The state of the travel industry
The COVID-19 pandemic is a health and humanitarian crisis, and it is also an economic shock. The outbreak has initiated an undeniable call to action for the travel industry to now rapidly assess these fast-changing developments, and the ensuing impact on their people, their customers, and their organizations. Currently, passenger travel and tourism is a public health hazard as well as a global economic problem. Travel companies are now making rapid decisions that will affect their very survival.
What now? Reduce, restructure, rebuild.
The fall in demand and closure of borders has seen the travel industry reduce at an unprecedented pace. Cruises have stopped, many airlines have suspended all scheduled service and hotel occupancy is low. The industry is starting to restructure—and the fortunate travel companies will pass from restructuring to rebuilding for a new normal.
Next steps for travel companies
Because passenger air travel is the fastest vector for virus transmission, it is the most dangerous path for a resurgence of this economic crisis. Governments are recognizing this at different speeds, but the end outcome is clear: most, if not all, borders will be shut to people for as long as the virus circulates. The recovery for this crisis will only start when measures have been taken and travel is judged safe. Domestic passenger aviation will resume first, followed by international travel on a bi-lateral basis. When proven safe, national aviation systems will open back up to each other and the flow of people will again begin.
Government support is coming, with strings attached
Government support to economies is beginning in earnest. Travel companies need to be prepared to address the demands that will be placed on them when they accept the funding, irrespective of the source. Assuring public safety, creating wins for people and other themes can help travel companies 'reset' and potentially come out better than ever. The determination of those strings will be political, and the industry still has time to work with politicians and others to shape those demands for stronger, safer, and more resilient travel.
We anticipate these "strings attached" will be focused on creating "a new normal" for our industry, centered on the following themes:
1. Assure public safety
The public is understandably wary about travel now, and they need some assurance and instruction on how and where to return safely to traveling. We expect important regulatory bodies and travel industry participants to work together to respond to this health crisis in the same as they have to others: by engineering towards safety with prudent risk mitigation techniques.
In the short term, it is conceivable to expect health screenings just as we have security screenings in airports. Trusted, robust passenger information will be vital to helping ensure short-term traveler confidence and long-term public health.
2. "Wins" for the travelling public
Travel today is optimized for operational efficiency. All travel businesses are likely going to restart from near zero—will they just scale back what they had or rebuild it better?
While cost competition will always exist, crowded cabins may be perceived as a health risk for some time. Customers may expect airlines, hotels, and cruises to implement hospital-like hygienic practices for every change of flight, room, and cabin, and expectations around cancellation policies and refunds will surely change.
3. Truly human employment
The workforce in today’s travel industry is not organized in a way that makes it easy to respond to events that generate over- or under-capacity. In the event of a crisis, companies lack the cross-training capabilities and scalable infrastructure to resize and shape the workforce up or down as needed and as a result, they can be forced to lower service level and/or reduce the workforce.
4. High-speed one order
Travel bookings are currently disconnected across suppliers. While technology is available to stitch together the legs of an itinerary across air, car, and hotel, there is little to no information sharing to create an end-to-end transparency of the journey and to smooth out the handoffs between suppliers. This situation affects the customer experience under normal travel circumstances but has made it even harder for the industry to mitigate and respond to catastrophic events like COVID-19.
The underlying technology that supports the industry has evolved into a web of integrations that are limiting growth and creating barriers to better service that make it less constructive to generate tourism in some markets.
5. Anti-trust protection
The fabric of the travel industry will change significantly as a result of COVID-19. Expansion of services, mergers, and acquisitions will likely be part of the new normal. The number of competitors in each market may decline. This means that companies must be ready to rapidly and effectively adjust to market changes.
6. Better than ever
Throughout history, crises like COVID-19, while adversely affecting an industry, have also been the driver of innovation and change. In the 2008/2009 automotive bailout, governments placed higher emissions and capital standards on the industry. The travel industry must be prepared to work in an environment where sustainability and operational requirements will become more stringent, and diversification into adjacent business models becomes even more important.
Looking beyond the immediate future
The COVID-19 outbreak has resulted in dramatic disruptions to Travel leading to new paradigms and many cases, permanent shifts. Companies will be forced to make quick decisions to ensure short-term confidence and longer-term business sustainability. What will be needed to meet the urgency of today and the demands of tomorrow? All Travel companies must immediately decide how they will improve in the six key themes we’ve outlined and address how to re-size and re-engineer their organization for a new normal. Many will apply new technologies to facilitate immediate responses, but these could pave the way for longer-term strategies that improve overall resilience and competitiveness.
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