The travel gold rush 2020: How global travel is changing
Thursday 9, December 2010
Amadeus has commissioned a study to explore the trends shaping the future of travel, specifically focused on the challenges and opportunities facing airlines and agents.
The report looks at potential new revenue opportunities and drivers of profitability, new models driving future growth and changing traveller tastes and preferences.
Key findings and insights include:
1. The global travel industry is making an uneven recovery from the recession. 2010 has seen a return to growth with global arrivals increasing 5.6% in the first six months of the year. However, Europe remains sluggish and there are lingering economic concerns. Hotspots remain Latin America and Asia-Pacific.
2. Asia will represent one third of travel spending by 2020 – up from 21% today. Macroeconomic modelling by Oxford Economics has suggested a dramatic realignment of travel spend over the next decade. Asia will account for nearly 22% of global arrivals by 2020 (up from 18% in 2008) and the region’s residents will account for 32% of travel spending by 2020.
3. Ancillary services offer new opportunities but they may not be the silver bullet to revenue growth that many expect. Ancillary revenue generation has spread from LCCs to major carriers and become an increasingly important source of revenues; however, it may not be the answer to revenue growth many would like. Considerable uncertainty remains about how important ancillary revenues will be in the long term, especially to major carriers. Nonetheless, with estimates suggesting that ancillary revenues may contribute anything up to 35% of airline revenues in the future the industry needs to fully understand where the opportunities lie.
4. Airlines and agents must explore new models that take a more comprehensive view of the total travel experience. Airlines may adopt a broader (or generic) approach to travel and integrate activities more closely with the rest of the travel value chain. There may be potential to derive yield from alliances with high speed rail providers, from customers who are willing to pay for seamless travel (e.g. improved ground transfers/transport), and by taking closer account of customer preferences beyond the airline trip itself.
In general, there are significant opportunities for airlines (and agents) which could arise from the weak points in the current value chain, such as the disconnect between ground transportation and the flight. Passenger willingness to pay for a smooth travel experience seems to be a significant opportunity, with a variety of sources of value but one which has so far gone largely unexploited. New technologies offer the potential to access these sources of value by allowing airlines and agents to more closely tailor their products to match traveller preferences.
5. Traditional cabin classes to be replaced by “virtual classes” as individual traveller preferences create a personalised experience. The future of the aircraft cabin is set to go through significant changes as customers are able to share their preferences with airlines and airlines will be expected to meet their individual needs leading to the decline of traditional cabin classes.
6. Face-to-face (F2F) travel agents set to become more highly valued. F2F agents may evolve to provide more services across the entire travel experience, particularly at its weak points. As travellers increasingly try out new experiences and destinations, it is likely that F2F agents may be able to play to their strengths of being there. They are likely to focus on industry niches/deep expert advice in the future. Their customer proposition will focus on ensuring that their clients are assisted across the entirety of the travel experience.
7. Richer, older and going somewhere - demographic changes will alter Western travel. Demographic changes and health advances will mean more travellers with more free time, who travel for longer periods and who are still able to incorporate a variety of travel experience. These new travellers will present new opportunities for airlines and agents.
8. Business travel will recover from the recent recession but business class may face changes. Videoconferencing is likely to supplement rather than supplant business travel due to industry growth and the continuing advantages of F2F contact, particularly for initial meetings. Analysis in the US suggests that for every dollar invested in business travel companies realise $12.50 in incremental revenue. Business class is most likely to survive and thrive but classes in general are likely to become increasingly fragmented.
9. Emerging nations’ travel habits remain the great unknown. Despite their importance (and macroeconomic forecasts indicating broad trends) there is some uncertainty about where citizens from emerging nations may travel to or how their tastes may differ from Western travellers. The demographic trends associated with Western travellers may be less relevant when applied to the emerging markets.
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