Changes in Consumer Behaviour - Travel

Expert Profile

Section 1: Consumer Behaviour Changes in Your Industry

1.1. What have been the biggest 2-3 changes in consumer behavior observed in your industry?

1.1.1. Flexible Bookings

In the travel industry the first massive change in consumer behavior is the need for flexibility. Flexibility in this industry, is the capacity to change the booking or refund the booking. It should be easy and possible to complete online and without any human intervention.

That is a big change in this industry because traditionally low fares or promotional prices with hotels; or for airlines were linked to conditions and restrictions of non-refundable and non-changeable. You have to book them immediately and commit without any change of getting out of your purchase. But that is not going to be possible anymore, because, at least for the next few years, consumers are not going to commit unless they have some kind of confidence that they can get out of their purchase easily.

1.1.2. Reducing Importance of third parties

Companies have to rethink their revenue management strategies, what we call financing strategies. How do you separate your different types of segments and types of demand so that you can offer an appropriate price and set of conditions for each segment. The previous instances that you specified cannot work any longer so that’s a massive change.

Coming along with this change is the fact that customers want to have confidence for the engagement because the process has to be guaranteed. And so, they can’t involve a third party that doesn’t have a high level of credibility. So the consumers are used to buying this from agencies or other intermediaries are going to be very careful of who they buy through, and they would also like to buy directly direct from the suppliers, the airlines. If those corporations guarantee in terms of changes.

1.1.3. Affordable Last-Minute Buying

Another big change is the anticipation of your booking. Traditionally airlines or tour operators use to heavily discount their prices. The idea is that the closer you are to the travel date the higher the price because people who buy at last minute are those who don’t have any other plans and they are less price sensitive because they really want to travel. And there is some kind of urgency that translates into higher prices. Again, that has changed because today nobody wants to travel when you don’t know what your travel conditions will be or the government restrictions. So, people have been forced to delay that trouble decision and as that happens the suppliers have to discount the offers.

The whole pricing strategy of increasing the pricing has gone down the drain. The major change is consumers will be having their cake and eating it. That is, they an buy last minute, have low fares, with very few conditions, and their trip is fully refundable and has changeable fares.

1.2. Which consumer behaviour is going to endure after the pandemic?

These changes have massively changed the business. We have completely undermined the capacity of major operators to increase the yield. And also to plan the revenue. In the tourism industry planning is the key to success because you require massive investments. It takes 15-20 years to be made credible. So having visibility on your revenue stream and your creditability is crucial. Now in the current environment operators have no visibility and that is a big issue because nobody can plan for massive investments unless that you can achieve the required flexibility. That is a massive problem because it will be difficult in the next few years to mobilize finances and equity. In terms of consumer behavior that has changed for good and are unlikely to change, that is a bit early to say because the consumer behavior has changed so much, we don’t know what is going to stick. What is sure is that traveling has become a big hassle and is complicated. It requires planning and is expensive as well especially for long haul that’s become more expensive. So, I believe the value appreciated with long haul travel, the perceived value is going to increase because we realize that now taking flight and going to Australia, it used to be very simple and easy to do, but now has become much more complicated. I believe that perceived value long haul travel is going to increase. The price of long-haul travel is going to durably increase because taxation will increase as well.

1.3. How has the pandemic changed consumer interaction within your industry?

One thing that has changed tremendously is the operators have to make sure that the terms and conditions are not some types of fine print anymore but are very clear and very easy to understand for the consumer in the booking process. Because as the customers are online you want to be able to give enough information to consumer so that it doesn’t slow down or make the booking flow more difficult. It should be comprehensive, easy to understand in any language, it should be clear enough so that the consumer can make an informed decision. In terms of online merchandising and we present, your offers, I think this is going to be watershed moment. The level of information that we give to the clients has to be tremendously improved in terms of quality.

Then the interaction also after the purchase has to be improved. Airlines are usually concentrated on the acquisition and conversion of the clients. But they haven’t really invested lately in the retention of clients and in the customer care. We had a situation in the travel industry where major online operators, when the situation started to turn sour then they had millions of calls coming in and emails coming in from that guidance for refunds changes questions, etc. But they had absolutely zero capacity to answer because they never built into that business model. The business model was about acquiring and converting clients and it was never about engaging with those kinds of service that they always thought that they were selling was some form of commodity that require a lot of explaining. That has changed as well, they need to build into the system, the capacity to endorse massive amounts of calls or emails so that your clients can be dealt with and, of course, that comes with costs. That means also it’s a third-party distribution cost. That is also likely to increase.

1.4. What macro-economic trends/public policy measures impacted consumers in your industry most?

Travel behaviors have always been very affected by the macro economic trends, especially when it comes to the exchange rates. And it’s very well that economies change, depending on how currencies evolve compared to the currencies, the major source markets like the UK, EU or the US or Japan. That hasn’t changed and there hasn’t been a big shift in the currency exchange rates in the pandemic. So that hasn’t changed so much.

