Here’s how the top travel and leisure brands are responding to consumer trends in the new reality.
To say the pandemic has been challenging for the Travel and Leisure sector would be an understatement. Due to the social underpinnings of the sector, it is the first to go into lockdown and the last to come out of restrictions. It is the most vulnerable to changes in consumer confidence. And it is generally asset-heavy, making full shut-downs, like our current lockdown, particularly difficult to absorb.
The continuing rollout of the UK vaccination programme is clearly a positive development and a signal that, eventually, the sector will turn the page on this challenging era; we see light at the end of the tunnel. Yet the future shape of the sector will depend on how the experience has changed consumer preferences, behaviours and needs – and how much of that change is permanent.
That is why, since the initial phases of the pandemic last year, KPMG International has been surveying consumers (some 75,000 of them across 12 markets globally) to find out how their preferences and behaviours have changed. Throughout, we’ve been tracking their thoughts on the Travel and Leisure sector.
A mixed outlook
Some of the responses in our last wave of research offered cause for optimism. Please bear in mind that these survey responses were received before the latest lockdown started. Fifty-six percent of consumers said they planned to book a holiday for the first half of 2021 and 63 percent said they would book a holiday for the second half of the year. Nearly half (and 65 percent of retirees) reported they were financially comfortable, suggesting pent up demand for travel and leisure in certain segments. Evidence from markets that have returned faster – China, for example – suggest consumers will quickly return to at least domestic travel and leisure once confidence returns.
However, some of the responses also point to a rather rocky road while that lack of confidence continues. Fewer than three-in-ten consumers said they would feel confident going back to entertainment and leisure venues. The number of households prioritising spend on eating at home has been rising since the pandemic began. One-in-five consumers admitted that they just wanted to stay home as much as possible.
Trust has emerged as a significant challenge for the industry. In fact, as an industry, travel and leisure has suffered a 13 point drop in trust since the start of the pandemic. I suspect the results are rather polarised, however: restaurants performed rather well in responding to customer safety and health concerns in the initial phases of the pandemic; airlines and hotels, on the other hand, received some terrible press based on their willingness to offer refunds and deferrals. Trust will remain a significant issue for some going forward.
There’s no going back
The big question, of course, is how permanent these trends will be. Our survey suggests that 37 percent of consumers expect to work from home more often, even after the pandemic is over. If this results in commuters going into the office one less day a week on average, that would translate into a 20 percent decline in footfall for downtown / city centre restaurants, for example. And that could undermine the fundamental premise of many business models over the long-term.
Business travel is also a big question mark. Many companies and executives now feel some (though not all) of their meetings could be just as easily – and more cost effectively – conducted virtually. With global growth severely depressed and economic activity slowed, some pundits suggest business travel may never return to the levels seen before the pandemic.
I believe that – while the sector faces clear headwinds over the coming year – consumer confidence will return and, with it, heightened demand for travel and leisure services. People are fed up with lockdowns and restrictions; I know I can’t wait to go on a holiday, to eat at a big noisy pub, or to go watch an Aston Villa game in person. I’m sure I’m not alone (choice of teams aside). But I’m also certain that the way I enjoy each of those activities and the experience being offered will have changed.
Embrace the art of the possible
The challenge facing travel and leisure companies, therefore, is not how to ‘make it through’ the crisis, but rather how to evolve as a result of the crisis. It will require significant innovation and effort. But it should ultimately lead to a more sustainable, more resilient and more customer-centric travel and leisure sector over the long term.
Consider, for example, how some restaurants have pioneered and embraced new hybrid models – concepts like embedding retail outlets into the dining experience; creating pop-up suburban outlets; offering subscription-based models; delivering prepared or ‘ready-to-prepare’ meals; partnering with delivery services; and so on.
Hotels have been equally innovative. When hotels were open at the end of last year but business travel volumes were down, many hotels and chains started to focus on offering ‘staycations’ to local residents; renting out rooms as temporary office space for virtual workers; extending the use of day rooms; and pivoting their food and beverage facilities to support local deliveries.
Some of the leading travel operators have also taken steps to improve their reputational and financial resilience by offering customers incentives to delay their bookings to a later date. This provides a win-win where the customer gets a holiday at a better price while the travel operator gets to keep the cash – something that will be incredibly important if they hope to survive.
Pull out your sunglasses
While it is easy to focus on the challenges facing the sector today, I firmly believe there are significant opportunities to be had for those travel and leisure organisations able to predict how customer expectations are changing, understand the impact on their current models and take the appropriate steps to transform for the future.
With vaccines now being rolled out, there is a strong light at the end of the tunnel for the travel and tourism sector. But don’t be surprised if – when you emerge into that light – your view is rather different from when you went in.