How is the travel sector adapting to change?

How is the travel sector adapting to change?

Exploring the key forces shaping the UK travel industry.

Based on our consumer spend data and the mergers and acquisitions (M&A) activity we’re seeing, the outlook for travel is bright. Looking at the big picture, travel businesses may need to make the most of emerging technologies, consider increasing their focus on environmental, social and governance (ESG) commitments, and stay abreast of regulatory requirements to capitalise on growth opportunities.

Simon Atkinson

Head of Travel, Barclays Corporate Banking

The travel sector is set for continued growth

73% of UK consumers plan to go on holiday in 2024 Ref: 1
10.1% increase in spend across travel in the year to March 2024 Ref: 1
7.5% increase in spend per customer on travel in the year to March 2024 Ref: 1

Various indicators paint an optimistic picture for the travel industry. Consumers continue to see getting away as an essential spend, with travel increasing by 10.1% in the year to March 2024, and both travel agents and airlines performing particularly well. As such, many of our travel business clients are increasing capacity to meet higher demand.

Rohan Kumar

Head of Client Insights, Barclays

Year on year growth for Travel sub-sectors*:

Travel Agents
Cruises & Ferries
Hotels, Resorts & Accommodation

*From April 2023 – March 2024

Read our UK Consumer Spending Report to view customer transaction data which can help to inform your strategy.

Tapping into technology

Laura Maior, Head of Travel, Barclaycard Payments, suggests that emerging technologies continue to accelerate the pace of change across the travel sector: “These technologies are helping to drive operational efficiencies through greater integration and automation, reduce risk, personalise customers’ travel experiences and fuel growth.” Given how technology is helping to improve operations, it’s not surprising to hear that many travel companies plan to increase their spend on technology this year.

How are APIs driving connectivity?

Application programme interfaces (APIs) – which, in essence, allow different systems to ‘talk’ to each other – continue to play a key role for travel businesses by streamlining day-to-day operations and opening up new revenue streams.

By leveraging APIs to facilitate connectivity between different systems, travel companies can integrate additional services with their platforms to enhance their offering – while also reducing the risk of fraud and human error.2

Aside from offering greater efficiency within businesses, APIs can be used to deliver benefits to customers by enabling a more connected and seamless end-to-end booking and in-journey experience.

Personalising journeys with AI

A booming industry worth £81bn3 , AI and machine learning continue to demonstrate their potential to transform the travel sector. As an already highly digitised industry with 81.8% of customers spend happening online, this provides a wealth of granular data. Operators can use these technologies to better meet travellers’ needs throughout the customer journey – from planning and booking through to in-trip experiences – by offering information, emergency assistance, recommendations, translations and other interventions in real time, among many other applications.

“Combined with the right transactional data, many travel businesses we speak to are looking to deploy AI to be more responsive to customers’ needs and provide them with increased flexibility and hyper-personalised experiences.” says Laura.

To adopt AI successfully and responsibly, businesses need to invest in the right people and skills, focus on developing a source of rich data, and ensure they understand how to mitigate the associated risks, particularly in terms of data privacy and security.

Digital banking solutions for the sector

Alongside evolving payment platforms and multi-factor authentication technologies, our API-based banking solutions can help boost efficiency, improve your treasury operations, and enhance customer interactions. Similarly, our open banking APIs enable increased collaboration with third-party providers to deliver a range of value-added services.

A positive outlook for M&A

M&A activity in the sector has gained momentum in recent months, driven by increasing travel demand and renewed confidence in the market. Strong interest from both buyers and sellers should continue to bolster activity throughout 2024. Private equity activity is also on the up, with a strong pipeline of anticipated assets likely to come to market.

Simon Atkinson

Head of Travel, Barclays Corporate Banking

What’s driving M&A in the travel sector?

Simon suggests increased M&A activity is being driven by a variety of factors, including the sector’s exceptional results for 2023, pent-up consumer demand continuing to prioritise travel spend, and trade buyers seeking niche bolt-on strategic acquisitions.

Travel businesses receiving the most interest include those focusing on technology, digitisation and ESG. The cruise ship sector and companies that look after the high-end traveller, ‘digital nomads’ and sports fans are also experiencing strong demand4.

In addition, the volume of pandemic–delayed private equity (PE) exits, along with continued positive trading momentum, mean that PE investors are viewing the sector as an attractive investment opportunity given the positive trade momentum. This, along with a number of pandemic delayed exits are driving increased activity as well as new sellers wishing to capitalise on current market conditions.

A systemic approach to ESG

There is an increased focus on ESG

Regulatory requirements across different jurisdictions means addressing sustainability could be seen as a priority for the industry. “From speaking to our clients and leaders in this space, there is a justified emphasis on enhancing sustainability in the travel sector, with a focus on getting the balance right. Our conversations at a strategic level, unpack thinking on how companies meet their objectives to become more sustainable. We often see large companies looking for BCorp certification, as well as smaller businesses looking to use sustainability as a differentiator to unlock commercial opportunities. More businesses are also plugging into advancing technologies to manage their operating costs. When these strategies are executed efficiently, they can both create value and help transition the sector to a low carbon economy.” suggests Marco DeBenedictis, Head of Structuring & Sustainable Lending, Barclays.

How can we help you on your ESG journey?

“The question on the mind of many of our corporate clients is "how?". How can they, as a sector, meet their objectives of being more sustainable while gaining a competitive advantage in the process? The answer could potentially lie in linking sustainability to finance.

Many of our clients have been successful in using financing as a tool to demonstrate sustainability commitments by linking bonds, loans and trade and working capital facilities to environmental and social targets.” says Laura Galvin, Head of Sustainable Transaction Banking, Barclays.

Find out more about how our green solutions could help support your transition to becoming more sustainable.

Keeping tabs on regulation

Regulatory reforms

Several changes across the regulatory space may affect travel businesses to varying degrees during 2024.

In late 2023 the Department for Business & Trade launched its review of the Package Travel and Linked Travel Arrangements Regulations 2018, the results of which could have a bearing on many across the industry. Meanwhile, the Civil Aviation Authority’s proposed changes to the ATOL protection scheme have been delayed and, given the uncertain political landscape, further regulatory reform will effectively be on pause for now.

Broadening choice and flexibility

The industry has benefitted from a resurgence of insurance providers, enabling travel businesses to adopt a mix of protection methods based on their business needs. The success to date of this increased choice and flexibility in the market perhaps raises questions about the necessity of further reform.

To continue to meet the needs of a rapidly changing industry, the Association of Bonded Travel Organisers Trust (ABTOT), in partnership with PT Trustees, has launched a new escrow accounts and bond hybrid solution for larger travel SMEs. This solution aims to offer ATOL holders increased flexibility when managing supplier payments.5

How can we help?

Our dedicated and experienced travel industry team can help you navigate the opportunities and challenges facing the sector as you strive to realise your business ambitions.

We can provide a full range of transactional banking support and corporate financing solutions, including industry-specific credit support, cash management, payment and foreign exchange services and debt capital markets financing.

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UK Consumer Spending Report

Read the UK Consumer Spending Report to view customer transaction data which can help to inform your strategy.