Travel Industry Boards Prepare for the Roaring ’20s

junho 23, 2021

The travel industry is preparing for a year of travel “unlike any other,” according to a new survey from payments company Flywire. The findings show that consumers will spend more on travel than ever before and they’re planning to take longer trips than before the pandemic.

Similarly, they’ll also be flocking to shops and restaurants.

Now, in order to accommodate an influx of customers as many parts of the world still grapple with the pandemic, companies in the travel, hospitality and entertainment industries are preparing for new costs and changes to strategy and operations. Whether it’s hiring more people beyond skeleton crews, allocating more dollars to marketing or investing more in health and safety, boards are closely monitoring the return to travel.

“In general, there’s a lot of pent-up demand and bookings for the [airline] industry,” says Ben Baldanza, CEO of advisory firm Diemacher and board director at JetBlue Airways and Six Flags Entertainment Corp. “Many airlines are adding a lot of capacity for the summer, many back to 2019 levels. It’s going to be, principally, a leisure-based economy this summer.”

According to the Flywire survey, 70% of consumers will spend more money on travel in 2022 than they have in the past five years, and 78% say the money they saved not traveling during the pandemic will boost their travel budget this year and next. The Flywire survey also found that 65% of travelers say their first vacation will be “much longer than their typical vacation.”

Travel-reliant industries like airlines are gearing up for the influx. However, Baldanza says it’s low risk for airlines to prepare for full capacity, because “they can pull some of that back. The last thing they want is to have more passengers than seats; they’d rather have more seats than passengers.”

He doesn’t expect the cost of cleaning airplanes to increase greatly compared to earlier in the pandemic. The planes had to be cleaned entirely even when there were fewer passengers, he says. While sanitizing wipes will be handed out to more customers, he says those costs will “probably be offset” by less catering being done on the airplane.

“I’m not gonna say it’s not an expense, but it’s almost become the cost of doing business,” Baldanza says.

One concern that boards in the airline industry might have is the reliance on other industries. For example, he says that consumers might be willing to travel to another location, but if that destination has too few restaurants open or rental cars available, that could limit travel broadly.

“The return of airline demand is no longer an airline problem,” Baldanza says. “I’m sure it’s getting better, but there are things airlines can’t control that could have a real effect on airline demand, and that presents a risk.”

Because most airlines rotated their pilots throughout the pandemic to keep them current on FAA standards, there shouldn’t be a shortage of pilots this summer, according to Baldanza.

The major airlines received support from payroll support legislation throughout the course of the pandemic, which allowed them to keep many of their crew members on staff.

In the hospitality industry, hotels and restaurants generally saw more furloughs and layoffs.

“From a human capital perspective, it’s very difficult, because we had really slimmed down and a lot of people were furloughed,” says Mia Sodeyama Mulrennan, chief people officer and chief human resources officer at Maryland-based Star Restaurant Group. “I agree with the social psychologists who say that on some level it will be like the Roaring ’20s and everyone will want to travel. Everyone’s going to want to go out.”

Mulrennan, who is a member of the board of advisors at Agora Brands Group, says her chain of restaurants was fortunate to “pivot and thrive” in some of its locations by adding the option of curbside cocktails on top of “a huge amount of takeout business.”

“For those that survived, right now we’re just trying to find the talent,” she says, noting the shortage of talent among hospitality workers with such high demand.
The onboarding process will be critical for companies, according to Mulrennan, noting that selecting, engaging and motivating “are such important components as to whether or not someone will actually stay with [the company].”

“Onboarding is the best investment organizations can make right now,” Mulrennan says.

Indeed, the U.S. Chamber of Commerce Foundation and the Society for Human Resource Management released research in late May that found “employers have an appetite for further talent investment and employer collaborations.”

“Even in a time of significant economic and labor market volatility, employers have maintained their investment in and commitment to their workers — with many eager to increase it,” Jason Tyszko, vice president of the U.S. Chamber Foundation’s Center for Education and Workforce, said in a press release.

Consumer Behavior
Another area of spending among travel and hospitality companies is advertising to attract or retain customers.

Matt Voda, CEO of OptiMine Software, advises such companies as Choice Hotels, Twitter, Overstock.com, Pandora and Verizon on their marketing strategies. He says there are challenges for companies as they prepare for post-pandemic spending.

When it comes to companies in the travel industry, not all brands are preparing in the same way, Voda says. For instance, he says companies with “strong loyalty programs” such as The Walt Disney Co. or resorts “are probably going to invest more in marketing this year.”

Specifically, companies that cater more to consumers versus business travelers are starting to invest more heavily, according to Voda, since business travel will take more time to get back to pre-pandemic levels.

“In general, travel brands are loosening up their wallets,” Voda says.

However, he explains that companies are being cautious with their marketing dollars, because they don’t want to spend too heavily on “chasing a finite set of consumers who already made the decision to travel.” There is a group of consumers who are “on the sidelines,” and companies could find it difficult to convince them to book a trip.

Still, consumer behaviors can be difficult to predict right now. Voda says companies and their boards should continue to watch what transpires over the summer and could feel less cash-strapped “as they see more and more evidence of that discretionary decision-making.”

In the hotel industry, there will be many changes. Boards should be mindful that their companies may need to invest more in technology, says Andrea Grigg, global head of hotel asset management at real estate services firm JLL.

For example, many hotels created an experience during the pandemic where customers bypassed the check-in desk and checked into their rooms via an app.
Hotels also saved a fair amount of money by offering housekeeping services only at the time of a guest’s check-in and checkout, Grigg says. Some hotels could continue this level of service as a cost-saving measure. Hotels will also rethink whether food and beverage options offered pre-pandemic make sense to continue. If a hotel restaurant was not profitable before the pandemic, hotel operators likely will be looking at other options, especially since many consumers are now comfortable ordering from delivery companies such as UberEats, according to Grigg.

The bottom line, Grigg says, is that companies will have to navigate these changes in behavior. They need to observe and recognize that the space is going to be different.

“We’re still in uncharted territory, and navigating what’s coming to us will be challenging one way or another,” she says, noting that planning is key, as is opening slowly.

Additionally, she says that investors are aware that “most hotels are coming out of 14 months of negative profitability” but will be looking at what companies are doing with their operations strategy and their cash reserves “until we see a more steady pipeline of business coming to our properties.”

Source: https://www.agendaweek.com/c/3194954/403464/travel_industry_boards_prepare_roaring