Industry Update
External Article23 September 2020

The travel industry turned upside down: Insights, analysis, and actions for travel executives

For many players in the travel industry, navigating the COVID-19 pandemic has been like sailing into a hurricane. Six months in, many are trying to right themselves—realizing that their navigational charts are no longer adequate.

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McKinsey & Company

Although the travel industry is no stranger to hardship and has been seriously damaged by the pandemic, we have already seen strong leadership actions that are keeping companies and their people above water while remaining focused on long-term growth. Many players have acted quickly to retain customer goodwill, tap into new sources of liquidity, and work effectively with unions to agree on voluntary redundancy programs. We have also seen innovation and a focus on customer experience. These examples illustrate the travel industry's strength that will help it chart a way forward through these challenging times.


Key insights of the report

To see how the industry has been affected by COVID-19 and how it might thrive in the future, we have synthesized ongoing Skift and McKinsey analyses and interviewed travel executives and major corporate-travel buyers. In so doing, we observed five, perhaps counterintuitive, themes:

  1. We see signs of latent demand for travel. Customers are interested in traveling again when restrictions lift, even willing to do so before a vaccine is available at scale. China—which, as of the time of writing, has effectively controlled the spread of the virus—is seeing both the leisure and business travel segments recover domestically. And led by Germany, Europe shows encouraging first signs of recovering travel demand. Other geographies, including the United States, have not yet effectively controlled the spread of the virus; even so, we see a considerable increase in searches and advance bookings.
  2. Travelers are keen to travel but feel restrained. Indeed, due to necessary public-health measures and safety precautions—such as quarantines, closures, and other restrictions—the leisure space may be curbed by the inability to do anything meaningful at a destination. Similarly, many business travelers who are ready to fly again may be limited by corporate travel policies and companies' understandable focus on duty-of-care obligations to employees.
  3. The working-from-anywhere trend could permanently blur the lines between leisure and business travel. Digital nomads and "bleisure" travel predate COVID-19. However, the pandemic and the rise of remote work seem to accelerate growth of these travel segments. Players across the travel value chain—including destinations, corporate travel managers and hotels —need to think through key implications.
  4. Nonprice factors have become more important to customers. The industry needs to cover other terrain before "demand stimulating" its way out of the crisis and instead restore traveler confidence. The travel industry is only as strong as its weakest link, so customers need to be comfortable with all touchpoints in their journeys.
  5. Self-reported sentiments may not accurately reflect preferences or behavior, despite being easy to gather, and especially in the depth of a crisis. For this reason, travel companies cannot rely only on stated preferences; they need to improve the way they keep a pulse on travelers' actions through leading indicators.

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