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Getting into the travel industry today is unthinkable

Profile image of post author Krista WymengaProfile image of post author Jonny Blackler

The COVID-19 pandemic has been tough on the airline industry: revenue loss reached ​​$324 billion USD in 2021, international passenger demand fell by 60% in 2020 and 49% in 2021 compared to pre-pandemic levels, and 68 airlines entered bankruptcy protection or liquidation.

What’s clear is that, through the last 18 months, companies in the travel industry have been forced to adapt to stay in business. When international travel dropped off a cliff, travel sellers focused on local experiences. When lockdowns meant that passengers didn’t know if they’d be able to fly, airlines introduced more flexible booking options and travel vouchers.

Despite the tough market, the average person’s desire to travel hasn’t gone anywhere. What’s changed is how and where those people are travelling, what they expect from their travel experiences, and how travel companies are meeting that demand.

Getting into the travel industry today might seem unthinkable. But going beyond the headlines of travel restrictions and COVID variants, there are promising signs of recovery, investment, and pent up demand from travellers that makes 2022 a surprisingly good time to build a business selling flights.

What the travel market looks like right now

Let’s imagine you’re about to open a travel business. What does the market you’re operating in look like? What are the trends to watch?

Domestic travel is strong and big trips are on the horizon

While a traveller might have been willing to book a long-haul flight with little hesitation in the past, travel restrictions meant that domestic trips are more practical and less likely to be disrupted. Flight data showed that domestic travel is recovering faster than international and recent research found that 59% of U.S. travellers are planning domestic-only trips for 2022.

Passenger demand surges and falls quickly

Businesses selling flights have seen ups and downs over the last two years as the unpredictable nature of the pandemic, tiered government travel lists, and COVID variants muddied the path to recovery.

We’ve seen international flights take off as restrictions were lifted. For example, when the UK announced that Portugal was to be added to the green travel list with the lowest level of restrictions, demand surged 30% higher than 2019 levels. And in contrast, when Portugal was removed from the UK’s green travel list, demand fell to -120%.

Source: IATA Economics, using data from Direct Data Solutions (DDS)

These types of scenarios are likely to continue in the medium term as the global rollout of vaccinations continues. Passengers are ready to take advantage of routes re-opening and COVID testing requirements easing – travel sellers need to be ready too.

The reason and the way travellers book is changing

The rise of remote working has given workers more flexibility than ever and intertwined work and home lives. This has led to the growth of travellers visiting friends and family, and the shrinking of business travel.

After months of lockdowns and restrictions, what many travellers want more than just miles between them and their home is connection by visiting friends and relatives (VFR). Research in mid-2021 showed that VFR was a top priority for nearly two-thirds of travellers, and more than half feel more obligated to take these kinds of trips post-pandemic instead of other kinds of trips.

As face-to-face meetings worldwide moved to Zoom, businesses saved money that would otherwise be spent on flights, accommodation, meal expenses and more. In 2020, business travel fell 54% before increasing by 14% in 2021.

Travel companies need to pay attention to these travel patterns and adapt their offerings to deliver quality experiences and stay competitive.

Overall flight demand is recovering

Travel industry giants like Expedia show in their latest quarterly results that the demand for travel hasn’t disappeared, it’s just shifted to new areas. Whilst demand for international flights wasn’t as high as 2019, Expedia saw that their net income and earnings “nearly matched Q3 2019 levels driven by the superior performance from [Airbnb competitor] Vrbo and domestic travel along with improvements across virtually all lines of business.”

Despite the big drop in demand earlier in the pandemic, the recovery has started, and there’s more to come in 2022 with 47% growth in passenger capacity projected for the year. Travel companies have to be ready to compete as passengers take to the skies again.

What we see when we follow the money

One of the best predictors of where the market is moving is where major investments are being made. In its 2021 edition of the ​​Startup Investment Trends in Travel and Mobility Tech report, TMNT found that funding rounds in travel and mobility fell to $23 billion in 2020 and was projected to bounce back to $44 billion by the end of 2021, strongly hinting at the fact that forward-thinking, flexible travel startups are ready to take on a challenging market. Updated figures haven’t yet been published for the end of last year.

