Navigating a New Era for Travel, Airlines and Hospitality

Travel, Airlines and Hospitality continued to bounce back at scale in 2023. Trans-continental connectivity was revitalised as Asia Pacific, the slowest region to reopen its borders, enjoyed a first full year of unrestricted travel since 2019. In October 2023, global air capacity matched the 2019 level for the first time. Airports on all continents handled impressive passenger numbers despite high air fares and airline capacities that were still rebuilding.

As more business and leisure travelers took to the skies, airlines and hotels recorded dynamic revenue growth. Business travel continued to recover supported by a resurgent meetings, conventions and exhibitions sector. Demand for travel proved so strong that the pre-pandemic term “over-tourism” resurfaced during the northern hemisphere summer.

If 2023 restored upbeat sentiment to the travel industry, concerns emerged that the post-pandemic honeymoon period may be nearing an end. Macro-economic uncertainty, geopolitical schisms and two major conflicts could potentially decelerate growth in 2024. Conversely, resilience borne from the unprecedented challenges of Covid-19 could see travel stay in the fast lane. Either way, there will be many unknown factors to navigate.

This paper sets out the landscape for Travel, Airlines and Hospitality in an unfolding new era. We can look forward to exciting technological advances and entrepreneurial solutions to the planet’s environmental challenges. AI adoption will drive digital transformation in 2024, while payment solutions will remain centre stage in the debate about the future of travel.  

Recovery Fades, Growth Pressures Increase

By the end of 2024, the world will complete a five-year Covid cycle. Even so, the travel recovery may remain uneven. Lagging far behind in 2022, 2023 saw Asia Pacific accelerate its catch-up and end the year much closer to other regional markets. This will continue. As a result, 2024 will see a competitive global landscape. Cost pressures will intensify, growth rates moderate and a quest for consumer value gain momentum. Travel businesses can mitigate this through price signalling further out in the booking journey and achieve cashflow benefits.

Climate, Sustainability and Seasonality

Travel industry narratives about consumers wanting to be more sustainable in their travel choices will be tested. Irregular weather patterns and extreme climate events will become more frequent and the outcomes longer lasting. This could prompt pattern changes for the seasonality of domestic and international tourism. The travel industry must confront complex issues related to the environmental and community impact of travel and engage consumers as partners for the long-term. In 2024, we could witness the start of long-term shifts in how, where and when people travel and spend.

Virtual Interlining with LCCs

As aviation reshapes, agile low-cost carriers (LCCs) are spotting new windows. Data by OAG shows LCCs comprise 34% of global seat capacity. In four regions, they operate more than half of departing capacity: South Asia 62%, South East Asia 52%, Central America 50% and Lower South America 50%. Budget flying is extending beyond domestic and short-haul. Virtual interlining tools enable online bookers to plan trips using LCCs on all continents. Specialist LCC distribution service providers will gain scale as consumers invest more time researching deals and localised payment formats will unlock bookings in Asian markets.

OTAs and a Complex Channel Landscape

Mobile booking is transforming travel distribution, albeit at variable speeds in global regions. While OTAs expand their inventory for B2C distribution, specialist B2B solutions providers are supporting the channel expansion strategies of SME travel suppliers. In regions with strong hotel pipelines, like the Middle East, Asia and Africa, OTAs will connect more mobile-centric travellers with rooms and in-destination experiences. Contributing to channel fragmentation are Asia’s Super Apps, Mini Programs and Social Commerce, which offer direct pathways to sell FIT and traditional agency travel products direct to consumers.

Upselling Ancillaries

Stubborn inflation will influence the cost of travel. Purchasing travel is segmenting as hotels, airlines and OTAs promote new ancillary products and services. Adding a ride-share, pillow upgrade or date-change raises the average spend of mobile bookers. In 2024, travellers also face new visa charges for the EU, UK and Bali. More cities will trial tourist taxes to limit visitors, while a rail pass price hike makes exploring Japan more expensive. Pricing factors will influence travel consumers to be highly alert for additional costs when planning each trip.

Managing Costs & Processing Efficiency

Global airline capacity in 2024 is forecast to match and exceed 2019 levels, although regional variations will apply. Stronger route competition and rising costs will place downward pressure on revenues and margins. Record profits announced by many carriers in 2023 should moderate. This will increase the pressure to optimize transaction processes and capture every payment opportunity, both in-market and across borders. Payments have a high cost in terms of margin, and travel industry discussions will focus increasingly on cost transparency and processing efficiency.

On-Demand Mobile Travel Payments

China and Asian markets continue to drive mobile payments. Phocuswright forecasts that mobile will comprise 93% of gross online travel bookings in China by 2026, and 54% in South East Asia. This compares to 47% in Europe and 23% in Australia/New Zealand. Local market factors influence smartphone booking preferences for flight tickets, hotel rooms and airport train transfers. Mobile payment apps can make in-destination travel decisions more spontaneous. In Macau, casino stakes, concerts and musicals, cable car rides, fashion previews and drone shows can all be booked on-demand by a mobile app.

