Envisioning the future: Travel and hospitality in the wake of coronavirus
“Yesterday is not ours to recover, but tomorrow is ours to win or lose.” -Lyndon B. Johnson
THE WORLD Health Organization (WHO) declared novel coronavirus (COVID-19) as a highly contagious ‘pandemic’. The outbreak of the disease has severely affected 1,431,700+ lives across 150 countries and counting. This has impacted world trade with the travel and hospitality industry being the worst hit.
The scenario is proving detrimental in the successful completion of annual strategies of organisations as the first quarter of the business year is facing the brunt of the novel Coronavirus outbreak. According to the International Air Transport Association (IATA), the airline sector could lose up to US$113 billion this year due to the COVID-19. Several leading airlines such as Lufthansa and Air France-KLM, have either stalled their flight operations or announced slump amidst the dwindled demand.
Apart from the airlines, hotels, tour operators and OTAs are taking measures to work with their partners to refund or rebook for the customers who are more prone to the virus threat. As per an analysis done by RateGain on the impact of coronavirus on the hospitality industry, this trend is not limited to China or Southeast Asia anymore but has also transcended to the other parts of the world. The analysis was done on the bookings between January 1, 2020, to Feb 29, 2020, across multiple cities in over 90 countries with more than 50 hotel properties as a base.
The analysis reveals a steep 16% decline in the room revenue trend (for the bookings made in the month for the same month) globally, month over month from Jan-Feb 2020 and more than 9% for the next 12 months, irrespective of the day. It also confirms that while booking trends have registered a reduction in the last few weeks, the number of cancellations has significantly increased by 53% You globally.
In the wake of the mass confusion and panic, most companies are refraining from making new strategic decisions and instead are focused on the immediate future committing resources to additional infrastructure for screening, quarantining and treatment of properties and staff. However, the travel and tourism industry has faced similar crises before, adapted to deal with them, and survived.
Past instances of surviving epidemics
The night is the darkest before the dawn. An experienced player in the industry would focus on the journey that awaits. The aftermath of 9/11 in 2001 and the SARS virus in 2003 had tried to deter the travel industry. Although the former led to a 50% fall in the air and hotel bookings, the after-effects of later were experienced worldwide for six months. As per World Bank Data, global tourism incurred losses between USD 30-50 billion.
Not bowing down to the challenges, the industry witnessed technological innovations due to which OTAs such as Priceline and Expedia started to mushroom by the end of the 20th century. OTAs played a pivotal role in making airlines and car rental companies adopt digital channels which helped them sell unsold inventory, instead of being dependent upon customers approaching travel agents and tour operators. With their wide reach, OTAs brought a confluence of various travelling services on a single platform.
Despite the momentary damage done by SARS in 2003, the travel and tourism rose to register immense growth by 2006. The top 4 online travel portals at the time (Expedia, Priceline, Orbitz, and Travelocity) recorded considerable growth in the booking revenue for the year 2007.
These are not isolated examples of the epidemic and technological disruptions side by side. The H1N1 breakout in Mexico, followed by eruption of Icelandic volcano Eyjafjallajökull in 2010 broke the back of the airline industry globally by incurring mammoth losses. But, this did not drench the spirits of innovative brands like Virgin Atlantic to invest in social media to form a deeper connection with their customers to influence sales. Brand’s ‘Looking for Linda’ social media campaign in 2010 offered its exclusive travel destination while promoting itself, skyrocketing its social media audience by 8 times.
A recent use case of Zika virus which restricted travel ban on 60 countries did not limit the zeal of people dedicated to creating exceptional travel experience for guests. With its technological capabilities, Celebrity Cruises opened new horizons of personalisation for the customers through the digital channel and mobile applications, in the same year. It strengthened the brand’s omnichannel approach to target its customer through advanced analytics, providing a seamless digital experience.
Throughout the past, we can witness exceptional cases wherein the industry has not only survived but grown, invested and evolved despite the adversities. Our closely connected and the technologically-advanced world has empowered this industry to be sufficiently equipped in dealing with calamities of global scale.
A roadmap to recovery
One of the late bloomers in adopting technology, the travel and hospitality industry has yet managed to significantly metamorphose its state owing to the internet accessibility and reduced cost of mobility. It has accelerated innovation in travel technology, providing solutions that permit brands to transform a traveller’s journey.
As the pandemic has urged businesses to mindfully execute their expenditure to limit the impact, the onus lies on the commercial units to vision ways that reduce leakage while staying relevant and ready to host once the demand surges when the virus is eliminated. We recommend following strategies that influencers across the travel industry must consider to resolve with limited money:
Independent and small hotel chains: Remain active
While large hotel chains can recuperate losses through different markets, independent and small hotel chains will suffer more in the short term. They should keep a close watch on intra-day rate changes and access data that may recommend new demand partners that can drive their businesses. Agility would be the key in a post corona world.
OTA Market Managers: Rework market KPIs
With bookings affected, it will be challenging for OTA market managers to deliver annual figures based on former year’s performance. This makes it imperative to re-work on your annual targets and ensure that your actions allow you to track these KPIs across your markets easily.
Airline e-commerce teams: Mend revenue leakage
As the virus has not affected all regions, not all airline routes will be equally hit. Thus, airlines should monitor all partners or resellers that might unload inventory at cheaper rates to benefit from the current state of the market. Plastering the loopholes at all fronts is pivotal in making up for the losses.
Distribution Managers: Look for alternate markets
Countries with high cases of the virus are witnessing steep cancellations of up to 50% in reservations. Here, OTAs can become proactive in innovating new market sources by studying the insights and directing travellers to comparatively safer destinations to make up for the lost bookings.
Car rentals: Flexibility is the key
The business of car rentals is only impacted by airports. They should understand the alternate areas which could demand their services while tracking the pricing of their competitors to ensure pick-ups and increased revenue.
Tour and Ferry Operators: Mindful offering
Midsize tour and ferry operators who are currently facing cancellations on hotels and airlines, should understand the wake of events and have the ability to charge a premium on their offering. Many companies lack a mechanism to weigh past data in formulating offerings fit for different customers, during such times.
The aforementioned strategies guide the travel and hospitality industries to curb the damage and search for prospects of new revenues. The Keynes model advocates for increased government spending during a recession for building capabilities of the market and be ready when the demand picks up. The same principles are also suited for the travel industry to invest in strengthening newer avenues and taking competitors head-on when the market reopens.
Currently, RateGain is actively working to help over 13000 brands in travel and hospitality, including 25 out of the top 30 OTAs, fastest-growing airlines, 23 of the top 30 hotel chains, largest tour operators, and all leading car rentals. Our easily deployable and AI-powered solutions are relevant for any travel brand that aims to prepare themselves better to overcome challenges and identify new horizons for revenue creation.
We strongly believe in fostering strong relationships during times of crisis, helps our ability to adapt and leverage resources on-demand and help businesses respond to travellers’ needs for a longer period. Our investment beyond commodities makes every journey and experience a memorable one.
