Travel Brands Challenged

So here we are. We're in a recession. Belts are tightening and budgets are getting trimmed. And if you operate in the travel and hospitality sector, you're likely feeling the squeeze right now. How are consumers reacting to the recession? And what do you need to know to weather this economic storm?

Perception matters. So too does relevance. Those who are optimistic in the near term are more willing to plan that vacation or conduct business as usual. Unfortunately for travel industry, far too many leisure and business travelers do not feel good about the about the economy in 2009 or have recently experienced a personal economic event.

The following charts illustrate how business and leisure travelers plan to reduce trips and travel expenditures in the current economy.

How are travel brands responding?

It is a unique challenge now as brands seek to maintain market share and profitability. On the revenue side, prices are dropping to help brands compete for fewer travelers who are spending less. At the same time, the industry is deferring capital projects and reducing costs by eliminating amenities and headcount. The challenge will be for brands to maintain service levels and ultimately, customer loyalty.

We are seeing many examples where brands are bringing very compelling offers to the marketplace - lower fares, free night stays, bonus points, ties-ins to local attractions and events - all designed to keeping the travel machine running. Deals are evident everywhere.

Unfortunately, it appears that price reductions are table stakes at this time. Even the affluent consumers are scaling back in today's economy.

Communication and Customer Service: The Key to Success

Are we seeing a paradigm shift in consumer behavior, or a merely a reaction to the crisis? Only time will tell. The travel sector has a history of innovation, and it needs to demonstrate that more than ever.

Consumers are becoming more aware of brands as they shop for bargains. What is unclear right now is whether consumers are shopping within brands, or abandoning their preferred brands in lieu of alternatives. And therein lays an opportunity for travel suppliers and intermediaries. Communicating a brand's value proposition could come in many forms - from capitalizing on green initiatives or social networking trends, or it could be as effective as:

• a hotel publishing their price ranges across their portfolio of brands to help increase customer awareness of available options
• a cruise line creating new itineraries, or helping consumers compare the cost of a cruise to other vacation alternatives
• an airline that promotes how they do not charge fees for checked baggage
• an online travel agency offering tie-ins to popular sporting events or reality television shows
• a casino/resort entering into marketing relationships with other sectors of the travel industry

Marketers need to continually stay in touch with the changing needs and preferences of today's travelers and understand the hows and whys of consumer decision making.

A Silver Lining?

Only a small percentage (7%) of business travelers this year see an advantage in the economic turmoil, saying the current financial crisis will allow them to travel more because of the favorable travel deals that exist, as compared to only 5% of leisure travelers who reported the same.

And we congratulate that small percentage of consumers who are traveling more this year compared to last - the industry just needs more people like this!

However, the hotels are not sold out, planes are not full, there are rental cars available and the cruise lines have capacity. The travel suppliers and intermediaries that provide an outstanding customer experience, across all the touch points, may very well be rewarded as the economy improves - whenever that may be

This article is based on the findings of an Ipsos poll conducted from December 27, 2008 - January 19, 2009. This online survey of 1,572 U.S. adults (18+) was conducted via Ipsos' Voice of America online forum. With a sample of this size, the results are considered accurate within 2.47 percentage points,19 times out of 20, of what they would have been had the entire adult population in the United States been polled. The margin of error for sub-samples may be higher.

Need more information on the findings and advice in this article? Download a copy of our recent Ipsos Point of View or contact the author.