I think the second factor that affects travel and that is macroeconomic origin of haul price. The higher the haul price, the less. likely people are to travel long haul because cost is a big factor. This has the biggest impact on the Travel industry. There will be another big influencing factor, which is the. safety and hygiene situation of each country. And how predictable, manageable and easy it is for you to plan your trip long events, knowing that regardless how the situation falls, you can take your trip under conditions that are acceptable and predictable.

1.5. Have consumer product demands in your industry shifted?

Yes, the interaction has changed and people demand more quality in terms of information pre purchase, especially on the terms and conditions, the reflectivity the change conditions, etc.

The consumers demands and desires also changed because they now understand the value of tourism close to home. They are going to stay in the next few years, not sure if it’s going to take forever, but in the next few years for Europeans, I mean just in European. Americans will stay in America. Japanese will stay home, etc. But the desire is still there, so we find ways to be tourists at home. And that is going to change because, of course investments will be made to accommodate those tourism for those not there before and once those infrastructures are in place that will be there.

A good example of that is in Germany, which is the biggest markets in Europe to massive market. And Germans this year have you know come, to discover their own country. and it stayed home. And they realize that they actually have a very beautiful country. You have coastline in north that you can see all across the country, and you get the lakes and the castles and the rivers from where you can cruising etc. And so Germans came to realize that, in fact, what they’ve been seeking abroad, you can find at home and under very predictable circumstances at affordable prices, safety and security, and you know. I think, Germany and each domestic country in Europe now will become much more interested in stimulating and retaining its own domestic markets and attracting within markets, which can be a little bit more qualified in this environment.

Section 2: Company Responses to Behavioural Changes

2.1. What are the new measures that have been put in place to respond to behavioural changes?

The biggest change in Qatar Airways and in terms of the entire airline industry has been to trying to be much nimbler in terms of your flight money. That is the biggest difficulty right now. In this business nobody knows what’s going to happen next two weeks. The operating conditions change every day based on government regulations or restrictions that are put in place. You need to be much more nimble in how you reallocate your assets, how you decide to open /close destination, how do you say to increase or reduce capacity.

I think airlines across the world have who are extremely good at planning they have now become mature or successful and adjusting very quickly. So that’s the biggest adjustments. I think the biggest change that is taking place right now is, we want to make direct interaction with clients. And you know that’s what’s the biggest talk in the hotel industry is that you know, most of the bookings are through third party platforms and, at the end of the day they want to change and have the control of the computer interaction consumers. I think this is now become critical of the direction they want to have the security of the changes and refunds and they want to stay because it’s been very stressful. It could be another stressful year for us. And so customers care and attendance during the stay and the quality of interaction with the staff has become more important than before. Because I think people will value their vacation more than before. And therefore it will be related to quality.

2.2. What are the future strategies/opportunities to deal with behavioural changes in terms of emerging technologies that could be implemented?

One thing that’s very important is the investment in digital to eliminate all interactions that can be made problematic by the virus. Contactless payments, contactless transactions, avoiding interaction with people if it’s not necessary, putting all the tools into the hands of consumers that’s on the service device. So, he or she can have access to all the elements of the stay and basically perform both entities on the service basis, etc. And I think that’s very important. And many companies we’re not ready at times like this. So, they had to adapt, and we need to test tremendously in hygiene and the customer experience.

I think in the travel sector you need to make sure that you improve your customer experience because direct customer experience has to be spontaneous and your COVID strategy has to be flexible and making sure that your direct costs or fixed costs are very low so that you can withstand long periods of industry drought. And so, it’s a very difficult thing to do, because as your company grows, you know the layers of central fixed costs accumulate. And you need to grow further so that you have bigger review base to absorb these costs. Now a lot of businesses will have to think and profitability we have to increase because the amount of debt has been taken has increased tremendously. Productivity has to be up, flexibility to be increased. So, it’s very difficult equations to solve for big corporates.

2.3. What are the challenges in implementing the current and future measures?

We realize now that there are lots of valuable areas in our businesses. And the number one change, I think, is how to retain talent. The tourism industry has been very labor intensive especially when it comes to ground operations. For example hotel management results, etc. And you have to have a big workforce which is highly qualified because most often they have separate images to different types of clients and have to be openly indicated, able to work under pressure, etc.

But the problem is that we always paid those people very little. And with pandemic a lot of this workforce has been stuck at home and have found other jobs and realize the value of their skill set. So, now in in Europe, at least, and I think it’s the same in in the US. There’s been a massive outflow of labor from the tourism industry. And we need to replace that now. That’s a massive challenge going forward; attracting talent, retaining them and revisiting your business model so that it can sustain higher labor costs.

For example, in European resorts we cannot find anyone to clean. That is a huge challenge because at the current wage level, no one is interested. So, you have to be regular with paying salaries. Otherwise people will not come and clean those rooms now. That’s fine but it’s going to take time before you find those people about 20 to 25% of the manpower, which is missing. And the second is that long term, how do you pass this cost on to consumer because, of course the consumer has to pay for the extra cost.