Boomerang Return or Inflationary Bust?
December 22, 2022
The travel industry must work out how to communicate better in 2023, amidst the most complex set of circumstances that the industry has ever faced.
We are sailing through a perfect storm of negative headwinds, which have been triggered by economic contraction, Covid-19 hangover, supply chain disruption, war in Ukraine, fuel price spikes, interest rate hikes, and raging inflation which reduces consumer disposable income.
Buffeted by this storm, emerging from the worst of the pandemic, people have proved eager to travel despite the pressures on their disposable income, driven by a feeling of missing out and the need to catch up with relatives and friends.
This demand is not uniform across the world, particularly as the second largest economy China continues to pursue its zero-Covid policy, impacting the travel sector in Asia and the global economy. The bold surge of protests sweeping China to denounce this policy should imminently open the borders to travel. As with previous crises following 9/11 and the global financial crisis, leisure trips or visits to friends and relatives have rebounded first, with business travel taking far longer to recover. Technology and remote working will ensure that there are fewer corporate trips, settling out at around 80% of pre pandemic levels.
Russia’s shutdown of natural gas flows to Europe has resulted in skyrocketing energy prices. Markets have been further hit by the poor results from the large tech companies like Meta and Alphabet, whose numbers highlighted a considerable weakness in the consumer spending and advertising space. This would typically give clear clues as to an upcoming recession. As growth slows and the labor market cools the risk of job losses increases, so households’ precautionary savings are likely to rise. This could curb consumption.
So, where are the consumer trends headed, that will provide the focus for 2023 and beyond?
- Prices will rise, as airlines grapple with the highest aviation fuel prices for more than 20 years.
- Inflation and interest rate rises will remain front of mind in deciding travel budgets.
- Customers will continue to prioritise travel above all other disposable income priorities.
- Businesses will become more welcoming, sustainable, accessible, and focused on local communities.
- Blending work and leisure on trips abroad will ensure that employees stay motivated.
- Digital nomads are here to stay, as small and large companies develop more employment policies.
- Flexible travel options are critical, allowing people to change bookings without penalties.
- Lodging cleanliness standards will be not so critical, as this is now taken for granted.
- Social media platforms continue to evolve, with Instagram influencers and TikTok driving change.
- Travel choices continue to be influenced by clear messaging and visual imagery that strike chords.
Despite concerns around inflation, there is reason to be optimistic. People see travel as an important priority in their lives, as business and international trips are resuming. The huge resilience of the travel sector is driving massive pent-up demand. Communication of your brand and its value-added offers has never been more important. Boomerang demand will trump inflationary caution.
The future is bright.