How long has it been since you last traveled?
That’s how anxious the tourism industry practitioners are.
It is obvious that the global tourism industry is experiencing unprecedented changes, but can this change be simply attributed to the COVID-19 pandemic? What other mid- to long-term trends and opportunities are worth paying attention to?
How can the tourism industry seize the trend and survive the winter? To this end, Deloitte Management Consulting has carefully customized the “Future of Tourism” report, which systematically analyzes the impact and causes of the industry value chain, as well as the opportunities and challenges facing the tourism industry, and provides exclusive insights and suggestions.
Uncertainties beyond the epidemic
Apart from the “black swan” of the epidemic, looking to the future, Deloitte Management Consulting believes that the following five major uncertainties may have a profound impact on the direction of the tourism industry. Industry players must face these uncertainties that affect their strategies and businesses (even survival) to formulate corporate strategies and business plans.
- The expansion of emerging economies (middle class)
With the development of emerging economies, a considerable number of middle class people have emerged. The increase in the number of this group will greatly affect the existing structure of the tourism industry. - Affordable technology perfectly replaces offline experiences
As new digital travel enabled by technology replaces traditional offline experiences, both leisure and business travel will be affected. In the field of leisure travel, technology such as VR/AR and video games can create experiences that allow consumers to meet their needs for various experiences without leaving home.In the field of business travel, the trend of remote work and digital interaction is gradually strengthening, which may completely eliminate the need for business travel. - In the future, the investment and development of technology
giants may completely overturn the competitive landscape of the tourism industry and become an important uncertainty factor in the industry. - Social stability (health, environment, society and technology)
is the norm, but the impact of possible black swan events cannot be ignored. - Changes in local protection and public policy
destination protection policies, tax and regulatory policies to encourage tourism, geopolitics and other factors will also cause industry shocks.
Long-term trends that cannot be ignored
We should not only see what is changing, but also what will remain unchanged in the future. Regardless of how uncertain factors such as the epidemic affect the future development of the industry, we believe that the following trends will exist for a long time and permeate the future tourism industry.
- Sustainability
The sustainability of business models is of great importance to the future of the industry. Consumers will pay more and more attention to sustainable development factors, and only players who are truly committed to social development can win trust. - Sharing Economy
The efficiency advantages and flexible structure brought by the sharing economy model itself are sufficient to cope with market fluctuations. In the future, the sharing economy model will continue to develop rapidly. The new management and procurement model under the sharing economy is expected to optimize and increase profit margins. - The battle for data
requires both internal data and market data to achieve better business decisions and improve operational efficiency. At the same time, artificial intelligence and machine learning will be the key to making full use of data and will play a greater role in market competition in the future. - Content is king.
The essence of the tourism industry is experience, which requires industry players to create high-value and differentiated content to firmly grasp consumers at all stages of the journey. The industry must establish partnerships and ecosystems to make the entire creation process more innovative and flexible.
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Four future scenarios for the tourism industry
Deloitte Consulting believes that the two most critical factors affecting the development of the industry are the uncertainty that may arise from the direct impact on the competitive landscape or the entry of new players. Based on the interaction of these two factors, Deloitte Consulting conducts scenario-based thinking on the future of the tourism industry and constructs four possible trends, and provides exclusive suggestions under each scenario.
[Scenario 1/Return to the Happy Age] In this scenario, as the middle class continues to expand, the demand for tourism is also growing, but the limited supply of the tourism industry will significantly increase the price of tourism products. The expansion of the supply of accommodation, catering, leisure activities, etc. still cannot meet all needs. At this time, only consumers who are willing to pay high prices can travel to the most popular destinations.
Service providers can make full use of their own advantages, increase prices for popular destinations, design standardized products for the mass market, and customize personalized products for high-end customers. Travel intermediaries will be greatly affected because they cannot directly attract emerging groups.
Therefore, they need to position themselves well, get close to target customers, and meet customer needs in order to win a certain market share.
Technology platforms will continue to play an important role because they carry demands that traditional service providers cannot meet. They will strive to provide more attractive products and acquire more customers at competitive prices.
[Scenario 2/Slowdown] In this scenario, the pace of growth in emerging economies slows down, both demand and supply will remain at the same level for a long time, and the industry is not expected to grow.
Based on this, consumers will have stronger bargaining power and can buy the best products and services at the most competitive prices. In the future, service providers will need to adopt more aggressive pricing strategies to expand their customer base and provide differentiated products and services to customers who are willing to pay a premium.
Intermediaries will have to launch the lowest-priced travel packages and adopt a more streamlined organizational structure to adapt to the market environment agilely. Technology platforms must provide services at highly competitive and affordable prices, and strive to get suppliers to publish more differentiated services/products on their platforms to provide consumers with abundant choices.
[Scenario Three/Reinvention of the Tourism Industry] If the development of technology can perfectly simulate the offline experience at an affordable price, then some people will switch from offline experience to virtual travel mode, which may give rise to scenario three.
In scenario three, the tourism industry must reinvent itself, given the substantial growth of emerging economies and the middle class’s enthusiasm and affordability for novel experiences and travel.
In this scenario, offline products are becoming fewer and fewer, and consumers’ expectations are becoming higher and higher. Of course, correspondingly, they are also willing to pay more. All players in the industry will focus on content production to meet the needs of the online market. Technology platforms will become the industry players with the greatest benefits.
[Scenario 4/Virtual Travel] In this scenario, due to the slow growth of emerging countries, travel demand remains stable, and technological development makes it possible to simulate online experiences at affordable prices.
By then, the physical world will coexist with the online world, and industry players will need to compete for business in both worlds at the same time.
Players need to offer competitive prices and provide the best experience online and offline, which will trigger larger-scale industry consolidation, and small and medium-sized players are expected to be forced to leave.
Leading industry players may use their huge customer base to achieve business transformation and focus more on the personalization of products and tourist experiences.
