Did you know that the largest evacuation effort of British citizens since Dunkirk happened just over a year ago?
Over 150,000 British citizens were left stranded abroad after Thomas Cook Group, one of the worlds oldest travel agencies, went into liquidation on September 23, 2019. Over 21,000 people lost their jobs overnight, and the UKs Civil Aviation Authority had to fly back tens of thousands of disgruntled British tourists via chartered flights cobbled together from over 60 different airlines. It even had a code name: Operation Matterhorn.
Thomas Cook had been in operation since 1841, when its founder started arranging single-day rail excursions for temperance supporters in rural England. It eventually became a national institution, arranging holidays for millions of middle-class Britons over the decades. Recently the company had tried to diversify into online booking and airlines, but it was too little, too late. People just werent using travel agents anymore. A 178-year-old company vanished overnight. As it turns out, the travel industry had plenty of systemic problems even before COVID arrived.
If theres any industry that could use a little more predictable recurring revenue in its business model, its travel. And thats not just because of the current crisis. This has always been a transactional, unit-based industry: hotel nights, restaurant reservations, flights, cruises, etc. Historically, operators have run on discrete booking sales, and agencies have run on commissions. Startups like Expedia, Travelocity and Orbitz (not to mention Airbnb) have swiped billions of dollars worth of margins from this model. The traditional travel industry had been struggling for quite some time. Then came COVID.
Given this context, its no wonder that brand names like InterContinental Hotels Group, Marriott and Accor have all launched or are considering monthly subscription plans. Subscription models have the potential to completely transform an industry that has historically been based on boom-or-bust cycles of bookings and commissions. The current crisis has given the industry time to reorient itself towards new sources of recurring revenue that are both sustainable and predictable.
So what will the travel industry look like next year after it (hopefully) emerges from its year-long hibernation? Based on what Ive been reading lately, here are a few new trends I think were going to see:
We all know the airlines have been struggling for years. They run an incredibly capital-intensive business, and the advent of low-cost carriers has pitched them into a brutal pricing war. Lots of times they dont know if a flight is going to be profitable until the passenger door slams shut. Airlines are in desperate need of some predictability and stability in their revenue models. Long-time Zuora customer Surf Air has been a pioneer in this space since 2013 they offer access to a set number of routes in California and Texas starting at $199 a month. The company recently secured $200 million in new funding and plans to go public soon. Expect to see similar offers from the major airlines next year.
Millions of people have shifted to remote work on a permanent basis. Many of them are moving to more affordable places to live. Companies will be shrinking their office footprints. Theres going to be a new need for on-location meetups on a recurring basis. United Airlines recently cut a deal with Peerspace, a meeting space aggregator, to offer end-to-end business trips on a subscription basis called Team Together. Companies sign up for a monthly package, and they take care of all the details: flights, lodging, private workspaces, and social events.
This has been going on for some time, but I bet were going to see more hybrid hospitality subscription models that combine the independence and individuality of private residences with the amenities and services of hotels: keyless check-in, 24 hour concierge, business centers, etc. Two boutique hotel groups, Selina and citizenM, have recently launched subscription plans, including corporate packages that bundle overnight stays and meeting spaces. More and more of us are going to be living in secondary work/home spaces for set periods of time throughout the year. Timeshare models have been around a long time, but legacy players like Marriott Vacations, Wyndham Destinations and Hilton Vacation Club may need to re-orient and rebrand in order to capitalize on this new market demand.
What if you were a hotel that had all your booking revenue lined up a year ahead of time? What kind of planning resources and new ideas would that open up? Thats essentially what a destination club has. Here Inspirato is another pioneer. Their tag line is Subscribe to safe, luxury vacation rentals. Members subscribe for access to a set number of stays at high-end homes around the world. Theyve suffered hardly any attrition during COVID, and reported a renewal rate of 97% in June. Expect to see this model spread to all sorts of non-luxury groups.
This is another trend that I think were going to see dramatically accelerate next year. In much the same way younger people are forgoing ownership in favor of access these days, theyre looking for compelling travel experiences that dont involve lying on a beach chair. And many of these experiences are just a car ride away. As Ruzwana Bashir, CEO of experiences platform Peek.com told me: We went from $1 billion in bookings in January to net zero in April when COVID hit the USA. But people still wanted safe ways to get out of the house, so they explored their own backyards. It led to a record-breaking summer for us, with a surge in bookings for activities like renting a boat, taking your kids apple-picking, or being more active with paddleboarding or horse back riding. The majority of activities happened 50-150 miles from consumers homes. We think this will hold true next year as people will continue to take advantage of close to home experiences and daycations. We predict families will do these local trips more frequently, rather than saving up for a big, two-week family vacation abroad.
To wrap up, I think were eventually going to see the travel industrys reliance on individual bookings, commissions and fee charges collapse under its own weight. Its the depressing result of a product mindset that prioritizes add-ons and revenue extraction, and devalues travelers. We dont want to see another Cook travel debacle. Fortunately, the experience of travel planning is rapidly evolving from a sequence of painful transactions into a smart, intuitive service that solves for getting from point A to point B with zero fuss and zero logistics. (CLEARs new mobile app, for example, tells you exactly when to leave for the airport based on traffic data, secure screening, and terminal walking times. In short, subscription models enable experiences, which is what travel is all about.) I cant wait to see more of the world next year.