of up to $26 billion for aviation.
Consumers, meanwhile, have demonstrated pent-up demand to reconnect with family and friends — or just to get away, as they did pre-pandemic. They have the financial means to travel and will soon feel safer doing so: President Joe Biden announced in March that all adults will be eligible for vaccination starting May 1.
This confluence of events presents a timely opportunity for TTH companies.
Even though many consumers have suffered job losses, furloughs and other hits to income, US households, in aggregate, are sitting on record amounts of excess personal savings, perhaps as much as $1.5 trillion heading into this year, according to PwC analysis of economic indicators.
Although lower-income households have suffered disproportionate job losses and economic hardship, government transfer payments have provided many with a lifeline. And many higher-income households have increased their savings, partly because they couldn’t spend on services such as travel and dining out. Now that’s changing.
With some US cities and states easing guidance on restaurant capacity and reopening other entertainment venues, personal travel is already on the upswing. In fact, the US Transportation Security Administration (TSA) screened close to 10 million passengers during a weeklong stretch in late March, marking the biggest week of air travel since the onset of the pandemic.
However, scars from the pandemic could have long-lasting effects, with consumers hesitant to return to pre-pandemic spending on restaurants and travel for several years.
Higher-income households are likely to drive increased spending on leisure, hospitality and travel, since this cohort spends a greater share of income on such discretionary services. The demographics of this group encompass older consumers with comfortable retirement incomes as well as high-earning Generation Z and millennial households. Use data and demand intelligence algorithms to identify and tailor specific messages to these desirable travelers.
Vaccinations are already proving effective in boosting consumer confidence. And PwC analysis finds that taking that first trip seems to vastly reassure travelers. Among respondents to our travel survey, those who had traveled once since the onset of the pandemic were far more likely to do so again: 58% versus 26% for air travel and 74% versus 38% who expected to stay at brand-name hotels.
Meanwhile, TTH companies have implemented comprehensive safety protocols based on the most current guidance from medical experts. And they are communicating the breadth of those safety measures to reassure consumers, through every channel that customers might expect, both digital and physical.
Slow vaccine rollout worldwide might well dampen global travel, as more than 85 developing nations are unlikely to have widespread vaccine access before 2023.
Develop and test offers to entice loyal, profitable travelers to re-engage. Develop messages highlighting the trustworthiness of the services your company offers — their safety and sensitivity to evolving consumer tastes and needs, for example — and use these messages to re-establish consumer loyalty.
The first wave of travel resurgence is likely to be domestic, as international travel continues to be restricted. Testing mandates and lengthy quarantine periods create additional costs and obstacles for travelers. Even so, some consumers are embarking on cross-border travel, with a new set of expectations.
For instance, if traveling internationally is challenging, why not make the effort worthwhile by staying longer? Now that remote work has become more commonplace for a vast segment of workers, this option is growing in popularity. Such “flexcations” blur the line between work and travel, allowing for extended getaways.
Travelers may turn to short-term rentals, rather than brand-name hotels, for accommodations. The lack of midweek bookings will likely continue to challenge hotel operators. Other consumer trends, however, such as increased emphasis on personal care and wellness, may offer new service opportunities for TTH companies.
Leisure travel is expected to resume sooner than business travel, as businesses regroup after a year in which video calls replaced the bulk of in-person meetings; hotels with meeting and event spaces will likely continue to rethink space allocation.
Recognize that consumers may not return to travel or restaurants in the same way they did before the pandemic. Determine which of your company’s services are most attractive to consumers now and double down on those. Look beyond your usual customer base to identify and nurture new consumer segments. Deepen relationships with them so you can better understand their travel preferences.
Consumers are more highly attuned than ever to public health and safety issues. And many have been sheltering in place for months on end. As they eventually reconnect with family and friends, they may expect to be reassured that TTH companies are providing safe, comfortable options in keeping with public health guidelines. Expect pent-up demand to be tempered by public health concerns. New customer segments are up for grabs as travelers reassess preferences to line up with evolving tastes.