Summer 2021 may be the summer of fun, depending on whether you’re vaccinated and where you plan to go. At a high level, the world is reopening, and consumers are eager to satisfy the pent-up wanderlust that has remained dormant for the last 15 months. We’re ready to see friends and family, and to see new vistas.
But is the travel industry ready? Specifically: Are the booking platforms and travel operators prepared to meet both consumers’ demand and their newfound fondness for everything digital?
In some cases, as evidenced by PYMNTS’ Payments Innovation Readiness Playbook, many hospitality firms lost as much as 70 percent of their bookings, while some digital brands such as Airbnb were able to pivot and adapt to a rapidly changing landscape where work, fun and life all converged into one.
As HomeExchange CEO Emmanuel Arnaud and Spreedly CEO Justin Benson told Karen Webster in a special episode of On the Agenda, while we all went into lockdown together in the dark days of 2020, so to speak, the reopenings and the recovery of travel will look a bit uneven.
Benson said that operators are planning for surges, and have already been seeing some uptick in demand from end consumers. But large key markers — Europe, Latin America and India among them — have been rocked by new coronavirus waves and variants, and some lockdowns … enough so that the recovery has been uneven.
“It’s been two steps forward and then maybe one step back,” Benson said, though transaction volume and demand across his own firm’s clients has been markedly higher in April compared to February. There’s no reason to think that things will slow down in May, he noted, as demand for travel from both consumers and businesses has been strong.
From HomeExchange’s point of view, Arnaud said, while the U.S. has been leading the charge in terms of vaccinations, and the bulk of COVID’s impact is in the rearview mirror, other regions are still bracing for new waves.
As Arnaud and Benson noted, it’s true that we all went into COVID-19 together, globally speaking. But the emergence, the reopenings and the travel readiness have been anything but uniform — and that means the readiness of the travel operators themselves is anything but uniform.
And when consumers do take their trips, parts of the journey — specifically, payments — will be altered. Consumers are now habituated to be digital-first, to use QR codes and mobile wallets, all in a bid to be as contactless as possible and in control of the experience from end to end.
Along the way, said Arnaud and Benson, as operators weather the storm and accelerate their own recovery, companies need to think more proactively about how payments can be embedded in the travel experience itself — where travel operators can deliver value-added services that extend beyond simply booking and buying the tickets.
Demographics — And Staying Close To Home
Within the initial indications of travel’s return, they said, as older citizens are getting vaccinated, younger family members are taking the plunge and going out to see them — by plane, perhaps, though both Arnaud and Benson noted there’s been a marked upswing in demand for rental cars.
Right now, according to Arnaud, “demand is going to be local or domestic. It’s going to be higher for places and occasions where you can be in a private area. If you think of things like home exchanging or renting a house, chances are you’re going to see greater demand than you would for going to a hotel or going on a cruise, for instance, where there’s a lot of shared spaces.”
As a result, travel plans have been effectively short-term and a bit closer to home. Consumers are still skittish about booking things too far in advance or too far off familiar terrain, as they are leery about having to cancel things in a repeat of what happened last year.
Reading The Fine Print
Arnaud and Benson stated that the expectations around payments are changing as consumers are reemerging and booking. But as has been seen with so many other aspects of life in the wake of the pandemic, consumers want to control things digitally from their mobile devices (which means, of course, not having to touch other things on their journeys). Consumers have gotten used to QR codes and tap to pay, and other means of transacting that are less tactile.
As to the readiness of the operators and platforms to meet the consumers where they want to be met, and to allow them to pay the way they want to pay — well, that’s an open question.
As Arnaud stated, travel operators are a diverse crowd. On one side of the equation might lie a digital-only platform such as HomeExchange, and on the other side of the spectrum lies the hotel, the guided tour, the physical shop … where physical contact may be part of the norm. Levels of preparedness may vary — but, he noted, everyone’s headed in the same direction: toward digital and contactless, of course. “Those are the only ways you can make money today,” said Arnaud.
Done well, rethinking the experience around payments can drive not just the recovery of travel industry service providers, but their transformation as well. Buy now, pay later (BNPL) has been taking eCommerce by storm and may open up opportunities in travel (especially for big-ticket items), or layer in insurance paid for in installments.
But, as Benson noted, payments can be used in a proactive manner that lets travelers have security through payment flows, giving them the ability to change their minds when cancellations and refunds are part of the overall “package,” so they won’t be left holding the proverbial bag. Ease in getting refunds may have the benefit of boosting travel firms’ incremental sales.
“The question we’re getting all the time is about cancellation policies,” said Arnaud. “So many people have been burned that they want it to be an easy part of the experience. There are opportunities to make more revenue by selling different types of cancellation policies or insurance. You may want to book now without any cancellation, or if you want it to be flexible the same way you see it done for airplanes, you can imagine the same thing for accommodations or even restaurants … these are ways for companies to make some upside.”
Arnaud pointed to subscriptions as one payments model that might get more scrutiny from providers moving forward — particularly flexible subscriptions.
Changing the payment flows and modernizing the tech stack, of course, takes time — and money.
Drilling down a bit, said Benson, larger firms have been able to invest the capital needed to upgrade tech infrastructure and modernize their apps and payments offerings (Google Maps, for example, has been embedding hotels and availability into that function). Smaller companies have been pivoting toward partnerships with solutions providers.
Many companies have been trying to deal with the challenges of the virus while contending with the demands of 3DS2, the authentication protocol that confirms digital identity during checkout. Merchants will have to adapt to these technical and regulatory changes — otherwise, they’ll face high declines (or won’t be able to, for example, get up and running with new payment schemes, such as Brazil’s PIX instant payment offering).
Time is of the essence, of course. While other verticals — clothing and restaurants, big-box retailers — all swerved to adjust to the new, digital age of commerce, the travel industry was left to the side, mothballed, you might say, as no demand was there, and the revenue and cash flows were not materializing to help fund tech investments.
No one knows how permanent the travel shift is, as it had been in other areas of commerce because the demand is not (yet) steering companies in a clear direction — nor are they indicating how much they can invest as we move quickly toward the peak summer travel season. The aggregators, remarked Benson, have the scale and resources to make those investments. Perhaps down the line, there will be consolidation in the travel space, he said.
Said Arnaud, firms yearning to transition can take a cue from what digitally native platforms are doing in their own bids to create end-to-end experiences. Or, he said: “You can buy some businesses today with valuations, which will be interesting and attractive compared to the ones that you might get in in 2023, for instance.”
Selected by EFXA