2020 Aviation Plan: 8 major changes in the travel industry in the coming months

The report analyzes the impact of the epidemic on the tourism industry and predicts eight trends that may emerge in the industry in the future. The report's forecasts include: intensified price competition for tourism products, temporary dominance of the leisure market by surrounding tours, partial absorption of business travel demand by online solutions, changes in airline refund and change rules, and weakening of Google's threat to the tourism industry.

1. Business closures will reduce air capacity and travel inventory

According to an analysis by the International Air Transport Association (IATA) in mid-April, air passenger revenue in 2020 may plummet by US$314 billion, a year-on-year decrease of 55%. According to previous data from IATA, the total revenue of aviation markets in various regions that have implemented strict travel restrictions accounts for 98% of the total global air passenger revenue. It is expected that the Asia-Pacific region will be the region with the largest losses in the global aviation industry this year, followed by Europe and North America.

As global air travel decreases, hotels, vacation rentals, car rentals and sightseeing businesses will also suffer a heavy blow. The report believes that in each of the above business lines, tourism companies will go bankrupt.

2. Local travel temporarily dominates the leisure tourism market

In the short term, leisure travelers will prefer shorter trips closer to home, and business travel habits may also change.

In mid-March this year, the World Health Organization officially classified the COVID-19 outbreak as a "global pandemic." According to IATA data, after the SARS outbreak in 2003, the tourism industry gradually recovered within three to four months. Based on this trend, the recovery period of the tourism industry after the COVID-19 outbreak is between June and July this year.

But considering the extent of the epidemic, this scenario is not realistic. In order to catch the tail end of the northern hemisphere summer, the hotel industry may take measures to promote room bookings in August. According to the U.S. Department of Transportation, it took two to three years for the tourism industry to recover from the shadow of 9/11.

The report predicts that regional travel within the United States, Europe and Asia will grow, while leisure travelers will be less interested in long-distance outbound travel.

Self-driving tours, trains and short-haul routes will be the first to resume. There is huge potential demand for hotels, vacation rentals, car rentals and sightseeing activities in these markets.

3. Continuous strengthening of protective measures

When using public facilities, passengers will pay more attention to personal hygiene, such as not easily touching the small table in the cabin, the TV remote control in the hotel, etc. However, as time goes by, the previous habits may be restored.

Delta has made a brand commitment to provide safer sanitation facilities for passengers, disinfecting high-touch points such as small tables, seatback entertainment screens, armrests and seatback pockets in the cabin. In addition, crew members may delay flight departure times and require cleaning staff to return for additional cleaning.

Airlines also need to optimize the purchase of in-flight meals. According to the personal experience of Jay Sorensen, the author of the report, he ordered a hamburger during the flight, but the flight attendant gave him a sandwich wrapped in foil, a seasoning packet and a small napkin. During the whole process, there were no plates, plastic knives for spreading sauce, or hand cleaning tools after the meal. The design of this service lacks empathy. In the future, consumers will give low scores to such services.

4. Affordable services are more popular with consumers and will also bring more traffic

Most consumers will cut their budgets during and after the epidemic. The first reason affecting consumer spending is that demand has fallen, but suppliers are still trying to attract customers, which will make low prices a common promotional tool. Secondly, consumers are accustomed to expecting better prices for products during economic downturns, so suppliers can only increase discounts.

In summary, airlines will face challenges in selling a la carte products after the pandemic ends. Regulators, journalists and consumers will be more sensitive to airlines' attempts to use this model to increase prices and revenue. If airlines increase baggage fees after receiving government aid, this will become a hotly debated topic, and the aviation industry needs to work hard to avoid this storm.

5. The aviation industry, which has received government assistance, will face more public scrutiny

As one of the industries hardest hit by the pandemic, aviation has become a focus of public attention and a major recipient of government aid, with a growing number of aid measures, including direct operating subsidies, loans and delayed airport fee collection, helping to keep the industry from bankruptcy.

In this context, consumers will also pay more attention to the airline industry, which has been widely discussed for its pricing strategies, flight delays, and passenger handling errors. Other areas of the tourism industry that have received government assistance will also receive more attention. Between 2020 and 2021, news that US travel industry executives received dividends in the form of stock options will cause public dissatisfaction. The recovery of airlines depends on consumers, employees, managers and governments at the same time, and the company's management team must carefully measure budget plans to deal with public scrutiny.

