Looking ahead at travel in China

Accenture China

The travel industry has been severely impacted by the COVID-19 pandemic, and China has been no exception. However, thanks to a centralized pandemic response system, coupled with the general public’s compliance with rigorous countermeasures such as mask-wearing, the COVID-19 pandemic in China is largely under control across much of the country. Domestic travel has recovered to nearly pre-pandemic levels.

How long will this recovery last? No one knows for certain. However, no matter what the future will be, the travel companies have to be fully prepared as the New Game is on!

Four Future Scenarios for China’s Travel Industry

Accenture has developed four future scenarios for the global travel industry that reflect various potential outcomes and impacts of key external factors that influence global travel demand. 

Given the rebound in domestic travel, we expect that at least for the domestic travel industry, a “remarkable recovery” or “collective coexistence” future scenario is quite likely. However, the international travel market still remains volatile since the virus is not yet fully contained globally. Therefore, for the international inbound and outbound travel market, the “market mayhem” future scenario remains a possibility in the short and medium term.

Four Key Shifts in Market Dynamics & Customer Behavior

We’ve identified several key shifts in local market dynamics and customer trends that have implications for the specific actions that travel companies should take to prepare for the future travel scenarios described. 

Increased Emphasis on Domestic Spending

Consumer confidence is starting to rebound. In May, the Chinese government issued the directive of “domestic circulation”, which prioritizes domestic consumption to drive future economic growth. Given the limited opportunities to travel overseas where the pandemic is still spreading, we expect that domestic travel will account for a significant share of Chinese consumer spending going forward.

Reservation-based Planning

Prior to the pandemic, Chinese consumers were more accustomed to buying tickets to tourist attractions on the day of their visit. However, new government measures such as capacity limits at tourist attractions and real-name pre-registration for ticket purchases mean that consumers now plan and make reservations ahead of time, and often through digital channels.

Self-guided and Contactless Travel

Before the pandemic, Chinese consumers preferred traveling in large groups as part of a guided tour. However, there is now a rapidly emerging, clear preference for private, self-guided tours that allow people to avoid crowds when they travel. Many wish to reduce unnecessary direct contact with other travelers or staff as much as possible across their entire journey.

“Bleisure” Travel

A new “bleisure” trend has emerged in which people combine both business and leisure when traveling. According to a market survey of 200 Chinese travel agencies/companies, two-thirds of those surveyed believe that more corporate travelers would arrange personal trips during their work travel in the coming year.

What Actions Should Travel Companies Take Going Forward?

01 Traveler Experience: Elevate travel experiences with new technologies to address new behaviors

When they do travel, customers will have heightened expectations about their end-to-end experience, particularly with regards to health and safety. Companies can use technologies such as 5G and virtual reality (VR) to offer travelers an enhanced experience in a combined real/virtual environment without additional human contact.

An example of how companies have successfully integrated the offline and online travel experience for customers is the “Digital Yunnan” project. It fulfills customers’ desire for self-guided travel by giving them necessary information to help them plan without having to directly interact with others. 

02 Retail in Travel: Develop or reshape value propositions across the purchasing journey to stimulate demand

Regardless of the extent to which travel demand rebounds, companies need to be creative about how they entice customers to engage with their brand and, more importantly, complete the purchase. 

Live-streaming has always been a popular form of entertainment for Chinese consumers, as evidenced by Douyin, China’s TikTok. In its live-streaming broadcasts, Ctrip featured James Liang, the Trip.com Group Chairman, who dressed in traditional Chinese gowns and other outfits as a way to drive traffic and entertain viewers through cultural appreciation. In one hour alone, Ctrip was able to generate 27 million yuan in sales by using entertaining content to reinforce and encourage customers to travel more.

Beyond the purchasing journey, companies need to think about how to restructure their existing offerings and/or explore new consumption opportunities. By adapting their propositions, companies will also drive loyalty among their existing customers. Companies can also explore forming partnerships or alliances with each other or with companies outside travel in order to create new demand.

Jinling Hotel Group created a new consumption opportunity by launching a food-delivery service from its seven hotels in Nanjing in the first quarter of 2020. By repurposing kitchen and frontline staff, the Group earned 8.4 million yuan in revenue in only 22 days.

03 Intelligent Travel Services: Leverage data analytics to support business and operational strategies

Regardless of the travel future, the pandemic has altered the way customers travel to such a degree that companies cannot solely rely on their past understanding of customer behavior. Leveraging data analytics tools will help companies gain the necessary insights into what customers want and structure their offerings accordingly.

China Eastern has been stressing the importance of omnichannel data analytics to improve customer understanding and product customization. Earlier in the year, as the pandemic was coursing through China, the airline used analytics to identify an untapped opportunity: weekend travel. Based on this insight, the company designed and launched the “All you can fly” Weekend Pass, which allowed customers to enjoy unlimited weekend flights for the rest of the year for 3,322 yuan. Over 150,000 people used these passes in just two weekends—a strong indicator of the offering’s success.

04 Intelligent Operations: Realize operational efficiencies through cost-reduction initiatives

Companies should not only think about how to stimulate demand, but also focus on driving operational efficiencies. Under the “remarkable recovery” and “collective coexistence” futures, companies should explore strategic cost-rationalization opportunities, but not necessarily invest in major operational transformations. Under the “market mayhem” future scenario, in which revenues do not rebound, there should be an all-out focus on aggressive cost-reduction initiatives. This means streamlining business processes through outsourcing and reducing the number of fixed workforce positions, thereby reducing labor costs. With these measures, companies can shore themselves up for the short-to-medium term without sacrificing the ability to “keep the lights on.” 

FlyZoo Hotel, an Alibaba Future Hotel in Hangzhou, has successfully automated its front-end hotel services. With these services, travelers are able to enjoy a seamless check-in experience via a mobile APP and artificial intelligence (AI) facial recognition. They can order room services through voice AI and robots and check out using an invoice machine. With these technologies, FlyZoo Hotel is able to reduce its staff-to-customer ratio to 0.5, as compared to 2.0 for a traditional hotel. 

05 Living Systems: Migrate and transform legacy IT systems to enable a more nimble and efficient organization

Companies should also consider revamping their underlying system infrastructure. Depending on the overall market outlook, this will either support the increased demand that comes with a positive recovery, or enable a more agile organization if demand is at a standstill. 

Under the “remarkable recovery” or “collective coexistence” futures we anticipate, demand for travel will return. But given shifts in customer behavior, we expect a surge of activity on digital platforms. Migrating to cloud architectures will help companies cope with this increase in traffic. However, under the “market mayhem” scenario, scalability and agility are crucial for survival. In that circumstance, migrating to the cloud should not be the focus. Rather, companies should pursue a full transformation of core systems and infrastructure in order to equip themselves to react to high volatility, while also realizing significant cost savings necessary for long-term survival. 

China’s travel industry has rebounded faster than travel industries in most countries thus far. Amid this recovery, companies need to quickly prioritize actions that both stabilize their short-term future and sets them up for longer-term success. Those that don’t will lose out on the new business opportunities that will emerge with new customer expectations and market dynamics. Those that do will reap the benefits of first-mover advantage and play a vital role in leading the industry towards recovery.

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