Inside The Industry: Consumer Travel Trends

Navigating the Landscape of Travel Trends and Consumer Behavior

Despite the escalation in living expenses, the post-COVID demand for travel persists. According to the Mastercard 2023 Travel Trends report, global leisure travel has surged approximately 31% in March 2023 versus the same period in 2019. However, the mounting cost of living combined with the rising preference for sustainable travel poses a quandary for travelers. Let’s delve deeper.

Impact of Cost of Living on Consumer Spending

The Simon Kucher report identifies three consumer segments based on inflationary pressures. While ‘stable’ travelers maintain their budgets, ‘cautious’ travelers plan to reduce spending by 6%, and ‘splurge’ travelers intend to increase spending by 20% on average. According to Deloitte’s Global State of the Consumer Tracker, the percentage of global travelers opting for cheaper flight itineraries, rather than convenience, rose from 21% in October to 35% in November 2022. Inflation has also prompted more consumers to book trips in advance, with 41% preferring early bookings due to inflationary concerns.

The rising costs have also impacted corporate travel budgets. Approximately 20% of consumers now opt out of business travel, and those who travel prefer shorter trips. Nearly two-thirds of businesses encourage employees to travel by train instead of plane, partly due to the shift toward sustainable travel. While consumers economize, almost a third are willing to pay more for sustainable options, particularly for food and accommodation rather than carbon emission charges. On average, 55% are willing to spend extra on sustainable food, accommodation, and flights, whereas only 20% are open to paying for flight carbon emission charges.

Embracing Sustainable Travel Choices

As per the Booking.com 2023 Sustainable Travel report, consumers are divided on sustainable travel. While some consumers are purposefully spending more amidst rising living costs, believing sustainable travel options are too costly, others are willing to pay extra to make an impact. Forty-nine percent feel sustainable travel options are too pricey, yet 43% are open to spending more. Nonetheless, 80% of respondents prioritize sustainable travel, evident in micro-level behaviors such as conserving energy by adjusting air conditioning or reusing towels and bottles.

How can travel brands cater to the burgeoning demand for sustainable yet affordable options?

Brands may consider offering discounts or incentives for eco-friendly choices. The report indicates that 42% of consumers would be motivated to opt for sustainable travel with reward points for such choices, redeemable for perks or discounts via online booking platforms. During periods of inflation, customer retention holds heightened significance, urging brands to cultivate existing customer relationships. Reward schemes not only foster brand loyalty and trust but also meet consumer expectations for sustainable travel options.

Consumers increasingly seek credible assurances when booking travel, with 65% preferring accommodations certified or labeled as sustainable. However, 39% remain skeptical of purportedly sustainable options, reflecting growing awareness of greenwashing, elaborated in our exploration of ethical consumption in 2023. Amid declining trust across industries, transparency is pivotal. Sixty-nine percent express interest in understanding why certain options are deemed sustainable. Clear communication about sustainability efforts can enhance brand appeal to ethical consumers.

While the proportion of ‘cautious’ and ‘stable’ travelers opting for all-inclusive packages remains unchanged from the previous year, personalized trips are gaining ground. According to the Simon Kucher report, half of US holiday-goers prefer personalized trips. In an era where 90% of consumers expect brands to anticipate their needs and interests, personalization emerges as a competitive advantage, as highlighted by Mastercard. For instance, Marriott Hotel’s proactive gesture of delivering champagne to a guest who shared an engagement photo on social media underscores effective brand loyalty strategies and expanded reach.