Market trends in the travel industry in light of the new elections/ oil prices

Many trends due to the New US presidential elections and the continuously increasing price of fuels; are presently affecting the travel industry from the growing number of carbon offset initiatives, to self service kiosks and charging stations, to the unbundling of services that consumers have traditionally paid for, while adding value and visibility to our brands.  The passengers are more demanding. Importantly, these new trends indicate a shift in business models which we must embrace, in order to stay on top of our game and to expand market share, provide excellent service and/or value to customers, and produce profits.

 

The major trends are:

 

1) High Fuel prices:

As per the IATA, projected profits for the global airline industry was forecasted at 7.8 billions in 2008, but was later reduced in NOV 2007, later reduced to 4.5 billions in March 2008.

 

2) Green Initiatives: Carbon offsets

All signs point to a continuance of the ecofriendly phenomenon. Al Gore’s Nobel Peace Prize for climate change awareness, a Democratic focused US presidential cycle, and oil prices closing at the highest level per barrel have all served to keep environmental conservationism at the forefront of travelers’ consciousness’. Carbon offset programs have enjoyed limited success, but are poised to really take off in the current environment. Environmentally minded consumers (Especially Americans) would certainly be willing to pay for this concept. The purchase of such offsets, along with well positioned announcements about an airline’s environmental policies, can enhance the brand/image of the airline.

3) Ancillary Services

The development of ancillary revenue streams has become increasingly important for airlines struggling to compete in a business environment facing very real price constraints and escalating variable costs (i.e., fuel). Low, or zero overhead service offerings like trip insurance, simultaneous hotel booking and rental car options are already mainstays on airline booking engines; look for additional services and products to appear alongside them. Some examples of these ADDED-VALUES are: 1 day airport lounge upgrades, priority luggage handling, online/onboard gaming and entertainment. This is just a small offering of what’s to come.

 

4) Airport Lounges and Entertainment

As more business fliers take to the skies, the amount of time they spend in airports is increasing. Still tight security and governmental agency recommendations (tactics used in the elections) have increased this time by requiring fliers to be in the airport earlier. With a very captive audience seeking diversion during thee expanding wait times, airport lounges (especially to those without loyalty programs that offer access) and on ground entertainment are potentially lucrative opportunities.

 

5) American Recession

Recession is mainly due to the political/economical tactics used before the general elections. The typical US traveler has consistently sought the lowest possible price for an airline ticket anyway, and being more conservative than ever about their finances, an economic downturn will only serve to intensify this trend. With less travelers seeking ever lower fares, the unbundling of services, ancillary revenue creation, and cost conservation will become more important to airlines operating in the US. Furthermore, the traveling demographic will be bargain-seeking, websavvy.  The US Dollar is also dropping value facing other currencies especially the Euro, more Europeans to seek discount vacations in the US

 

6) The use of regional jets (Which can affect connections to our gateways)

In the US, this corresponds slightly with the impending recession, high fuel prices, as carriers will seek to maximize load factors through the use of smaller aircraft to ensure that the flights will be booked solid, as opposed to a larger jet that might fly only partially full. The average jetliner has 137 seats, versus 3570 seats of a regional jet. CO has cut thousands of jobs and cancelled few routes that are not profitable followed by UA and most will follow.

 

7) Frequent flyer/loyalty programs

In the age of lowest price guarantees and choose your –fare booking, natural loyalty is at an all time low, especially with high fuel prices. Airlines will need to step up their push for repeat customers through expansion of their frequent flier and loyalty programs. Expansion may take the form of incentives, as through the granting of extra privileges, or with a marketing push.  The FFP is a major factor on passengers deciding which carrier to use.

 

8) More selfservice kiosks

Today’s traveler is far more selfreliant and more familiar with airport procedures. Many airlines (Lufthansa, Air Canada, BA, Delta) have already capitalized on this by offering selfcheckin, enabling significant labor savings (and therefore cost savings) at the ticket counter.  So a personal service will capture more traffic as  kiosk will expand and hourly personnel become more expensive.

 

9) RFID tags on luggage and Charging stations for laptops, cell phones

Radio Frequency Identification Tags are used by many other industries for inventory control, delivery tracking and loss prevention. They could be offered as added-values as part of a customer loyalty program. Airlines that have instituted a pilot RFID program for internal use include Delta, British Airways and Japan Air.  Frequent Business traveler carries more computing powers. Every gadget needs to be recharged, can be offered at a small fee. Charging stations have emerged in airport lounges and malls on a small scale in 2007; Samsung, an early adopter, has sponsored charging stations in Dallas, LAX, and New York’s JFK airports, is reaping rewards in terms of brand awareness and exposure.

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