Read today’s newspaper or turn on the six o’clock news and you’ll hear about the difficulties of financial life. The Chancellor’s Autumn Statement predicted more doom and gloom for businesses in the UK, with unemployment set to increase and those people set to retire having to wait to the age of 67 before they receive their pensions. Merry Christmas to you too, Mr Osborne!
But how has the travel industry fared throughout 2011? Bearing in mind that when the UK ‘Guardian’ newspaper ran a survey on the health of the travel industry in October 2010, 74.3% of people said the industry would not bounce back in 2011, optimism from the public was not high. However, if the figures from the ‘ITB World Travel Trends Report 2011/2012’ are to be believed, the industry has survived a difficult year. The majority of people in 13 European countries surveyed said they either planned to travel as much, or more, in 2012 as they had in 2011.
So what has been going on in the world that might have impacted travel?
Let’s start at the end of 2010. The combination of air traffic controllers going on strike and heavy snow caused Ryanair to cancel 3,000 flights in the final three months of the year, resulting in a loss of £8.8m for the quarter. The snow continued, forcing Liverpool’s John Lennon Airport and Leeds Bradford Airport to shut temporarily in January – not a great start for travellers or travel companies in the New Year.
Sadly, the problems for the industry did not melt away with the snow. The so-called ‘Arab Spring’ – the wave of revolutionary activity, protests and demonstrations in the Arab world that began in December 2010 – caused significant disruption to travellers and travel companies throughout 2011, particularly regarding Egypt and Tunisia. The collapse of Thomas Cook’s share price in November highlighted not just the continuing economic challenges to the travel industry but also a change in the way holidaymakers are booking their breaks. More and more people are shopping online for holidays now, to the detriment of traditional high street-based operators. It’s also becoming more commonplace for holidaymakers to book close to their departure date in a bid to find the most competitive deal, but this tactic deprives operators of much-needed working capital. Additionally we saw American Airlines struggle as their parent company AMR Corp. filed for Chapter 11 bankruptcy reorganisation at the end of November, meaning everyone involved with the airline, from passengers to staff, faces an uncertain end to 2011 while the company tries to resolve the situation.
Without doubt, therefore, 2011 saw high-profile problems and high-profile casualties in the travel industry. That said, we at Collinson Latitude remain optimistic about the year ahead, especially when it comes to ancillary revenues and adding value to customers’ travel experiences. Given that 2011 saw a 43.8% increase in the value of ancillary revenue for airlines globally, compared to 2010, with an estimated value of $32.5bn, based on research conducted by consulting organisation IdeaWorks, 2012 looks to be an exciting year for this industry. After all, the continued economic challenges make loyalty more important than ever before to businesses and value more important to customers. A survey we conducted in June this year showed how much businesses value the option of offering add-ons to customers, with 61% of respondents believing these enhancements are vital in standing out from the competition. Our survey results announced in late November this year show 49% of travel industry bosses see cross-selling and up-selling through the booking process as the probable fastest growth area for ancillary revenues in 2012.
If we are to make the most of the opportunities within the industry, companies must be aware of the changing market and how consumer behaviour and expectations are changing, investing to deliver the best possible, personalised customer experiences. We are seeing an increasing shift toward paid-for loyalty programmes and memberships, highlighting the importance of value, choice and relevance to customers. Members of a loyalty programme need to have access to a wide range of relevant rewards if they are going to remain loyal. Critically, companies must maximise the potential of customer data insight, targeting rewards, promotions, benefits and services to the interests of each individual customer.
2011 may have been mixed for the travel industry, but by remaining adaptable and forward-thinking, and staying ahead of political and economic pressures, the industry has the opportunity to make 2012 a happy New Year.
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