An Enterprise Ireland-hosted conversation with industry thought leaders hears why airline and hospitality brands are looking to the tech industry as a painful rebuilding process is set to begin:
“Every crisis requires innovation,” is Henry Harteveldt’s parting shot. It’s a good way to finish, a welcome note of optimism but also a rallying cry to purveyors of bright ideas in the tech sector and elsewhere. Deep in crisis, the travel industry needs creativity and innovative solutions like never before.
One of the leading voices in the US travel industry, analyst and researcher Harteveldt has been in conversation with marketing and customer loyalty expert Dave Canty as part of an Enterprise Ireland-hosted conversation examining the impact of Covid-19 on the travel sector.
It’s been a sobering 60-minute discussion led by Enterprise Ireland for its travel technology companies. Of all global sectors affected by the spread of the virus, arguably none have been hit harder than the travel industry. For airline and hospitality brands that have withstood a succession of natural and man-made disasters in recent years, will Covid-19 prove to be the final straw?
Emotional v financial impact
“Well, we’re on an odyssey that nobody could have expected,” says Henry Harteveldt at the outset. “The financial impact of this is going to be extraordinary on a worldwide basis but I think the emotional impact is going to be even greater, and that’s something travel companies really have to think about.
“We have to ask the question ‘What are we going to be like after this?’ because there is going to be a lot of lingering psychological impact and nervousness,” he says. “How are we going to feel about being in a busy neighbourhood restaurant, never mind a crowded convention centre or even an airplane?
“So, there are all these unusual things to consider, even before we talk about the rebuilding of the industry,” adds Harteveldt. “Unlike a recession where things get bad and then things get better, the recovery from this is going to be uneven. It’s probably going to be slow and steady. We hope it will be steady, but it will certainly be slow.”
Rebound likely “by mid-2021”
“We’re in the jaws of this right now but you would hope that the containment efforts are going to bring some positive trends in the second half of the year,” says Dave Canty. “By next spring, maybe summer 2021, I would expect to see things starting to climb back.
“When confidence does start to return, I think leisure will rebound a lot faster than anything on the business side,” he says. “But even on that point, confidence may be a generational thing – it will certainly be subjective – and it may be a while before older generations feel comfortable travelling again, if ever again.
“Business travel will phase back in, but you’ll definitely see organisations re-assessing their travel budgets,” says Canty, pointing to the success of platforms like Zoom and WebEx in keeping people connected during the crisis. “Last to recover may be those hotels that have made big investments in events and conferences. They may suffer for longer.”
“It goes back to the psychology,” agrees Henry Harteveldt. “Organizations may not be sure they want their employees being in a large gathering of people. But we’ll also take our cue from public health officials. The challenge is that there’s a kind of patchwork of restrictions so it might be easier for some businesses to get back quicker than others.”
Both agree that travel companies will need help to ride out the storm.
“A lot of travel firms have gotten rid of contractors and outside resources to reduce expenses, and that’s had a massive impact on IT departments,” says Harteveldt. “In terms of technology investment, neither hotels nor airlines have been doing as good a job as they could have been doing or needed to be doing. That’s maybe an opportunity.
“Ancillaries are going to be hugely important, for hotels especially,” he goes on. “The challenge for hotels, unlike airlines, is that each hotel may have a different selection of products and those products are more likely to be at a property level rather than at a corporate or brand level. So, selling them may not be as easy.
Ancillary, subscriber-based products
“I think there’s going to be a big scramble for hotels to work on their ancillary retail, but their ability to sell these products is largely dependent on personalization,” says Harteveldt. “This is an opportunity for companies to sell subscription-based products into hotels.
“It may be easier if you’re able to bear more of the risk and tell clients that you’re willing to take it on the return,” he adds. “Also, the easier it is to implement any kind of technology solution, the more work you can take on for the company, the better.
“What sort of innovation do travel companies need? Anything that can improve their data insights and their personalization,” he says. “Tools that can help brands improve their retail, more targeted content. Any form of innovation that can help travel companies to be more effective and sell their products.”
“It’s delicate because you’ve got a lot of brands that are literally trying to survive,” says Dave Canty. “I’d suggest that if you are approaching travel companies, tread carefully and make it clear that you’re trying help. Can we help you connect better with your customers? Is there a way we can help you engage more deeply with your loyalty base?
“That might be a content offering that you can provide to travel brands, even on a free basis for a period of time, that they in turn can offer to their subscribers,” he says. “A crisis situation is when your loyalty programme should shine, so companies that haven’t invested in loyalty fundamentals are falling behind. They need to start making those investments now.”
David Canty is a partner with New World Loyalty, a partnership and loyalty advisory firm based in Atlanta. Henry Harteveldt is President of Atmosphere Research, a San Francisco-based market research firm serving the global travel industry. He recently authored Enterprise Ireland’s white paper on Maximizing Revenue across the traveler’s journey