WHICH TRAVELLERS WILL RETURN FIRST?
There are some clear signs about who Japan's first post-COVID visitors will be.
Even the most pessimistic amongst us accept that the demand for travel and holidays will slowly return. The big questions are how quickly? And what groups of travellers are likely to return early than others? A look at the data and research in the UK might cast some light.
We know that Covid-19 will have had a devastating effect on the industry. The effect for some businesses will, unfortunately, be terminal. For the survivors, the challenge will be to attract customers and encourage bookings as efficiently as possible.
One strategy will be to look for those that can most afford to enjoy a holiday.
According to the New Policy Institute (NPI) think tank, the coronavirus lockdown has caused the richest households to save up to £4,181, while even the least well-off may have been able to spend £636 less.
The savings have come from individuals spending less on holidays, going out, sport, travel and commuting due to spending more time indoors to fight the outbreak.
The 5.5 million homes in the top income bracket will have avoided £23 billion in normal expenditure. Those in the bottom bracket have £3.5 billion extra.
The savings only apply to households that have not seen a fall in income; anyone who has suffered redundancy, been furloughed or lost work are unlikely to have saved this much, if at all.
The bottom line is that, unlike in the financial crash of 2008, there are a significant number of consumers that have more money to spend now than they otherwise would.
On paper the total amount of unspent money could reach £57billion. However, not all of that cash will have been saved. Grocery shopping costs may have risen, and some of the money will have been used to pay off debts.
So personal finances is unlikely to be the main impediment to a recovery in leisure travel. Individuals have been shielded by the scale of government interventions. Across the G7, the average support package is 4.4 times bigger than in 2008-09.
In 2008, UK air travel dropped by around 16% in the wake of the 2008 crash. According to the WTO; globally, visitor numbers dropped by 4%, with an estimated 6% reduction in value. As yet we don’t know what the impact on the UK travel sector will be for 2020 and 2021. Given that that the industry will have effectively lost five key booking and travel months, the fall in 2020 will be severe; probably at least 40%. This compares to an overall forecast fall in GDP of between 7% and 13%.
But let’s try to be positive. We know that demand for travel will return. Also, there is no reason that the long-term trend for us to spend more on ‘experiences’ rather than ‘things’ is going to be reversed. According to Experian’s spending Power Index, this trend is most marked for high earning families, whose lifestyle spending has exceeded retail spending consistently over the 8 years covered in their report.
So, as we navigate our way out of this annus horribilis, we know that we have two things on our side. First is the long-term trend in affluent countries towards spending an increasing proportion of income on experiences. Second is the fact that, despite the negative impact Covid 19 has had on the economy, there is a significant group of people with the financial resources to spend on travel.
But now we have to be clever about what we say, and who we say it to. I’m pretty sure there is no one in the travel industry; airlines, operators, agents or destinations; believes the best way forward is simply to throw money at the problem and hope bookings will return. The challenge is to identify the right groups to target and concentrate our efforts on them.
There is one key factor that has to be considered however and that’s people’s attitude to risk and uncertainty. Often used interchangeably, risk refers to the assessment of possibilities that certain negative events will occur. Uncertainty arises in situations where tourists are exposed to an overload of information, which they are not able to process.
Unfortunately, with Covid-19, travellers are confronted with both risk and uncertainty. We might joke about muddled thinking and messages from our own government, but this is compounded when travellers have to assess the situation in both this country and one of a number of possible destinations. The 14-day quarantine rather bleakly highlight this problem.
There have been a number of significant research studies undertaken into the profile of those that are more likely to embrace higher levels of risk and uncertainty when travelling. Much of this has been focussed on terrorism and natural disasters, but work on the perceived risks of illness from unsanitary conditions also shows similar attitudes amongst key groups.
If I was forced to give you an ‘elevator statement’ I would tell you that those who are young and have a university degree will embrace risk and uncertainty, while those that are old and less well educated will avoid it. Oh, and before you go, I’ll throw in that if they have young children they will seek safety above all else.
And you will thank me and we’ll go on our way.
But it’s far more complex than that.
Published in 2018, research by Marion Karl at LMU University Munich looked at risk and uncertainty in travel decision-making across a wide range of age and socio economic groups.
Whilst it showed that younger people would embrace risk and uncertainty more readily than older people, it was those aged between 50 and 59 and 69 plus that were most likely to be risk and uncertainty avoiders. Those aged between 60 and 69 were actually likely to have less concerns about travel. Although the research didn’t look at the reasons, it may be that this group are most likely to be free of dependant children and be in good health compared to those that might be ten years older.
