Trends Defining the Global Travel Industry in 2017

Adam Weissenberg (Deloitte Global Leader for Travel, Hospitality and Leisure)

The world of travel and hospitality has entered a new era of growth and transformation. Global business travel spending hit a record-breaking $1.2 trillion in 2015, up five percent from the previous year[1]. In the United States, renewed consumer confidence, along with a shift in household spending from goods to services and experiences [2] (Figure 1) helped leisure travel gross bookings sustain a growth rate well ahead of gross domestic product (GDP)[3]. Healthy booking trends in the business segment, as well as growth in some of the world’s largest leisure markets, will fuel global travel growth in 2017. Direct travel & tourism GDP growth is projected to reach 3.8%, outpacing broader global GDP growth of 2.5%[4].

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Figure 1

While healthy booking growth is projected to continue across the leisure and business fronts in 2017, the spoils are not guaranteed to travel’s biggest or most-well-known brands. The past few years taught established industry incumbents to never again underestimate a seemingly innocent travel startup.

A combination of forces, including shifts in the global economy, game-changing innovation, geo-political turmoil, natural disasters, pandemics, and rising consumer demands reshaped the travel landscape in 2016. Expect a similar climate in 2017. Below, we reflect upon powerful elements of change in our industry, including evolving consumer mindsets, enabling technologies, rising forms of risk and platforms, and how they may all transform travel in 2017.

With the exception of frequent business travellers, most consumers in even the most mature global travel markets like the USA and Europe do not travel very often — maybe two or three times a year. Consequently, their exposure to travel brands is relatively limited. Everyday brands, however, showcase their innovation and services to their customers often — sometimes daily. Many well-known brands, such as Amazon and Starbucks, are leading on the customer experience front and setting the bar quite high for consumers’ brand expectations. Travel and hospitality brands will find themselves subject to the same expectations. Those able to capitalise on these changing expectations with speed and agility are more likely to capture their share of the billions of additional dollars that will be spent on travel in 2017. Experience is now integral to core travel product offerings.

But what exactly are these expectations? While different businesses offer consumers various products and services, there are overarching themes around how expectations are changing — and these generally centre around authenticity, personalised experiences, removal of friction and on-demand functionality.

From augmented and virtual reality to the Internet of Things (IoT), the promise of emerging technology has never been greater. When it comes to leveraging new technology, today’s travel brands have a daunting amount of choice. 2017 should be the year travel companies think beyond the “what” of technology innovation and proliferation — the shiny devices, applications, and capabilities — and understand what technologies consumers are ready to adopt, and what experiences will drive real value. Travel companies must first envision the customer experience they want to deliver. Then, they can explore the technology options best suited to support their goals. Companies should resist the urge to invest in new technology simply because it seems innovative.

The influence of Brexit and recent terrorist acts in Western Europe are reminders that, while globalisation has brought innumerable benefits to the travel market, interdependence also has its downsides. Pandemics such as the Zika virus can also have regional and global impact on travel behaviour.

Additionally, travel and hospitality companies will become more vulnerable to other risks in 2017, such as cyber-attacks and food safety. Data breaches are happening more often — and with unprecedented sophistication. In the months ahead, mitigating cyber-risk will only prove more challenging as travel companies continue to open their ‘doors’ to new technology enablers and third-party vendors. And, in an effort to satisfy the enormous demand for locally-sourced, organic food options, restaurants and hotels are leaving themselves more exposed to food safety incidents. Investing in Enterprise Risk Management (ERM) is no longer an option for travel and hospitality companies. Thoughtful awareness of risk should be embedded into the very fabric of the organisation — with senior executive and board level support.

Finally, in 2017, we urge travel companies to conceptualise their brands as platforms for new opportunity and growth. Travel is fragmented across many micro-experiences. For example, during a single trip, a traveller may transact with a variety of suppliers and businesses — including hotels and private accommodations, airlines, cruise ships, and multiple modes of ground transportation. And don’t forget destination activities and shopping. Most travel companies operate in just one (or maybe a few) of these verticals. With organic growth hard to come by today’s competitive market, travel brands must realise the benefits of scaling across the travel experience — rather than only trying to grow within their vertical.

For years, travel suppliers have been trying to crack consumer loyalty by offering intricate programs and schemes. 2017 calls for a shift in thinking to make customer experience paramount. Over the next 12 months, travel companies should leverage an increased awareness of customer expectations, re-imagined technology strategy, and differentiated offerings to provide unmatched travel experiences. Loyalty will follow.

-Adam Weissenberg

Thank you to Marcello Gasdia (Center for Industry Insights at Deloitte) for his contribution to this piece.

© 2017. For information, contact Deloitte Touche Tohmatsu Limited.

[1] Global Business Travel Association Press Release, June 11, 2016

[2] Deloitte’s Retail Volatility Index 2016

[3] Phocuswright’s Online Travel Overview: 15th Edition

[4] WTTC projections (March 2017)

This article was contributed by a WTTC Industry Partner and published in March 2017 as part of the annual update to the Economic Impact Research from WTTC. The full report can be found here.

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