Source: Startup Trends in Travel and Mobility Tech Report (2021)

Crunchbase points out that fintech pioneers Stripe and Square were both founded during a time of crisis in their industry – in the aftermath of the Great Recession. And now in the wake of the pandemic, travel businesses are rethinking their approach to service passengers and use more tech-forward strategies to make sure their business can not just survive, but thrive, in volatility.

VCs are making a sizeable wager on that fact, pouring more money into travel with the hopes that with the global rollout of vaccinations and COVID mitigation efforts, travel will bounce back.

Here are just a few examples of that confidence:

What passengers expect from travel companies

The pandemic started with so many travel horror stories when thousands of flights were cancelled, passengers were stranded overseas, and many faced difficulties getting refunds from travel sellers.

Research from McKinsey shows that travellers are reporting high satisfaction at or above pre-pandemic levels, despite the additional hurdles and inconveniences of travel. It’s indicated that this could be because travellers are in a “honeymoon phase” – they’re eager to travel after being at home for so long, even when faced with additional hurdles like COVID testing, unpredictable border closures, and vaccination passports.

As travellers take flight once again, there’s a big opportunity for new travel startups to acquire passengers by providing new and exciting experiences.

People want the best experiences in travel too

People are used to the highest standards of user experience in other industries and travel shouldn’t be any different. Travellers don’t want to be met with choice overload from thousands of travel options, or be forced to use half a dozen services to manage every aspect of their journey: flight, hotel, insurance, visas, excursions, and more. Travel sellers can leverage the power of modern APIs to create a smoother end-to-end passenger experience to service how they want to travel today and how they’ll travel in the future.

Apps like Airbnb already combine travel planning, booking, stays, experiences, recommendations, messaging, insurance (coming spring 2022), and more. And in other areas of their life, people enjoy hyper-personalisation, easy account management, and seamless interfaces from apps like Netflix and Spotify. In the context of travel and flights, travel sellers can save passengers time, money, and hassle by streamlining the booking and management process across multiple vendors with everything in one place.

Crucially, travellers want flexibility and transparency. They want to be able to change travel plans, get refunds for cancelled flights, and be notified of updates in real time. Instead, passengers are spending countless hours on the phone with travel sellers to change a flight that should be manageable in a few clicks online.

The future of travel tech will mean no more switching between multiple providers, opening a dozen web browser tabs, stitching itineraries together manually, and figuring out impossible booking management platforms.

The tech infrastructure behind the travel industry has made this difficult up to now.

The travel tech industry is moving forward

The industry recognises the need for change. For airlines, New Distribution Capability (NDC) is playing a role in the shift. By moving away from legacy technology and investing in the future infrastructure for flights, the experience for travel sellers, and ultimately passengers, will improve across the trip planning process.

The ability to manage pre/post bookings, add extra features like lounge access or priority boarding, or increase personalisation with dynamic flight pricing is on the horizon. Travel sellers will need to plan ahead on how best to embed these options into their service offering to differentiate themselves in the market

Duffel unlocks potential for new travel businesses

In 2022, successful and resilient travel startups will take advantage of new technologies, evolving traveller expectations, and innovative business models. And Duffel is building the software infrastructure to help them do exactly that.

Today, Duffel’s developer-friendly platform consists of a powerful Flights API and Payments API, making it easy for any business to start selling flights during this revolutionary time in travel.

Streamlining flights and payments means developers can quickly integrate and build apps for their customers to search flights, make bookings, reserve seats, and make changes. And business leaders can focus on reinventing traditional revenue models, go to market faster, and capitalise on exciting new upsell opportunities.

But the misconception of now being the worst time to be in travel isn’t the only one. Follow the series 5 misconceptions of starting a travel business to uncover four more assumptions around entering the travel industry.

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