Preparing for the return of travel in a post-COVID world
No industry has been harder hit by COVID-19 than travel and tourism. In 2020, the global industry lost an estimated US$2.4 trillion and in 2021 a further US$1.8 trillion could go1. Yet, there have been pockets of activity and, as the pandemic recedes, opportunities are emerging – both for travel companies and for the payment industry.
"We see evidence of pent-up demand for travel. Consumers are desperate to get on the road again, and industry players that tap into the opportunities are grabbing share." This is the view of Andrew van der Feltz, Global Senior Director of Business Development at Expedia Group Media Solutions. Drawing on search and booking data from the Expedia platforms, he describes a pattern of fluctuations, with sudden spikes of activity driven by positive announcements on, for example, vaccine rollouts or the loosening of restrictions. Over the past year, sudden week-on-week increases of 600% or so have not been uncommon2, demonstrating that the moment consumers see an opportunity to travel, masses of them will grab it – and grab it fast.
The challenge for payment providers is to be poised and ready with relevant propositions that tap into post COVID-19 consumer needs, and a flow of campaigns and communications that are appropriate. So what trends are emerging as the pandemic recedes? And what are the implications for financial institutions?
Drawing on recent analysis and payment behaviours, Visa has identified four main trends:
COVID-19 anxieties are prevalent
Leisure travellers have been favouring those facilities and destinations they perceive to be safe and sanitary. For example, Expedia Group data suggests that ‘cleanliness’ has become an important consideration for around a third of leisure travellers, double what it was pre-pandemic. Also, over the past year, overall safety, cleanliness and comfort have been among the main considerations when consumers search for flights on Expedia Group’s websites3. The balance may now be shifting back towards more traditional priorities like cost and schedule, but we can probably expect a long tail of COVID-19 related anxieties to remain a factor affecting buying decisions.
Payment behaviours are also indicative of this sense of unease, with a clear preference for card payments over cash, a continued increase in contactless transactions, and an abandonment of foreign exchange currency facilities – in the UK, for example, leading travel money providers such as the Post Office and No1 Currency all halted their services.
New booking behaviours are endemic
Traveller behaviours have become more opportunistic, with bookings being made much closer to the travel date, especially for domestic travel. At the same time, uncertainty about future travel restrictions and quarantine requirements has led to a strong preference for flexible bookings with the option for refunds.
Florian Bach, Vice President of Product Management at Barclaycard, confirms the extent of the changes. “In Germany, where I am based, most travel bookings are being made less than a month in advance, compared to up to a year in advance during pre-pandemic times. Meanwhile, in May 2021, bookings for package holidays had grown to exceed those from May 2019, suggesting a preference for those travel options with the highest levels of perceived flexibility and security.”
From a payment perspective, this means card protections and zero liability have become important assets, as has a streamlined dispute process. And, for premium products, travel insurance and global travel assistance services ought to be highlighted in campaigns and communications.
Stay-cations and alternative modes of travel have come to the fore
Partly out of necessity, there has been a surge in domestic tourism and, even where travellers do cross borders, they haven’t been going too far afield. In June, for example, Visa analysis suggests that the top airline destination being booked by French travellers was France itself, followed by nearby countries such as Italy and Spain4. Similarly, there has been a trend away from air travel and towards alternatives such as car rental and train travel.
The implications here for payments are that in travel-related communications, these new consumer preferences around domestic travel and ground-based travel need to be reflected in the messaging and imagery.
Sustainability concerns have increased
The pandemic has also accelerated the interest in sustainability issues. The need for sustainable practices was already getting highlighted pre-COVID-19 but are now in even sharper focus. For example, there has been a rediscovery of local travel options. A new Euromonitor report suggests that sustainability will be key to the recovery – as post-COVID-19 travellers become even more engaged with the topic and resist a return to the traditional mass tourism model5.
The recovery looks to be non-linear and lumpy: what does this means for you?
The bigger questions relate to the next phases of the recovery. Should we envisage a return to old behaviours? And when can we anticipate a return to pre-pandemic spending levels?
“Yes, a travel and tourism recovery is on its way, but it is bound to be non-linear and lumpy,” says Sam Sancheti, Head of Cross-Border Payments for Visa in Europe. “There will continue to be fluctuations, some travel types will perform much better than others, some new trends will stick and, while a partial recovery looks likely for 2021, most of the tourism experts believe that a full return to pre-pandemic levels of travel is at least two years away.”
To give an indication of the likely long-term shifts, data from Tourism Economics suggests that, by 2024, international leisure travel will be 10% above 2019 levels, but domestic leisure travel will be 30% up. By contrast, international business travel will still be down 15%, with domestic business travel 15% up6.
Under these circumstances, the advice is threefold:
- Be ready – by having the right monitoring in place to spot and respond to emerging trends
- Be relevant – by ensuring your travel-related propositions remain fit for purpose
- Be rigorous – by checking your communications and campaigns convey the right messages and hit the right notes
The dividends can be substantial, both in terms of monetary returns but also strategic significance. This is due to the value of consumers who actively use their Visa products when travelling. Based on Visa data, they tend to be 1.6 times more active than domestic-only consumers, account for six-times more spend, and are eight-times more likely to be top-of-wallet7.
Ultimately, the key message is that even a partial travel recovery in 2021 represents a significant opportunity and is imperative for the industry.
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Case studies, comparisons, statistics, research and recommendations are provided “AS IS” and intended for informational purposes only and should not be relied upon for operational, marketing, legal, technical, tax, financial or other advice. Visa Inc. neither makes any warranty or representation as to the completeness or accuracy of the information within this document, nor assumes any liability or responsibility that may result from reliance on such information. The Information contained herein is not intended as investment or legal advice, and readers are encouraged to seek the advice of a competent professional where such advice is required.
1 Global economy could lose over $4 trillion due to COVID-19 impact on tourism, UN World Tourism Organization, 30 June 2021
2 Expedia Group data, room night bookings from UK to European destination X Q3 2020 – Q4 2020
3 Voice of the Customer modelling of Expedia Group data, Clarabridge – Q1 2021
4 Based on analysis from the Visa Travel Bounceback Dashboard, which provides near-real-time insights into booking behaviours
5 Sustainable Travel Index: Embracing a Green Transformation for Recovery in Tourism, Euromonitor International, March 2021
6 Global Travel Service: Global Highlights & Risks, December 2020, Tourism Economics
7 VisaNet data based on 7 European markets CY2019
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