Travel is a never-ending activity, people will keep traveling. A significant amount of development in the Travel industry has encouraged many people to travel even more. Technology has created a communication channel which has helped in connecting everyone across different locations. The blend of globalization and technology has together helped cutting down on physical distance.
Travel apps are the next big thing and they are here to stay. Many travel companies have already introduced the idea of using a travel app over calling travel agencies to their customers. The Travel Industry has been growing at a rapid pace, which leaves us to wonder if the travel industry will still be profitable in 2020.
According to the UN World Tourism Association, 2018 was the 8th year in a row of sustained industry growth, with 1.4 billion international tourism arrivals. The trend is predicted to continue for 2020 and beyond. (UNWTO, 2019)
The trend of traveling keeps changing from time to time. Earlier, traveling for leisure was more of a family or a couple thing, however, with changing times, even though people still travel with their family, many solo travelers have also emerged. The new generation is also opting for sustainable tourism options know as an eco travel. Travelers require more personalized tours and like to engage in local experiences.
The average consumer is changing their spending habits, and travel is benefiting as a result. General spending on tangible goods is dropping, whereas spending on experiences such as travel and eating out is on the rise. (Deloitte, 2017)
Key Upcoming Trends In The Travel Industry
The travel industry has experienced a drastic change from just being a service industry that offers flight bookings, hotel rooms, cruises to offering experiences. Today’s travelers seek experiences rather ticking off destinations on their list. For them travel now implies, adventure, new skills, rejuvenation and doing things that fit with their personality.
Considering the changing trend in the travel industry, online travel agents are more focused on providing personalised travel experiences. Let’s take a look at the new travel trends to look forward to:
Traveling has become more than just a leisure activity, it has become more about experimenting, learning and experiencing. Travellers prefer adventurous activities such as hiking, trekking and camping rather than just sunbathing on a quiet beach. This new trend in traveling is shifting the focus on OTAs in providing experiences like never before to fit every budget.
Seasonal or territorial trend in travel is garnering the attention of today’s travelers. Travelers choose their travel destination based on the season or geographical attractions. Although European countries are still the most desired or preferred countries for travel, however, people have planning their travel to Asian countries to experience the culture as well as the geographical tourist attractions.
Augmented reality, virtual reality, and artificial intelligence have become significant parts of the travel industry. On one end AR provides a real-world experience virtually and on the other VR provides digital tours. The integration of AR/VR within a travel app benefits the travellers in knowing all the information about a particular place as well as in taking virtual tours.
Artificial Intelligence helps travel agencies in analysing the travel behaviour of their customers and designing tailor-made tours for them. Further, AI integration also helps tourists with a virtual guide or voice assistance in different languages.
Besides experimental or adventurous travel, many tourists also seek luxury travel. This class of tourists doesn’t mind paying more to experience luxury. For instance, many travellers who plan to go to Maldives want to stay in the overwater villas and bungalows rather than other hotels and they are willing to pay higher for that luxury and experience. Similarly, as per the trend, travellers may prefer hiring a private yacht to sail through the Caribbean.
Satisfaction & Safety
The travellers have become more aware of the details of their travel experience with the help of communications tools. Therefore, travel agencies focus more on the safety and complete satisfaction of the travellers. Businesses have started investing in marketing their services and loyalty programs on social media, to entice their customers who share their experiences further with their contacts. The travel portals provide satisfaction to their customers facilitating online check-ins, last-minute upgrades, etc which in turn increases their revenue.
Travel Industry Forecasts
The travel industry is facing a paradigm shift toward investing in the needs and preferences of travelers. Considering the changing trends and economic slowdown, online travel agencies and businesses looking to step into the travel industry are apprehensive about the profitability of the industry in 2020. Taking a look at the current trends and forecasts in the Air and Hotel domain:
The growth in the air travel market is slowing down with a decrease in traffic from 6.8% to 4.6% from 2018-2019. Due to the increasing demand, higher fuel prices, and labor costs, the airfares are expected to increase in 2020. However, the increase in airfares will be limited in most of the markets due to added capacity.
- Regionally, the airfare will increased by 1%-2% in Africa excluding the intercontinental economy travel.
- The regional fares in Asia will increase by 2%-3% including an increase in intercontinental fares by 1%.
- In Europe, while most of the airfares will rise, the regional economy fares will remain flat.
- The Middle East will not experience an increase in the intercontinental economy fares, while other fares will increase by 1%-2%.
- In Latin America, while the intercontinental fares will not be affected, the regional fares will rise by 3%.
- In the Southwest Pacific, the intercontinental fares will fall by 1% due to the increased competition and the regional fares will increase by 1%.
- North America expects an increase in fares in all travel segments by 1%.
In the hotel segment, the prices are expected to rise by 1%-3% globally in 2020. The hotel rates increase is expected to be higher in the Asia region averaging 2%-4%, due to the lack of hotel availability in comparison to demand. Whereas, in Latin America, the average daily hotel rates will experience a small rise averaging 0%-2% because of a modest increase in demand. Japan is expected to experience a significant increase in hotel rates due to the Summer Olympics in 2020 despite the addition of new properties.
Travel Industry in 2020
Going back in 2018, the travel and tourism industry grew more than other economic sectors, contributing $8.8 trillion to the combined world GDP creating 319 million new jobs. Further, it is expected to generate 100 million new jobs globally in the following 10 years, despite the US-China trade strains. Based on the following trends and data, the travel industry will still be profitable in 2020.
- As per estimates, the market for global tours and activities is expected to reach US$183 Billion by 2020.
- About 57% of tourists are estimated to be traveling to developing economies in 2030.
- Millennials are the most profitable demographic market in the travel industry and about 65% of them are expected to travel 2-3 times every year.
- The percentage of solo travelers is increasing amongst Millenials being roughly 1 in 4 people, and all age groups are opting for adventure travel.
- Eco-tourism, gastro-tourism and well-being travel are being recognized and growing rapidly in the travel industry.
- 40% of large businesses are expected to adopt AI technology and chatbots by 2020 to enhance travel experience for their customers.
As per a report by Global Business Travel Association, the rising hotel rates, and airfares will stabilize with the leveling off of travel industry pricing in 2020. While this is good news for travelers and travel agencies, however many fear that this may be a result of an economic slowdown in some countries due to factors such as trade wars, possible oil supply disruptions, Brexit, etc. The global economy is still expected to grow by 3.6% in 2020.
Growth of the dynamic travel industry is pegged to accelerate in the coming years with emerging technology at the core, changing travel experiences for both travelers and the online travel agencies. The industry is embracing the changes in trends and new technologies and is expected to continue to be profitable in 2020.
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