6. Changes to the refund and change fee system

In the aviation industry, cancellation fees and non-refundable tickets set by airlines are relatively new pricing policies. In 1985, American Airlines launched ultra-low-cost tickets with discounts of up to 70%, but the news of the price cuts caused airline stocks to plummet. American Airlines launched low-cost tickets at the time to win back passengers from the rapidly expanding low-cost airlines, but at the same time it also imposed strict regulations on the refund and change of ultra-low-cost tickets.

According to the Chicago Tribune, it was the first time in the industry that passengers were penalized for changing their itineraries. After purchasing ultra-low-priced tickets, passengers would be charged a 25% handling fee for refunding them. The resulting consumer boycott was actually a punishment for ticket agents and airport customer service staff.

35 years later, the policy of charging fees for cancellations and changes still exists, and the relevant airlines will gradually lose the favor of passengers. Southwest Airlines is one of the most profitable airlines in the world, but the airline has never charged passengers for cancellations and changes. The report believes that the case of Southwest Airlines at least proves that airlines can still achieve high profits without charging cancellation and change fees.

Southwest Airlines also sells non-refundable tickets, but passengers can complete free cancellations and changes up to 10 minutes before the flight. Refunds are made to travel account deposits and are valid for one year from the original date of ticket purchase. During the epidemic, Southwest Airlines further extended the validity period of account refunds.

Affected by the epidemic, airlines around the world have provided free cancellation and change services to passengers, refunding booking fees in the form of cash or account deposits. The same is true for hotels, vacation rentals, and car rental platforms. Due to the uncertainty, waiving cancellation and change fees is very friendly to consumers. When travel companies are forced to charge change fees again due to financial pressure, the market is expected to hear more negative voices.

On the other hand, Wizz Air has launched an attractive policy to encourage users to apply for vouchers instead of refunds. For flights that Wizz Air has proactively suspended, the airline will automatically give vouchers equivalent to 120% of the original fare to users who book directly through the airline's official website and app, but passengers can also choose to return 100% of the refund to the original account. This innovative guidance has undoubtedly attracted many passengers and also retained more cash for the airline. Scoot, a Singapore airline, has also adopted a similar refund policy.

7. Some travel needs are met by online solutions

During the epidemic, the demand for many offline business meetings was met by technological solutions such as video conferencing. The core of leisure travel is to enjoy life, while the core of business travel may be a one-hour meeting. Ben Baldanza, former CEO of Spirit Airlines, predicted that in the long run, the demand for business travel meetings will decrease by 5% to 10%. He said that short-term meetings between two people can easily be replaced by online video conferencing, but sales visits and factory tours still need to be conducted offline.

According to a survey conducted by National Car Rental, a US car rental group, on 995 local business travelers in November last year, 81% of the respondents believed that "business travel helps them establish new business contacts that would not be possible without business travel activities." In addition, 81% of the respondents would combine business and leisure activities during their trips.

8. Google’s interest in travel industry declines

The travel industry has been worried that Google will dominate the travel booking business with its flight and map products. After searching for travel products through Google, travelers may no longer need to visit airlines, hotels, vacation rentals and car rental companies, or even OTA booking platforms. Gmail may also help Google gain more travel booking customers.

However, the report believes that with the outbreak of the epidemic, Google may explore more direct opportunities in other industries, so the possibility of Google dominating the tourism industry has decreased.

Google has worked with public health departments in various countries to use the massive data it has collected to track the movement of people during the epidemic, mainly from the location information of residents' mobile phones. Google has released the travel routes of residents in more than 130 countries, covering grocery stores and pharmacies, parks, residences, retail and entertainment venues, transit stations and workplaces, etc., to help public health officials determine the safe isolation of residents. Google's achievements will attract more potential customers in the future.

The report believes that, by comparison, Google has more limited options in the tourism industry. The quick profit opportunities that remain in the tourism industry are no longer what they used to be. And tourism sales require direct customer service support, which is not Google's strong point. In the next five years, online education and public safety will usher in huge investments, and the tourism industry has been left far behind. Through comparative thinking, the report believes that Google has no motivation to conquer the tourism industry.

This article is compiled from Travel Weekly

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