A number of studies have shown that those with a higher than average income are more likely to be comfortable with a degree of risk and uncertainty. This correlation however is less strong than it is with those who have attained a degree-level education or above. Although, as education is in many cases linked to income, it’s difficult to separate the two.
There is one more defining characteristic of those that are least likely to be deterred from travelling immediately post lockdown that’s worth considering. Those who regularly take holidays abroad (more than one per year) show lower levels of concern than infrequent travellers. Many in the trade have been talking about ‘pent up demand’ and clients ‘wanting to travel’. It’s likely that it’s the voices of these regular travellers that they have been hearing.
It should be no surprise that the least risk-averse travellers are those that are more likely to choose new, little visited destinations. ‘Novelty seekers’ dominate at the beginning of a destination’s life-cycle versus ‘familiarity seekers’ at the end. What’s also of interest though is that the travellers we should be looking for are also likely to be those that seeking new and novel experiences while they are on holiday. They may not immediately consider Spain, but they may be attracted by unique restaurants, cultural experiences and physical activities.
Younger people are certainly less concerned about possible risks and uncertainty, however their lack of travel experience often encourages them to explore the world with operators such as G Adventures or Intrepid. Covid-19 is likely to make such operators an even more attractive option.
Clearly there are those that will embrace risk and uncertainty. The problem we have is that there may be too few of them to re-establish the UK travel market in the way that we need. If you label them as ‘innovators’ and ‘early adopters’ they may only make up around 15 per cent of the market. To make this 70 or 80 per cent of the market we have to use techniques to reduce perceived risk and uncertainty.
Whilst many may criticise the government’s handling of the Covid crisis, the strategy they are adopting in ensuring that the population are well informed is the right one. This is also the case with the government ensuring that scientists, and ‘the science’ is central to the presentations. For the most part, people trust doctors but miss-trust politicians; and trust is critical when you are looking to persuade people to do something.
So by and large, people are more likely to take the course of action that you want if you give them the facts to support what you are saying. It’s also important that you’re seen as a trusted source of information and advice.
There is one last aspect of human behaviour that should be considered before we look at how best to identify and communicate with potential travellers in the months to come. This concerns group behaviour and ‘social norms’. However much we might consider ourselves to be individuals, we tend to copy each other’s behaviour and actions. Whether it’s the stock markets or concerns about a pandemic; if the majority of people aren’t concerned, we’re unlikely to be a contrarian and behave differently.
So, when it comes to taking a holiday overseas, most people will travel when they see others travelling. There’s clearly a problem here; but there are things we can do to help ensure that this desire to do what others are doing works to our advantage.
In summary, the groups that are most likely to travel will have the financial ability (maybe enhanced by the lockdown); are less averse to risk and uncertainty than average and are more likely to have been regular travellers. To this we must add two important strategies. The first is to reduce perceived risk and uncertainty by providing information and advice travellers can trust. Secondly, when we can, is to show people returning to enjoy the pleasure of travel and holidays to help re-establish this social norm.
5 Tips to attract the early bookers
1) Talk to loyal, frequent travellers
Those that have been regular travellers in the past are most likely to return to booking holidays in the near future. The exception is likely to be those over the age of 70 who are more likely to be cautious and risk averse. Past regular travellers will require accurate, reliable information on where to travel to and any restrictions that might apply.
2) Provide information and advice to reduce perceived risk and uncertainty
Tour operators, and travel agents in particular, should be trusted sources of advice. Make sure the information you have is as accurate as possible; especially with regard to restrictions that might be in place at destinations. Inform existing loyal customers by Email and include a destination update on your web site.
3) Talk to travellers that are least likely to avoid risk and uncertainty
Research has shown that those with higher educational attainment, travelling without children, and aged under 40 or between 60 and 70, are less likely to avoid risk and uncertainty. Also, as many of those that are less concerned about risk are also attracted by unusual and challenging activities, consider including some of these in your marketing.
4) Target those with the disposable income to spend on holidays
Consider using behavioural targeting online to identify those that haven’t been affected adversely by the lockdown. For example, significant expenditure on garden furniture would indicate that a household wasn’t concerned about redundancy or unemployment.
5) Show others enjoying the pleasure of travelling again
It’s more important than ever to encourage those returning to travel to post pictures, videos and reviews. Tour operators should consider adding to this with their own videos and interviews with guests. The more the industry can show people enjoying the pleasures of travel, the more quickly this will become seen as normal again.
Huw Williams. November 2020
This article was first published in Travel Weekly.