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Travel in a world of geopolitical, climate, and digital disruptions

Travel Weekly Insight Annual Report 2023-24

Consumers’ appetite for travel in 2023 showed no signs of abating as post-pandemic pent-up demand continued to fuel spending in the sector despite surging inflation and geopolitical instability. As ‘revenge travel’ gradually subsides, the travel industry is expected to return to pre-pandemic performance patterns in 2024, barring any major unforeseen events. The growth rate of recent years is not sustainable and there are indications of softening demand, particularly in the US market.

Following the disruptions to the sector over the last three years, consumers have found a renewed interest in travel giving the industry the opportunity to redefine itself. The future of travel lies in recognising it can play a fundamental part in the human experience. Beyond being a ‘commodity’, travel is increasingly becoming a means of self-discovery and personal enrichment. To redefine its role and its offering, the travel industry needs to embrace innovation, better understand the diversity of its customers and prioritise the delivery of personalised experiences.

Changing consumer priorities

Despite initial forecasts of a decline in living standards, outbound travel demand in 2023 exceeded expectations. However, the lag effect of high inflation and interest rate hikes may lead consumers to be more cautious with their holiday spending. There is likely to be a continued focus on securing value for money including booking more all-inclusive trips, holidaying closer to home, reducing the length of trips, seeking cheaper flights or planning holidays outside of the peak season. Additionally, the growing concern regarding climate change and sustainability is influencing consumer behaviour, with a significant percentage of UK adults willing to pay more to travel with companies that prioritise carbon emission reduction. Overall, the industry remains optimistic. However, operators are prepared to adapt and offer more flexible capacity based on evolving consumer demands.

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Transforming for tomorrow

Generative AI has the potential to disrupt the travel and hospitality industry, particularly in areas such as itinerary generation and hyper-personalisation. AI has the potential to redefine loyalty by focusing on personalised experiences rather than point-based programmes. AI based models are accelerating the speed at which businesses can make decisions and drive better outcomes. However, the need for quality data to feed into these models will be critical to the success of AI.

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Building resilience

The world officially experienced its hottest year on record in 2023. Between January and November 2023, the global average temperature reached 15.1°C, marking a record-breaking increase of 1.46°C from preindustrial levels.1 The progress on sustainability in the travel industry has been modest, with incremental improvements rather than a step change. A recent Environmental Impact Research report on the global impact of travel concluded that given the current climate and biodiversity crises, continuing business as usual risks breaching environmental tipping points at a time when the sector is more dependent than most on the natural world.2 While corporate responsibility and marketing play a role, customers do not consistently reward sustainable practices when making travel decisions. Institutional investors and government regulations are the key drivers for change, but the pace of change is often slow. Sustainability and ESG considerations are increasingly important to investors as businesses that demonstrate sustainability and have clear ESG plans are likely to command higher valuations and be more attractive. However, there are costs incurred in becoming more sustainable, whether it is investment in technology or processes. The cost pressures businesses are currently under impact how much investment they can make in sustainability, but equally the cost and the impact of not transitioning is also becoming increasingly clearer.

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