Travel into the future: BA's Willie Walsh, plus Google and TUI, tell Marketing what lies ahead in the turbulent market
By Loulla-Mae Eleftheriou-Smith at ABTA Conference, marketingmagazine.co.uk, Friday, 14 October 2011 12:00AM
Global and local crises on varying scales have plagued the sector, but a new optimism is emerging among its major players.
It has been a year of economic crisis, regulatory restrictions and socio-political upheaval - or, put another way, just another 12 months in the travel industry. Yet there are signs that this embattled sector is starting to reinvent its approach to consumers.
At last week's annual ABTA travel trade conference, held at Palma de Mallorca in Spain, the usual bigwigs gathered to discuss the state of the industry. The ongoing saga of Air Passenger Duty (APD), for example, continues to provoke the ire of travel companies.
International Airlines Group chief executive Willie Walsh even went so far as to attack transport minister Phillip Hammond, claiming: '(He) does not look at the impact APD is having on transport, he looks at the impact it is potentially having on the deficit.'
However, having weathered snow chaos, ash clouds, tour operator collapses, strikes and the Arab Spring, the industry is waking up to evidence of how durable the attraction of an overseas holiday is to UK consumers. Its focus now turns to how it can use online channels to attract customers.
A survey carried out by OnePoll for Marketing (see box, below) showed that consumers are not sacrificing their holidays when it comes to looking at what to cut back on. More than a quarter of those surveyed said they plan to spend more on holidays next year, while an average of 47% intend to budget for the same amount.
Judging by last week's event, travel businesses are more confident than for some time, and are quickly shifting their fight for growth to the online space. Except, this time, they may not allow themselves to become distracted by the latest slice of crisis management.
Among the highlights of the conference were keynotes by Walsh, Johan Lundgren, managing director, northern region, at TUI Travel, and Nigel Huddleston, head of travel at Google. Between them they covered the big challenges and emerging opportunities facing the travel industry.
Marketing spoke to three big influencers, asking what lies ahead for their companies and this turbulent market.
NO EVIDENCE OF GLOBAL RECESSION; THE NEED FOR OPTIMISM
Willie Walsh, Chief executive, International Airlines Group (owner of British Airways)
Marketing asked Walsh how travel brands should prepare for a global recession.
'The problem depends on whether you believe we are on the edge of a global recession or not. The view in Europe is quite pessimistic, but if you travel to Russia, China or Brazil, there is no evidence or inkling, or even discussion, about a global recession.
Everyone would like to see the situation with the Eurozone resolved, because it is a drag on us all, but we have to remain positive and optimistic.
The world is moving on. When I look at the performance of our business on a global basis, it is clear that there are still very strong markets out there: America, Africa and Asia, even transatlantic traffic remains positive. So my view is that until I see evidence of a global recession, I'm going to continue to operate on the basis that there is growth opportunity available to us.
Within the UK, we will definitely see a deteriorating situation if we all continue to talk in a negative way. We have to remain optimistic and remember that every threat has an opportunity within it - you just have to look for it.
I think it is said that in times like this, not everybody suffers to the same degree; it depends on how much flexibility you have and how you respond. You have to have a clear view on where you're heading so that any changes you make in the short term do not put your long-term ambitions at risk.
The restructure we've done at British Airways has all been designed to make it a more efficient company, give it greater flexibility so that we can respond to either improving or deteriorating external conditions.
Flexibility, for me, is the key: if you can take capacity out where demand weakens and save cost, or if you can move capacity around to where you see growth opportunities, then I think you can avoid the worst of any downturn.'
FROM INTERNATIONAL EXPANSION TO ONLINE EFFECTIVENESS
Nigel Huddleston, Head of travel, Google
Marketing asked Huddleston how travel brands are adapting to the digital world.
'The numbers for overseas travel are way down on three years ago, but the one thing people don't want to give up is their main annual holiday.
People will sacrifice a weekend trip, but will always be keen to get away, so the long-term picture for the travel sector is still very positive.
Tour and hotel operators realise that the opportunities for expansion are coming from international fast-growing markets. What UK-focused companies should start thinking about is how to grow in markets such as Turkey and Russia. Many of our clients are already expanding internationally, getting their brand out into different territories and doing a good job of it.
You have to make sure everything you spend on advertising is optimised, targeted and aimed at the right people.
We are confident that we can help make that investment effective. We are very open about the attribution model and ROI with our clients. Often travel clients ask us whether they are spending too much on offline marketing and not enough online. We know that no one is in a position to waste money.
Travel brands can spend very effectively in the online space, but it must be targeted more precisely and in a sophisticated manner.'
FROM THE CRISIS BUSINESS MODEL TO EMBRACING SOCIAL
Johan Lundgren, Managing director, northern region, TUI Travel
Marketing asked Lundgren what firms should do when facing a crisis.
'We have to recognise that the events we have seen since 2007 - snow chaos, the Arab Spring and the ash cloud, for example - are going to be part of our ongoing business.
The underlying fundamental of the travel industry is good: people will travel more and more. However, we have to be realistic, and we all need to have a basic business model that can cope with crises. We have to set out to work in this kind of an environment.
We are at a significant disadvantage when competing with other industries for customers' money, because our marketing and media spend is generally low. How do we find that extra money? If you are dealing with high distribution costs and legacy costs, you're not going to have a funding mechanism to be able to increase your marketing spend. We have to look at alternative ways of distributing the resources that we have, while being more creative and innovative in the way in which we communicate with customers.
The travel industry has been slow to adapt to the importance of social media, whether Twitter or Facebook, and it is something that will be used much more in TUI's future activity. We are working on this at the moment.'
This article was first published on marketingmagazine.co.uk