Travel-Tranpsortation-Hospitality-Sectors

Redefining Norms for the Travel, Transportation and Hospitality Sectors

“A ship in harbor is safe, but that is not what ships are built for.”
— John A. Shedd

The initial “shock and awe” period for the travel and transportation sector is largely behind us, and we are all painfully aware that demand cannot sink much lower. The only thing we know for certain is that people will travel again, businesses will travel again, and demand will rise. Anyone selling certainty in their demand forecasts also has a bridge to sell you. But whatever letter recovery curve you subscribe to (V, W, U or L), the quest for a “return to normal” is overly simplistic and a futile pursuit. 

The early defensive measures – furloughs, capacity cuts, vendor contract restrictions, CARES, sourcing funding, cash immediacy, etc. – were obvious necessities. Now that there is even the slightest light on the demand horizon, it is time to switch to offense. 

No matter when or how demand returns, will you view the norms of January 2020 as Utopian? Don’t those same barely functional processes still exist now and are only hidden by the lower volumes? Rather, consider this the moment to create your new future.

Disruption is an overused term and does not equate with what is happening in our industry. When operating at five-percent revenue, there are no more sacred cows to “disrupt.” Instead, the opportunity exists to create a whole new set of standards and a higher benchmark. Then we can strive to “disrupt” that normal in two years, when technology and the environment shifts yet again.

Switching from defense to offense and establishing new standards requires answering the following questions with an innovative, post-COVID mindset:

  1. What is my immediate asset monetization opportunity? Consider how you might attain quick cashflow injections by monetizing mainframes, data centers, shared service centers and captives.
  2. Is my socially distanced workforce scalable? Clarify which processes can remain remote and identify what can be automated. Ensure your social collaboration tools, IT infrastructure, productivity standards and governance meet the sustained virtual demand.
  3. How do I generate customer confidence and demand without buying it with deep discounting? Assure consumer privacy and security (which has been tested by recent breaches in the sector). Build enhanced customer loyalty programs that will work to encourage a new form of travel as the restraints are lifted globally. Find new and innovative ways to connect with and communicate with customers. Maximize advertising on health precautions in demand-generation campaigns. Implement artificial intelligence and machine learning now to capitalize on customer data. Consider approaching this with industry peers as a consortium to create solutions faster, then differentiate yourself on other innovative services. Make confidence in your brand contagious. Negative travel experiences can go viral quickly – and often end up in the media. Highlight success stories that show how travel can generate good news and use it for positive social momentum.
  4. How do I maximize revenue during the recovery? Lessen your dependence on historic yield and revenue management models so you can gear up for the new demand environment. Develop dynamic pricing for different customer segments. Maintain disciplined pricing beyond the initial deep discounts needed for immediate cash and gradually rationalize toward sustainable and profitable levels. Lean on loyalty-driven campaigns for sustainable demand generation. Maintain corporate pricing and occupancy agreements and fares indefinitely and move to point-to-point revenue management that can lessen your dependence on origin and destination pricing.
  5. How do I increase resiliency in revenue and IT? Drive toward cloud migration while you shift investment away from recovery and toward the new future. Evaluate partnerships and technology solutions for specific business outcomes beyond simple cost-concession requests, and refresh current service level agreements to drive innovation. Emphasize continuous governance and leverage the global footprint of your current providers. Refuse to accept the old “it has been this way for years” norm, and drive changes in vendor management attitudes and behaviors on both sides of the relationship with a requirement for jointly developed and delivered innovation. Look for geo-diversity and evaluate how increasing work-from-home (even onshore) labor changes the offshore labor arbitrage calculus of service delivery.

The entire industry is literally banking on the anticipated pent-up demand of travelers who are champing at the bit to get back on the road. The timing and the scale of that demand is uncertain, but it is coming, and that will be an opportunity. The initial damage is done and, as the dust settles, the industry has a unique opportunity to rebuild in light of these learnings. If there was not a burning need before now to take advantage of technology to make a material difference in operational cost or customer service, there is now.

Offense-minded organizations will scale capabilities and introduce new paradigms in operations, marketing, IT, security, resiliency, passenger safety and efficiency to degrees that didn’t seem possible even just six weeks ago. There will be new names, new inventors, new innovators, new logos and new brands that will rise and set new standards. Picture yourself in May 2022 as a thriving global travel organization looking back on this period – and make decisions that will ensure you become it. Contact us to learn more.


About the author

Todd Dirks, based in Denver, Colorado is a Director for ISG’s Travel, Transportation, & Hospitality Business Unit – supporting the hospitality/gaming, cruise, rental car, travel agency/tourism, airline, shipping & transportation, rail, airport, and space travel market sectors.  ISG (Information Services Group) (Nasdaq: III) is a leading global technology research and advisory firm. A trusted business partner to more than 700 clients, including 75 of the top 100 enterprises in the world, ISG is committed to helping corporations, public sector organizations, and service and technology providers achieve operational excellence and faster growth. The firm specializes in digital transformation services, including automation, cloud and data analytics; sourcing advisory; managed governance and risk services; network carrier services; technology strategy and operations design; change management; market intelligence and technology research and analysis. Founded in 2006, and based in Stamford, Conn., ISG employs more than 1,300 professionals operating in more than 20 countries—a global team known for its innovative thinking, market influence, deep industry and technology expertise, and world-class research and analytical capabilities based on the industry’s most comprehensive marketplace data.