Although the onset of the coronavirus pandemic sent all segments of the travel industry into a tailspin, the crisis has also provided some clarity into how certain sectors perceive their business.
Take, for example, airlines, which for years have debated whether travelers care most about price, schedule or any other number of factors.
According to new report from CarTrawler, produced in partnership with IdeaWorks Company, the COVID-19 pandemic has changed the airline industry in lasting ways and has, crucially, brought to light the one key product carriers need to focus on: destination.
“Prior to the pandemic, we assumed the travel industry was an artesian well … forever nourishing an ever-growing supply of planes and hotels. The pandemic has taught us that competition does exist for the air travel spending by leisure and business travelers,” the report states.
“That’s why the destination and the emotional value of ‘being there’ are crucial.”
The report, titled Transformation 2021: The Airline Industry Has Changed – Convenience and Predictability Are Missing, identifies six ways the airline business has changed and why convenience and predictability are chief among consumer demands as they get from point A to B.
1. Network airlines will focus on leisure travel
According to the report, recently announced long-haul routes, including United Airlines routes to vacation destinations in Spain, Portugal and Norway, indicate airlines are embracing leisure travel.
Additionally, aircraft cabins are being designed with less space allocated for business class seating, aligning with the belief that a portion of business trips will be replaced by technology.
To capture the leisure audience, airlines are recommended to move away from transaction-based websites – where consumers have to input their origin, destination and travel dates – and toward recommendation engines that can better engage consumers.
2. Business will be come more à la carte and premium economy will grow
The decline of business travel will encourage airlines to promote business class to leisure travelers, the report continues.
Ongoing economic difficulties will also make some corporate clients sensitive to the expense of traditional business class fares.
By creating an à la carte “basic business” fare, airlines can attract both traditional full-service business class as well as travelers encouraged to spend less.
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Examples of airlines with such offerings include Finnair, which has a Business Light fare that charges for checked baggage, seat assignment, lounge access and internet access, and Emirates, which has a Business Special fare that charges passengers a fee for lounge access.
Additionally, premium economy will become an increasingly popular choice among upscale leisure travelers and business travelers on a budget.
3. Airlines will be enticed by branded fares and dynamic pricing
With airline ancillary revenue expected to increase to $65.8 billion worldwide in 2021, airlines will pay more attention to branded fares.
Using an approach of three branded fares – good, better and best – helps meet consumer preference for a “middle” choice when considering a purchase.
According to the report, hitting the right combination of reasonable price steps, amenity listing and a good retail display has approximately 55% of bookers selecting the “better,” or middle, choice, while about 5% will opt for maximum convenience.
“That’s the magic of branded fares – the inherent ability to encourage the majority of shoppers to spend a premium above the lowest price,” the report states.
Branded fares should include key amenities and can be followed by a limited number of à la carte choices in the booking path.
4. More effort will be made to improve buy-on-board food
Although the pandemic saw many carriers do away with or limit their food and beverage amenities, returning the offerings will indicate a “return to normal” to consumers.
Lufthansa’s key airlines introduced a buy-on-board option to its European network that offers local consumer brands to promote fresh and sustainable food.
The “basic business” fares referenced above could also lead to à la carte options in the business cabin.
5. Carriers need to provide protection from uncertainty
As the pandemic continues, many consumers remain confused and cautious about COVID-19 risks, travel insurance and airlines policies.
While many airlines promised refunds, travel credits or the waiver of reservation change fees during the early stages of the pandemic, most of those protections have receded and the burden has shifted back to consumers.
Unsurprisingly, confused and cautious consumers are reluctant to book air travel, and they’re looking to airlines to step forward and provide a nudge to travel.
According to the report, the industry should be playing the long game, deploying a strategy that anticipates there will be bumps on the road to recovery.
Discontinuing change fees, or making fees less punitive, has proven popular with consumers, as has providing full travel credits or refunds for cancellations.
The provision of travel insurance for all passengers is also an attractive method to mitigate the uncertainty of pandemic travel.
6. Border closures are here to stay
Finally, airlines must be ready for future border closures as the pandemic continues.
“This ‘light switch’ approach of turning off international travel, and then flipping it back on again, is something new. It represents immense power, and with power comes responsibility. But power can also be abused,” the report states.
“This reinforces the need to protect consumers from uncertainty. The world’s airline and travel industries must work hard to limit border closures as a tool of last resort, because the ‘destination’ represents the strongest feature of [airlines’] product.”