On Wednesday, MMGY Global CEO Clayton Reid presented analysis of
economic and survey data that leads him to believe the travel industry is
headed for a recession. Today, he offers thoughts on how travel brands can prepare
for what he sees as an inevitable downturn.
What are the opportunities to get out in front of a travel recession?
1. Invest in
pro‐growth and tax policy that supports travel. I recently heard Senator
Rick Scott speak about how he used travel to buoy a struggling economy as the
governor of Florida. It was about investment in travel marketing and
infrastructure, with a confidence that travel is a revenue enhancement tool,
not a cost to taxpayers.
I am hopeful that states and countries will adopt this
same mentality. Most importantly, it is crucial that Brand USA and U.S. Travel
continue to be fully funded to drive business into the United States travel
economy. As Roger Dow of U.S. Travel says, “Travel is trade and travel is
2. Use of data will
produce winners and losers. Each day there is a reservoir of data points
collected about how consumers shop, travel and transact, and the potential is
now here to not only understand much more about individuals but to also predict
how they will travel in the future.
As an increasing number of suppliers and
intermediaries chase a reduced market demand, who will win the battle to attach
data and machine learning to closed user groups (CUGs) and segments of would‐be
customers with specific travel needs and who seek relevant product offers?
is in the best position to provide unique content, rate‐appropriate offers and
a perfectly timed customer connection that then connects to a simple
Our bet: Amazon and Google will be at the top of the food
chain in the U.S., and Ctrip, Alibaba and WeChat will be at the top in the
In a new environment where data and technology require huge
investments, we would suspect this means fewer companies have more consolidated
control of the market, not more intermediation by smaller players. Voice and
visual recognition combined with personal assistant technology such as
Microsoft’s Xiaoice or Google’s Allo have the potential to completely change
the way people consume information and to shift loyalty away from consumer
brands to loyalty of personalized technology and the decisions made by
3. Invest in brand
voice. Although there is evidence that personal technology will begin to
process more and more of our decision‐making, brand is still important. Before
you accuse me of being old school, hear me out.
The truth is that we have
reached a level of price parity in most aspects of the travel distribution
path, and even where we still have price disparity, strong brands can better
overcome the proposition of a third party poaching their supply. Search, meta
and CRM platforms have created ubiquity for pricing and product, and giant
aggregators such as Booking Holdings have moved to a “we have something for
So then how do suppliers win on the margins? We would argue
that strong brands shape behavior that not only differentiates beyond price and
product, but that good brands also shift share from weaker competitors and
protect themselves against the need for deep discounting.
Subscribe to our newsletter below
In our research, consumers tell us they want to attach a
narrative to the travel experiences and brands with which they associate. And
sometimes that brand narrative can be about price or owning a discount space –
after all, that is how Southwest Airlines was born and how it still today
trades on that position, even when it is not the discount supplier many believe
it to be.
Brand as a price position is also fine for operators such as Spirit
Airlines or CheapCaribbean.com, but it is most definitely not for many other
parts of the market. Storytelling and established brand attributes can mean
pricing strength, higher margins, increased loyalty and advocacy for customer
With our own global clients, such as Lufthansa or Princess Cruises,
we know that investing in brand voice drives business and that a platform
combining smart pricing strategy and product merchandising with branded content
4. Rethink what
loyalty means to travelers. Everyone seems to be talking about the recent
launch of Marriott’s Bonvoy, mostly on the merits of the name and rollout of
the marketing campaign. But I think that misses the point.
The real power in
the consolidation of Starwood and Marriott is the data and the ways in which Marriott
can learn and engage with its guests. The question should be whether Marriott
can capitalize on the industry’s largest loyalty base as an enterprise CRM
Interestingly, our research shows that travelers are increasingly
putting more emphasis on social channel validation than points accrual, and
more than three‐fourths of airline loyalty members would join a social loyalty
program that rewards brand behavior in ways other than points.
Twenty‐four percent of travelers in our study are making decisions
based on social influencer content, and a recent 60 Minutes feature demonstrated how powerful social validation is
becoming in shaping purchase behavior.
So, can loyalty programs such as Bonvoy
close the gap between these factors?
It does stand to reason that the traditional approach of
signing up anyone and everyone for a travel loyalty program does not fully
appreciate the reduced value of points in the decision‐making process. Look at
the disparity between enrolled members of hotel programs versus active ones.
Going forward, it must be more about connecting program
membership to brand engagement, valuable and relevant offers and granular
segmentation to build a relevant base of membership. Hotels, attractions,
cruise and rental car suppliers are now working on new CRM platforms that
address this reality, but many have been slow to connect to other channels such
as social, search behavior and mobile proximity.
And the OTAs have proven to be
much more advanced than the supplier community in developing mobile interfaces
that make it easy to shop and transact, proving that a loyalty program, per se,
will not carry the day over convenience and accessibility.
5. We are moving away
from a reliance on central website platforms to flexible and fast content. The days of suppliers and destinations gathering and curating aggregated
information on one massive website platform are quickly coming to an end.
Although desktop website behavior still converts traffic and will play a
diminished but relevant role for the foreseeable future, the industry must move
to more diverse e‐commerce ecosystems that take into account mobile, television
commerce (T‐commerce) and augmented/virtual reality.
In Asia, the concept of platform website
commerce is almost entirely dead. Consumers there are moving to native apps,
social platforms, content engagement in smaller mobile web environments and
third‐party shopping bots.
The need to invest in enterprise websites is
analogous to having a battleship in an air war. Smart travel marketers would be
better off standing up content teams, developing major retail alliances and
investing in CRM platforms that integrate with social and booking systems.
These types of investments should replace the piling up of more central,
encyclopedia-like website content that uses as a predicate for success metrics
such as “time spent on site.” MMGY Global teams are, instead, working on media
approaches that allow shopping and booking to take place entirely outside of
the main client website but still within the client booking environment.
If China has the right idea (where Ctrip and Fliggy own the
market but do so in an environment dominated by social platforms), the
direction to go is a recognition that travelers want more content through their
own networks and in a way that enables fast, easy access and sharing.
Have no fear - but have a little bit of anxiety
It’s not Armageddon. Travel will continue to be one of the
most important industries on earth, and those who believe a recession will come
later, not sooner, could prove correct.
ForwardKeys, as an example, just
published a report that suggests there is still strength in the U.K. travel
market. And at their annual summit this month, WTTC announced that 2018 was the
eighth consecutive year that growth in travel and tourism exceeded global GDP growth.
But growth does not last forever, and we think now is the
time to prepare for some tougher times. If history is any indication, a new era
of challenges will produce more innovation and more opportunity for the
companies that recognize the challenge and get out in front of what is to come.
Making sure you have a healthy respect for these coming changes can ensure you
face them with your eyes wide open.