To maximise their commercial opportunities, travel companies have to understand and embrace changing customer expectations, new regulations and transformative technology.
Head of Travel, Barclays Corporate Banking
The consumer appetite for travel is well and truly back post-pandemic, opening up exciting opportunities for the industry, but operators are also facing regulatory change and growing concerns over sustainability.
While new and emerging technology can undoubtedly provide some of the answers, having the agility to negotiate the shifting sands ahead will be vital to keep travel firms on the road to success.
Innovative use of data and emerging technologies such as machine learning and AI in the travel sector is set to accelerate rapidly, driving greater automation, increased back office efficiency and more personalised travel experiences for customers.
Technology is giving rise to the ‘connected trip’ concept, offering travellers greater levels of customisation and flexibility than ever before, while more sophisticated payment systems will generate new in-journey sales opportunities for operators.
These developments will also increasingly enable travel companies to capture and use data to ensure compliance with evolving regulation.
Looking further ahead, virtual reality (VR) and augmented reality (AR) technologies are likely to create entirely new kinds of travel, with many experts predicting that these immersive trip and holiday experiences could become mainstream over the next ten years.
For example, customers will be able to experience elements of a holiday digitally in a hyper-realistic way before booking, and some commentators suggest future travellers will enjoy a combination of digital travel experiences and ‘real life’ holidays as the norm.
Given the rapid development of the technology to make virtual travel possible, the industry must take steps now to ensure that its payment systems, security processes and regulatory regime are fit for the future.
Demand for more sustainable travel options, driven by concerns over the environment and climate change, as well as a greater focus on the wellbeing benefits of travel, have been steadily moving higher up the priority list for travel customers, notably in younger age groups.
In fact, 75%4 of UK travellers say they intend to minimise their environmental impact when travelling. Therefore, all travel businesses need to be proactive about addressing sustainability and wider ESG concerns or face losing out.
There is a steady growth in sustainability-related regulations aligned with national net zero carbon targets and the wider ambitions of the 2015 Paris Agreement. The industry can expect more regulation to come and must be prepared for it.
Planned regulatory action already includes banning the sale of new petrol and diesel vehicles in the UK by 2030,6 with the EU following suit in 2035.7
Measures are being taken to limit domestic short-haul flights in favour of rail in France, Germany and Austria, with France looking to ban flights on specific routes.8
A ceiling on total annual carbon emissions of Dutch airlines operating at Amsterdam’s Schiphol airport is proposed, although currently paused by court action.9
Given growing regulatory and societal pressure and changing traveller demands, the sector will increasingly need to provide a wider range of sustainable travel offerings, particularly through air travel and greater use of carbon-friendly rail journeys.
However, many companies say financial incentives are needed if they are to adopt, invest in and deliver sustainable travel solutions and tech in a realistic, viable way.
Even so, technologies such as electric vehicles and bio fuels are already well advanced. Virgin, for example, aims to make the first transatlantic flight of a large airliner using 100% sustainable aviation fuel before 2024.10
Alternative-powered flight technology is progressing rapidly, with purpose-built electric-powered aircraft and larger hydrogen-fuelled planes potentially beginning regular commercial passenger services as early as 2025.11
Although the sector is upping its game in relation to sustainable travel solutions, many industry commentators feel progress is too slow and strong leadership is needed to drive change more quickly. The increasing demand for sustainable travel is likely to require a high-level strategic commitment as an integral part of travel companies’ wider ESG strategies.
The industry will also need to invest in the technology and data gathering systems they need to comply with existing and emerging sustainability regulations, and to meet rapidly changing consumer expectations.
All of this requires travel businesses to ‘tell their story’ effectively and clearly communicate the positive actions they are taking around sustainability to their customers, stakeholders and regulators.
Travel industry regulators need to be forward looking to keep pace with business and traveller requirements in a rapidly changing commercial landscape.
Against this backdrop, the Department for Transport is currently consulting on proposed changes to ATOL protection regulations via the Civil Aviation Authority (CAA) with the aim of giving consumers better financial protection and greater choice in a competitive market, with changes expected to come into effect in 2024.
A core element of the consultation is ensuring ATOL-protected travel businesses have sufficiently robust financing arrangements in place to meet their obligations to holidaymakers.
The CAA argues that although ATOL has been broadly successful, the scheme needs to be more financially resilient. However, the sector remains divided on the best way to achieve this.
Additionally, a government review of the Passenger Travel Regulations12 is also on the horizon, potentially complicating the changes already being considered.
Some operators and ATOL-licenced travel agencies are worried about the idea of potentially mandatory, sweeping changes.
Paul Nunn, Chief Operating Officer of the Advantage Travel Partnership says: “We believe change is necessary but it must be proportionate. We don’t agree with wholesale changes or believe they can be justified, and are in favour of a proportional, risk-based approach.
Rachel Jordan, Director of Membership and Financial Protection for ABTA, feels that any mandatory changes would not be positive: “We’re talking about many different and potentially significant changes. Some businesses may not be able to afford to implement them.”
However, as yet, the CAA has not indicated that any of the proposed changes will be mandatory.
Independent travel trust account providers are broadly supportive of changing ATOL regulations to protect consumers by ensuring segregation of their money from operators’ working capital.
Sudheer Sharma, Director of PT Trustees, a provider of specialist trustee services to travel organisations says: “The industry needs a sense of obligation to ensure consumers either get their money back or get another holiday if anything goes wrong.
“While segregating client money could potentially mean a loss of cashflow for travel companies, I believe the CAA proposals will address that and, if anything, should make life easier and cheaper for them.”
He points out that trust accounts offer appropriate protection and regular oversight of customers’ money so that all stakeholders know where they stand.
ABTA believes changes to ATOL regulations can be positive but feels there is a lack of clarity about what the CAA is trying to achieve with these proposals.
ABTA is in favour of retaining a range of financial protection measures for travel companies to choose from. It says many members are strongly opposed to mandatory segregation of customer monies and remain keen on using bonds for financial protection.
Some members are also concerned about operationalising a variable APC.
Rachel Jordan, ABTA’s Director of Membership and Financial Protection, says: “Ultimately, optionality is key – a ‘one size fits all’ approach isn’t appropriate and won’t work. Businesses need flexibility and a range of financial protection options to choose what’s right for them.”
Potential options being explored by the CAA to achieve change include:13
Whichever solutions are eventually adopted, travel operators need to anticipate and plan for these potential changes.
We have a dedicated Travel team to support your business navigate changes with regulation, technology and ESG. This is through our industry networking events and through our contacts with regulatory authorities and governing bodies.
We can provide you with full transactional and banking support – from day-to-day banking to Barclaycard Payment services to sterling and currency deposits, plus bonds, guarantees and indemnities.
Our corporate financing solutions include industry-specific credit support, cash management, foreign exchange and rates risk management and debt capital markets financing.
To discuss your business requirements and how Barclays can support you, contact us today.
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2 Source: https://www.e-unwto.org/doi/epdf/10.18111/9789284416660^
3 Source: https://wttc.org/consumer-trends^
4 Source: https://store.mintel.com/report/uk-sustainability-in-travel-market-report-2022^
8 Source: https://edition.cnn.com/travel/article/planes-to-trains-europe-climate/index.html^
12 Source: https://www.abta.com/news/main-points-abtas-response-caas-request-information^
13 Source: https://www.abta.com/news/main-points-abtas-response-caas-request-information^
