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How travel brands can discern and capture upswings in demand

Inflection Detection: How Travel Brands Can Discern and Capture Upswings In Demand

With tourism halted by the need for people to stay home and not travel unless neccessary, Carolyn Corda, chief marketing officer for data intelligence business Adara, shares findings on the consumer behavior patterns being displayed around the travel sector in recent months.

Demand for travel in the US fell more than 85% for leisure and more than 95% for business in the second half of April compared to volume at the beginning of the years. But, since 1 May, there are small increases for travel booked more than 91 days out as well as more immediate trips taking place within two weeks. Global and local travel and tourism across the globe faces a complex set of variables that will determine what the future really looks like.

Very few people are traveling now, but the $2.9trn question is: when will people start booking travel again? The World Travel and Tourism Council (WTTC) notes that 1 million travel and tourism jobs are lost every day that the pandemic continues, and so every day counts. In anticipation of increasing demand, different travel companies are positioning as best they can to capture it. Carnival Cruise Lines recently announced that it plans to resume cruises from Texas and Florida starting in August.

The signals of a rebound are likely to be market-specific and subtle. Countries in Northern Europe are slowly opening, but most international travel is still restricted, and so a hotel rebound will be slight, at first, while air travel could lag further. Singapore and Japan, which stayed open in March, are now adding restrictions, forcing recent bookings to be rescheduled or cancelled.

Elements such as trip purpose, advance booking window, length of stay, class of service can all be examined to understand which types of travelers will bounce back first, and when. But, these signs must be read cautiously. There are also major health and economic forces at work, and outcomes across regions and countries will vary widely. For example, a recent uptick in air travel to Hawaii was met with a mandate that out-of-state arrivals self-quarantine for 14 days. The future will be subject to structural changes that could alter travel for some time in addition to normal traveler demographic differences and individual traveler emotions.

Don’t expect a single curve

Travel, perhaps more than any other industry, will suffer long-term effects of the coronavirus pandemic. With past travel downturns, there were smoother patterns that could be seen across the industry. Structural changes like limits on capacity, sanitation regulations, testing requirements, and border closures, could all come and go as the virus comes and goes.

There is a danger that travel marketers try to create a single timeline of the future, with a unifying outcome. Looking at travel booking data through Adara, there are small signs of increases, such as US leisure travelers booking 90 days out, and travelers in South Korea continuing to travel more than their neighbors. But, these small inflection points will not add up to a single bottoming out of the curve that will then smoothly bounce back up. There will be fits and starts and small spikes that then turn back down, where each slice tells its own story.

Plan for several scenarios

Major gating events such as infection rates and shelter-in-place orders are the tip of the iceberg of the factors different travel brands need to understand. Tourism locations must know how many people can gather in one place, and if major sports teams will be able to play. Airlines will need to understand border crossing regulations, and the emotional willingness of people to travel while sitting next to strangers, not only on the plane itself but also across hundreds of airport lounges. Hotels will need to understand how to entice visitors when large gatherings like conferences and concerts are dramatically reduced, and how to manage elevators and other public spaces.

Each industry must create scenarios that examine each layer of gating events across different timelines. Companies are putting a lot of analytic resources and executive attention into laying out potential futures, whether it is an "U" or an “L,” and creating action plans for marketing, staffing, and capacity management based on the timing and strength of the rebound. One key unknown is whether the virus returns in the fall, which could dampen longer-term travel. For example, a recent survey shows that 40% of university students are considering changing their study abroad plans for next year. Each scenario requires different actions by the travel marketer. Travel brands will be well served to play these scenarios through.

Information is power

Widely-held assumptions about how travel is likely to rebound over the course of the next 12 months are emerging. For example, international travel is expected to lag behind domestic travel and outdoor destinations such as national parks are expected to be more popular than other attractions that tend to draw dense crowds. Further, the bet is that unmanaged corporate travel will come back before managed corporate travel, and that senior leaders will likely travel sooner than their junior counterparts. All of these forecasts seem logical and align with early indications of consumer sentiment. And, many of these trends may indeed prove to be true.

However, it’s particularly important to challenge logic when we lack historical precedent. We're seeing some actual consumer behavior that defies some seemingly logical assumptions - the notion that people will avoid destinations that cater to crowds is also proving to be a false one. A contrary indicator is Las Vegas which is seeing a nearly 200% uptick in bookings for late summer.

Travel marketers can use data from many companies that are making data publicly available to help with scenario planning including Smith Travel Research that tracks hotel performance, International Air Transport Association which provides scenario forecasts and BCG's Travel Recovery Dashboard that provides a snapshot of key indicators. Other leading indicators, such as an increasing radius in the distance people are booking travel from a specific city, or the increase in originating locations to a destination, are good signs of a trend. It’s important to have a shared cross-functional plan for the company to coordinate go-forward messaging, media buying, pricing and service as micro-trends arise.

Creating light at the end of the tunnel

When new positive trends do arise, the goal is to encourage travel by building trust and increasing willingness. A logical framework that uses data to analyze micro-trends can prepare travel marketers for a personalized approach. Individualized messaging, pricing and services will be more relevant to travelers than a blanket campaign that could come across as tone-deaf at best and irresponsible at worst.

It is important for travel brands to get the inflection point just right - to open the marketing machine - from pushing inventory availability across the distribution network, to optimizing ad spending and pricing, as well as timing messaging and communication directly to travelers. Restart too soon, and money is wasted. Spend too late and competitors take the early, intrepid, customers.

Similarly with ad messaging, each traveler will respond to different messaging depending on a complex interaction of past booking behavior, demographics, and emotions. Older people are more anxious to travel, because of personal risk of being harmed by the virus, compared to younger people, notes Lori Pennington-Gray of the University of Florida. Similarly, people in the Northeast of the United States are showing higher travel anxiety that people in more rural parts of the country.

Having a sensible approach to data analysis and a coordinated marketing effort sets the stage for success. Having a compassionate approach to the individual needs of each traveler ensures it.

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