Payment Security and Trust

While Covid is in the rearview mirror, the memory lingers about the levels of risk it rendered. Global travel companies will step up due diligence protocols for payment providers. As travel rebounds, their strategic outlook is to ensure they work only with strong partners. The requisite strength is found both on the balance sheet and in commercial reliability and trust. Distributing risk will be another focus, as travel firms manage payments by optimizing the cost of processing. This is particularly important for controlling foreign exchange risks.

AI: From Disruptor to Centre Stage

AI is an intrinsic part of every travel conversation. Few technologies have moved so swiftly from disruptive shock value to global assimilation. In 2023, travel brands frequently launched AI solutions. In 2024, the utility of those tools will come be tested. Many industry insiders believe AI will fundamentally change how OTAs, hotels, airlines operate. Others contend that the risks and benefits are yet to be assessed. Opportunities exist for companies to better understand payment touchpoints, create more actionable data and improve operational efficiency. Consumer-facing AI will aim to transform trip planning and travel management.

Asia Leads on Biometric Adoption

Mobile-native Asian markets spawned Super Apps and popularised QR-code payments. App platforms are driving two-way digital behaviors. AirAsia is a travel-first app incorporating consumer and financial services, whereas Grab is bringing travel elements to its consumer-first platform. These create biometric propositions. Chinese consumers use iris-scan payments and palm-recognition ticketing on the Beijing Daxing International Airport train. Airports are integrating biometrics at immigration points. Singapore Changi plans to eliminate passport verification for passengers. Hyper-localised payments benefit domestic travellers but incur challenges for visitors unfamiliar with local apps. Biometric adoption could eliminate these barriers.

Managing Currency Volatility

Currency fluctuations have caused post-Covid tribulations for travellers and for the dollarized airline industry. The effects are unlikely to subside in 2024 as a global slowdown, enduring conflicts and energy scarcity increase pressure on emerging market currencies. More countries in the Global South will trade with China in RMB to mitigate dollar deficits. Travel suppliers will offer app-based solutions for customers to pay in local currency wherever possible. Central banks in China. ASEAN and the Middle East are entering cross-border QR code payment agreements to reduce the impact of currency volatility on travel spending.

Partnerships Really Matter

How you manage payment streamlining for all parties without creating headaches for consumers? That question will be repeated frequently in 2024. A further deepening of B2B partnerships will help alleviate potential pain points for travellers. Travel value chains will count ever more on partnership solutions as loyalty among consumers dissipates and price and value take precedence. Hotels, OTAs and airlines recognise that working together can bridge payment gaps along the travel journey and offset higher cost bases.

Damien Cramer, Global Head of Travel & Airlines

The tailwinds of the post-Covid recovery presage a whole new competitive era in travel. The immediate future will bring a US-led economic slowdown, lingering inflation and geopolitical tensions. Businesses won’t be able to operate with the same margins they enjoyed in 2023.

Twelve months ago, we identified three factors – localisation, fraud management and data solutions and maximizing authentication rates. At the time, these were important but fairly isolated trends. In 2024, they will be much more strategically connected. Another concept to watch is ‘digital identity.’ This could become fundamental in the context of travel security and payments, with Asian markets leading the way.

Ivan Guerrero, Director of Travel & Airlines, EMEA

Due to mixed economic signals, Europe is seeing less spending on travel, even though people have saved more money. This will affect how tourists and business travellers choose to travel. Despite these challenges, leisure travel is still popular and travellers seek genuine experiences and good deals. A trend to watch is that during summer, Europeans are choosing cooler places like northern Europe and the US. As a result, leisure flight bookings will undergo significant changes in various countries. A developing trend towards mobile payments and social commerce is expected to increase.

Liyana Khan-Bah, Key Account Manager, APAC

India, Indonesia, Thailand and Vietnam are emerging outbound markets. Indian outbound tourism registered a 190% annual increase in 2022, and is forecast to be worth $44 billion by 2032. Pent-up travel demand from China will have a positive effect across Asia Pacific and the global tourism industry. Regional travelers will take more long-haul trips, with the US and Australia being popular destinations. Generative AI is taking over the role of a travel agent to prepare personalized itineraries within seconds. Platforms like Roam Around and Vacay will make research-intensive travel planning effortless.

Virginia Cicchini, Director of Travel & Airlines, Americas

Air travel in the region has recovered to 97% of the 2019 level, according to IATA. Brazil, Mexico and Colombia are leading the way with above-2019 capacity. Passenger demand for LCCs is now above pre-Covid levels. Long-haul continues to recover with the reopening of key routes that were delayed after the pandemic. OTA consolidation took place during the Covid-19 period, while new local regulations related to short-term rentals have deflated rental demand and increased prices. Pix continues to grow in Brazil as the payment method of choice.

Our 2024 Watchlist:

• China’s outbound recovery
• Business travel rebound
• Jet fuel prices
• OTA price competition
• Next steps for CBDCs
• Booking window trends
• Impacts of major conflicts
• 40 Government elections
•  The concept of Digital Identity