Seeing what is just around the corner can be difficult right now, especially as we face uncertainty around inflation and geopolitical issues. The good news for us in the travel industry is that we are seeing a quicker-than-anticipated recovery from the COVID-19 pandemic, which is encouraging, and demonstrates the resilience of our industry.
To help us get more visibility into what the future might hold for our sector, we have undertaken a scenario planning exercise, in partnership with specialist agencyStratforma . Together, we sought to identify potential paths forward for the global economy and examined how any changes might impact our industry in the years ahead, with a focus on 2025-2030. Our global head of Corporate Strategy, Wolfgang Krips,talked about the processhere – one thing that is important to emphasize is that the outcomes discussed below are not predictions, but instead possibilities. The project sought to understand the impact of several future scenarios on the travel industry with a view to safeguard against different kinds of disruptions that could occur.
In total, four potential pathways – entitled ‘Don’t Stop Me Now,’ ‘Turbulent Times,’ ‘Bloc Party’ and ‘In It Together’ – were identified, and today I would like to take a closer look at the first two.
Don’t Stop Me Now
This scenario is around global economic growth and digital innovation, driven by consumers who enjoy the benefits of an open world, which would bring more choice, innovation and opportunities for everyone. In this scenario, global growth would be powered by booming markets in Asia including India, China and markets in South-East Asia.
On a macro level, we would see globalization thriving as global trade would be prioritized over politics across the entire global economy and as major geopolitical players resolve their key areas of tension. Imagine a slow reduction in trade disagreements between the United States and China. At the same time, we would see strong economic growth, as well as the development of non-Western, emerging market competition in key sectors. From an environmental perspective, economic prosperity would be a higher priority than sustainable transformation.
So, what would this scenario mean for the travel industry? During the period under consideration, which runs from 2025-2030, we would see all verticals experience strong growth, while intensified competition would drive down prices. Dynamic leisure demand would increase, as travelers take more breaks, partially driven by FOMO – the ‘fear of missing out’ – created by booming social media. Asian travel players and tech providers would become more prominent on the global scene.
Travel sellers would have to react to a rapidly developing environment. Under this scenario, digital giants and lifestyle brands would become mainstream travel distributors, mediating most travel experiences and commoditizing many travel providers. This would represent a major change compared with what we see today. The tech provider landscape would likely split between globally scaled brands and rapidly innovating niche players.
Don’t Stop Me Now is a consumption driven world, with the growth of a ‘me-first’ consumer, looking to be part of the latest trend. Travelers will seek to discover new things wherever they are located, and to be provided in the way most appropriate to their needs. Consumers will demand their preferred experience and those companies not catering to the new demands will fail. While there would be concerns around a reduction in privacy, passengers would see a frictionless and continuously enhanced experience across physical and digital touchpoints. They would be rewarded with seamless, personalized and gamified social experiences as the market evolves.
Turbulent Times
At the other end of the spectrum, the Turbulent Times scenario (a scenario that would see an increase in border closures, fragmentation and conflict) would see a rise in populism and political instability, potentially leading to more nationalistic foreign policies. Geopolitical fragmentation would increase, with interests diverging at a national level, making it challenging for businesses to operate even regionally. Elements of this process were evident in the border restrictions introduced during the COVID-19 pandemic and could return, albeit in a new form. Fear in response to climate change would breed a ‘scarcity mindset,’ along with concerns aboutmigration and further pandemics, resulting in more efforts to secureboth physical and digitalborders.
The ramifications of such trends would mean strong headwinds for global travel. Heavier regulation, security requirements and government control would create extra complexity and friction in travel, resulting in an overall decline in spend, with a structural shift from international to domestic trips. At the same time, market access for foreign tech providers would be blocked in the geographies with existing incumbents and complexified in the rest. Faced with this scenario, barriers would significantly increase for travelers, while there would also be a scarcity of choice when it came to a given trip. This would result in an increase in technology-based travel alternatives to connect and escape.
An open world
While elements of Turbulent Times are currently visible in the global economy, we are hopeful this is a transitory phase, in the wake of the COVID-19 pandemic, with a wider recovery expected in the longer-term. At the same time, we don’t expect the world to move in just one direction. The world of tomorrow will certainly be a mix of the two scenarios presented above, and the two to follow in our final blog in this series (In It Together and Bloc Party). The key question is which will be most prevalent? Amadeus’ role will, however, not change depending on which scenario emerges; we are seeking to build a connected, sustainable industry, working to overcome fragmentation and complexity, both within the travel sector and beyond. This remains our ambition.
To achieve this, we are building an industry-wide travel ecosystem, connecting customers and partners around the world. With our global footprint, Amadeus is well-positioned to align with regional partners in many geographies, working to address local challenges. Each market is different and requires unique solutions. We are actively seeking out new, innovative players to form part of this ecosystem as we seek to overcome the challenges we face.
Let’s focus on how we can build a more connected world, by contributing to a renewed industry that works in the interests of travelers.
This is the second blog post in a series around scenario planning.
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