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Improving margins to make the most of travel’s rebound

4-minute read

Travel rebound is happening, but it’s not smooth sailing. Flight delays, cancellations and lost luggage are frustrating even the most seasoned of travelers. It’s even more frustrating for travel operators working to make the most of pent up travel demand. 

Delivering travel experiences that meet customer expectations is challenging. Countries may be welcoming back visitors but the travel infrastructure is full of gaps that operators will struggle to plug for some time. 

Even more challenging is trying to stand out among all the competition when travelers are making vacation plans. Most customers have become used to starting their buying journeys online and expect good digital experiences. Improving and optimizing experiences needs to start from the first click and continue through to post checkout to make the most impact. It requires careful consideration of what’s important to travelers.

How has the travel industry changed post-pandemic?

The travel industry is currently stretched, but it has always been vulnerable to external forces. High levels of competition as well as political and economic factors have often pulled the puppet strings of supply and demand. Despite this, at the beginning of 2020 many destinations and operators reported record numbers of tourists. This positive outlook was shattered by two years of Covid-19 travel bans and uncertainties. Now operators are being forced to scale quickly which is challenging after being in survival mode for so long. 

Resources are stretched and many operators are looking to not only grow sales, but also increase margins to make up for the losses of the past two years. For many airlines and hotel chains this may involve a strategy to increase direct sales which removes the need to pay commissions to booking agents and third party booking sites. In an industry that depends on partnerships it may be seen as a controversial move. What could make it successful is focusing on delivering consistently better experiences. This requires understanding how travel has changed and what trends influence decisions to book.     

Key trends influencing booking decisions

Blurring lines between work and travel: Remote work is enabling people to travel differently. Many are taking more time off, integrating work with vacation time or spending more time in destinations as working nomads. This is not limited to young single professionals. Many families are taking extended vacations with parents balancing putting in some work hours, homeschooling their children and spending the rest of the time exploring and experiencing destinations at leisure. When booking, these travelers often look for accommodation that can be a home away from home, with good WIFI, and a central location so family members can explore independently. Understanding what travelers are looking for and being able to learn from how they’re browsing can impact their decision to book.  

Mobile centered experiences: Many elements of travel have become contactless. For example scanning QR codes for airport or hotel check-in. Using a mobile device to search for local recommendations for places to visit or restaurants to eat out is common. This highlights the importance of creating consistent digital experiences and ensuring relevant information is easily accessible on mobile devices. Becoming the go-to source for travel related information helps create stronger customer connections which in turn can increase loyalty. Knowing what information to serve when is best achieved through ongoing experimentation.   

Greater flexibility: With flight delays and cancellations likely to remain for the short term, travelers expect to be accommodated in terms of having flexible cancellation policies. This is a departure from traditional discount pricing policies that are usually accompanied by strict cancellation and change policies. Also if they decide to lengthen or shorten their stay, they want to know it’s possible without significant penalties. How travel operators present this information and at what point in the customer journey can have a significant impact on the decision to make a booking. Knowing flexibility is an option can ease buying anxiety. When this is combined with a friction free digital experience the buying choice becomes easy. 

Social proof: Today’s travelers get inspiration from social media and travel review sites when they’re thinking about making travel plans. Rather than trying to compete, operators can create more engagement by extending their digital presence on these channels and delivering experiences that are consistent with their brand. This way, when visitors click through to the website it feels like an extension of the customer journey. Post-click optimization can identify where visitors have clicked from and then work to personalize experiences based on how they continue to browse. This creates consistency and helps build better customer experiences.

Loyalty programs: Despite a decline in frequent business travelers, many still have preferences driven by the desire to maximize earning loyalty points. Retaining loyalty, however, isn’t that simple as customer expectations based on experiences continue to increase. Understanding what travelers find useful and beneficial will be the key to growing loyalty program memberships. Delivering consistently engaging digital experiences across all channels is an essential part of retaining and acquiring loyalty. 

How to grow travel volumes and margins

Looking at these travel trends a clear theme emerges - it’s all about customer experience. No matter where or how travelers want to travel, it’s the booking experience that has the most influence on their buying decisions. The ability to create consistently engaging and friction free experiences across all channels is only possible with continual learning and ongoing optimization. There are so many choices to be considered when making a booking and so many constantly changing dynamics that influence price and availability, for example. Travel operators that can cut through the noise by serving relevant information at the right time to help guide customers through the buying journey are the ones more likely to stand out from the competition. 

Travel companies looking to increase their booking volumes, average order value (AoV) or margins need to optimize experiences throughout the entire customer journey. It’s a complex task, but one that is made easier by applying artificial intelligence (AI). AI driven experience optimization learns from browsing behaviors and uses that data to customize experiences. The biggest advantage is that optimization is not static. Learning and optimization are continuous processes that factor in constantly changing dynamics. This works to ensure that experiences served continue to be relevant even if customer preferences change.

In a world where everything is becoming about experiences, having the ability to continually adapt and personalize experiences is a key element to achieving desired outcomes. Whether it’s margins, volume of bookings or customer lifetime value (CLV), experience optimization is what can have the most impact. 

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