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Deloitte Analysts Weigh In on the Future of the Travel Industry

Deloitte Analysts Weigh In on the Future of the Travel Industry

Deloitte recently released its 2018 Travel and Hospitality Industry Outlook on the state of restaurants, hotels, and airlines and how these industries will perform this year. Two leaders of Deloitte’s travel, hospitality, and leisure sector team—Vice Chairman and U.S. Leader Guy Langford, and Manager and Research Leader Marcello Gasdia—discuss the findings and weigh in on the future of travel.

 

According to Deloitte’s outlook, each researched segment will have a positive outcome or a higher percentage for 2018. What do travel and hospitality industries have to be optimistic about?

Langford: There’s consistency and focus on an increasing level of personalization that’s happening in all facets of travel and hospitality. Blending digital with physical and talent with technology, there will be an enhanced, personalized experience. Hospitality is embracing a more health-conscious traveler, and the travel sector is becoming more resilient to natural and manmade disasters. This resilience is matched with prudent risk management from an operator and individual’s perspective.

Disruptions are shaping the industry, like ground transportation versus ridesharing and OTAs versus direct bookings. The reality is the beneficiary of these disruptions is the consumer. It’s optimistic because the customer is more resilient in their behaviors and will benefit from interesting dynamics that are changing the travel ecosystem.

Gasdia: Markets make decisions considering the consumer. For example, the airline industry’s high-spend international and domestic travel is experiencing an intense period of competition and pressure from low-cost carriers. This is keeping airline costs fair and honest for the consumer, which will have a positive impact on hotels. If a customer is planning a 2-week trip to Europe with high airline costs, the entire trip might get canceled or become an in-country road trip. But if they can save on flights, that trip becomes a possible reality, and that’s positive for the hotel industry. There are ups and down across the market, but the consumer and hotel industry will continue to be benefactors of that trend.

 

On the other end, will there be any downturn in these segments in 2018?

Langford: Short-term, there aren’t specifically factors that point towards a downturn. Hospitality is constant supply and demand, and various markets will have times where the supply and demand attributes can create downward pressure on rates. There’s vulnerability based on exchanged rates by the global traveler, which makes the United States a relatively attractive destination depending on currency. Fuel prices and consumer choices to travel by ground or air are also causes for vulnerability. Individual factors will impact travel globally, but negative macro-development has not been found in [Deloitte’s] outlook.

 

An interesting takeaway was that consumers are spending 44 percent of food budgets dining out. How is this going to affect hotels, many of which have on-site restaurants?

Gasdia: Technology, including ease of delivery, is changing the game in the restaurant industry, and this is beneficial for the customer. Potentially one of the biggest trends is food delivery in hospitality and restaurants. Robotics and animation will potentially drive this forward. In terms of budget percentage spent on dining out, customers want prepared and delivered food instead of traditional grocery shopping, and trends suggest that this will continue. Many of the big players in the restaurant industry are investing in technology and resources for automation and delivery. The big restaurant players have their eyes on changing the future of food delivery, and signals suggest that this will remain a trend.

 

How can travel industries implement emerging technologies and how will those be a driving force in 2018?

Gasdia: The travel industry is at a turning point. Over the past few years, travel businesses were introduced to technologies like artificial intelligence and Internet of Things among others, but these nascent technologies have been continuously researched and not yet implemented. This will be the year where consumers start to feel the benefit of these technologies, and businesses can have the assurance to start personalization with pilot programs.

While there are some brands that do personalization very well, it’s still complex. When a product is the experience, it needs to be personalized in real time, and maturing communication technologies like AI and IOT are beginning to be piloted in the travel industry. Airlines are providing travelers with push notifications of the journey and relevant data that are personalized as well as check-in recognition programs that send customer data to front-line employees. Travel businesses are optimistically providing ways that this communication will not lose the human touch. When you empower your employees with data, they are given the tools to create more personalized experiences.

Langford: Other examples include technology being implemented in real time, like picking a hotel room through an app or digital keys. One of the larger brands will soon give the ability to make room customizations—like temperature, lighting, and humidity—through an app. Enabling the consumer to customize that technology provides personalization.

 

If there is one key takeaway from Deloitte’s 2018 outlook what would that be?

Langford: The customer is going to be the winner. Ultimately, the focus on changing preferences through personalization, technology, or convergence of travel ecosystems will be a positive change. With a lot of interesting forces in play right now, there are many opportunities for different market segments, and while that is true, the customer is going to be more relevant in the next chapter of travel.

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