Huw Williams, strategy director at Push The Horizon, looks at economic factors and behaviours to predict likely bookers
Even the most pessimistic among us accept the demand for travel and holidays will slowly return. The big questions are ‘how quickly?’ and ‘what groups of travellers are likely to return early than others?’
Covid-19 will have had a devastating effect on the industry. The effect for some businesses will, unfortunately, be terminal. For the survivors, the challenge will be to attract customers and encourage bookings as efficiently as possible.
One strategy will be to look for those who can most afford a holiday.
Unlike in the financial crash of 2008, there are a significant number of consumers that have more money to spend now than they otherwise would. However, not all that cash will have been saved. Grocery shopping costs may have risen, and some of the money will have been used to pay off debts. So personal finances are unlikely to be the main impediment to a recovery in leisure travel.
In 2008, UK air travel dropped by around 16% in the wake of the crash. Visitor numbers dropped 4% globally, with an estimated 6% reduction in value. Given the industry will lose five key booking and travel months, the fall in 2020 will be severe; probably at least 40%. This compares to an overall forecast fall in GDP of between 7% and 13%. But let’s try to be positive. We know demand for travel will return, and there is no reason the long-term trend for us to spend more on ‘experiences’ rather than ‘things’ will be reversed.
So, as we navigate our way out of this annus horribilis, we know we have two things on our side: the long-term trend in affluent countries towards spending an increasing proportion of income on experiences; and a significant group of people with the financial resources to spend on travel – who we must target during the recovery.
But we have to be clever about what we say, and who we say it to. There are no airlines, operators, agents or destinations that believe the best way forward is to throw money at the problem and hope bookings will return. We must identify the right groups to target and concentrate efforts on them.
There is one key factor: people’s attitude to risk and uncertainty. Unfortunately, with Covid-19, travellers are confronted with both. We might joke about muddled thinking and messages from our own government, but this is compounded when travellers have to assess the situation in both this country and multiple destinations. The 14-day quarantine rather bleakly highlights this problem. There have been a number of significant studies into the profile of those who are more likely to embrace higher levels of risk and uncertainty when travelling. If I was forced to give you an ‘elevator statement’ I’d tell you young people with a university degree will embrace risk and uncertainty while the older and less educated will avoid it. Those with young children will seek safety above all else. But it’s far more complex.
Marion Karl at LMU University Munich found, in 2018, that those aged between 60 and 69 were likely to have less concerns about travel. The research didn’t look at the reasons, but it may be this group are most likely to be free of dependant children and in good health.
A number of studies show that those with a higher than average income are more likely to be comfortable with a degree of risk and uncertainty. This correlation however is less strong than it is with those who have attained a degree-level education or above.
Those who take holidays abroad more than once a year show lower levels of concern than infrequent travellers. Many in the trade have been talking about ‘pent up demand’ and clients ‘wanting to travel’; it’s likely that it’s the voices of these regular travellers they have been hearing. We must talk to these customers to encourage them to travel.
It should be no surprise the least risk-averse travellers are those that are more likely to choose new, little-visited destinations. What’s also of interest though is that those travellers seeks new and novel experiences – so while they may not immediately consider Spain, they may be attracted by unique restaurants, experiences and activities.
Younger people are certainly less concerned about possible risks and uncertainty, but their lack of travel experience often encourages them to explore the world with well-known youth operators – and Covid-19 is likely to make such operators an even more attractive option.
Clearly there are those that will embrace risk and uncertainty, but there may be too few of them to re-establish the UK travel market in the way we need. If you call them ‘innovators’ or ‘early adopters’ they may only make up 15% of the market. To make this 70% or 80%, we have to use techniques to reduce perceived risk and uncertainty. We must also talk to these people.
While many may criticise the government’s handling of the crisis, its strategy to ensure the population is well-informed is the right one: ensuring ‘the science’ is central to presentations. For the most part, people trust doctors but mistrust politicians. Trust is critical when you are looking to persuade people to do something, so it’s important you’re seen as a trusted source of information and advice.
We must also consider group behaviour and ‘social norms’, however much we consider ourselves individuals. Whether it’s the stock markets or concerns about a pandemic; if the majority of people aren’t concerned, we’re unlikely to behave differently. So, most people will travel when they see others travelling. There’s clearly a problem here; but there are things we can do to help ensure this desire to do what others are doing works to our advantage. It’s more important now, than ever, to encourage those returning to post travel pictures, videos and reviews – and tour operators should consider posting their own videos and interviews with guests. The more the industry can show people enjoying the pleasures of travel, the more quickly this will become seen as normal again.
The groups most likely to travel will have the financial ability, which has maybe been enhanced by the lockdown, are less averse to risk and uncertainty than average and are more likely to have been regular travellers. To this we must add two important strategies: to reduce perceived risk and uncertainty by providing trustworthy information and advice, and to show people returning to enjoy the pleasure of travel and holidays to help re-establish this social norm.