The switch in consumer habits

The degree to which the pandemic has permanently changed consumer behaviour, will potentially have a major impact on many business sectors. Will business people travel again, and will retailers ever recover levels of town centre footfall?  

The short answer is, nobody knows, and time will tell. But consultants and consumer behaviour experts are providing a view of the way out of the pandemic. And there are, they say, new opportunities that hotels would be wise to grasp. 

The latest to set their view of that path are consultants Accenture, with a global survey of almost 10,000 people across 19 countries. Almost all of the respondents reckoned they had made at least one change to their lifestyle which is likely to be permanent. Accenture says that, based on previous soundings, it expects those changes to last.  

According to the report, the tourism industry at large will need to take note of the views of the “post-covid” consumer, who will be paying more attention to wellness, localness and sustainability – as well as health, safety and cleanliness. 

The survey also found a shift in workplace expectations, picking up on the impact of months of enforced home working. It found 79% of respondents keen to work from a “third space” that is neither home nor the office – which could, potentially, be a hotel or coworking space.  

Business travel could also be impacted in major ways, with 46% of those surveyed saying they have not business travel plans currently, or expect to halve business travel in future. “How long this view will hold firm remains to be seen,” say the report’s authors, but note that for the hotel sector it means prioritising leisure travellers, at the very least for the short term.  

Miguel Flecha, travel industry lead for Europe at Accenture, told Hotel Analyst: “The outcome of the research is really interesting – travel will be different – in any case, the industry needs to adapt.” 

Flecha said hotels need to improve their digital offering for business customers – “as a priority”. Prior to the pandemic, he said investment had mostly been in the B2C area. “Now it’s urgent, if you want to offer a new product, the customer experience around that product is critical.” 

Prior to the pandemic, said Flecha, “the core technology was not ready. But cloud technology and adoption is moving very fast. Adopting the cloud will provide the flexibility. And the value that data brings to the industry is amazing.”  

“I am in the camp of this pandemic bringing about lasting change,” said Matt Costin, managing director at BVA-BDRC, which has been polling consumers throughout the pandemic. “In part, because we have not only had an economic shock, but also a societal / emotional / psychological one – in a way that was not the case after the banking crisis, for example. One thing we have learned from history is that major change happens when a number of factors converge – particularly when governments sense the need to be part of the change. Think votes for women after WW1 and the welfare state after WW2 – both of which were already in the pipeline years earlier but which were accelerated by the impact and national psychology of war.”   

“Consumers have been reminded that an established way of life can be brutally disrupted and cannot be taken for granted. The threat of climate change, once the concern of an environmentally conscious few, may begin to feel more immediate and real. Many loved ones have tragically passed away. Some may feel more vulnerable to health risks; others may be concerned about the potential for future pandemics.” 

Both Flecha and Costin expect changes in the way businesses use meetings. “Corporations will close offices – that will happen, and the volume of physical events may not be the same,” said Flecha. “But there’s a huge opportunity for hotels.” 

“The simple fact is that some trips and some meetings will no longer happen,” said Costin. “On the other hand, changes in the way we work may create new B2B demand for meetings which in the days of companies having a surfeit of office space, would have taken place in house.” 

With notably younger workers missing the motivation and opportunities of being with colleagues in an office, Flecha believes new types of company meetings – potentially in hotels – will be required. “The incentives side, from a community-building perspective, will be very important.” 

Costin said that even small changes in behaviour could feed through to noticeable impacts: “In terms of the structure of travel demand, personally, I think there will be some medium term shift from international to domestic – at least once the initial pent up demand for international holidays has been spent – and possibly also a shift from long to short haul. The picture will not be uniform, but it will only take a small proportion of the population to change their behaviour for an impact to be felt.”  

HA Perspective [by Chris Bown]: There’s plenty of opportunity here, across several fronts and not just to do with leisure travel.  

Home workers may or may not want to return to the office full time – but may also be yearning for a flexible third space. Could that be a hotel lobby or lounge, the repurposed local pub bar, or a new, suburban franchised serviced office set up in an unused retail space? We’re at a point where any of the above could grab the opportunity, and spoils await.  

And then there’s the meeting space opportunity. Flagged up as a new, important way to retain corporate culture, in a world of blended workspaces, this is another big opportunity for using meeting spaces, and creating company gatherings – if only hoteliers can work out how to harvest them. One place to start might be, as Flecha notes, the B2B offering. At previous Hotel Analyst conferences, we have heard how complicated it can be to compare and book hotel meeting rooms – in contrast to the simplicity of booking an overnight stay. Over recent months, we’ve all become more used to using digital, whether that’s online shopping, booking a takeaway or reserving a table outside a restaurant. So, it’s high time the hotel groups got to grip with making it simple.  

Additional comment [by Andrew Sangster]: Business travel is the great known unknown of the recovery. It is widely anticipated that leisure travel will rebound quickly but there is a good deal of uncertainty around business. 

There are three broad camps: those that think the recovery is going to be quicker than anticipated; those that expect it to be delayed; and those that believe Covid has changed the attitude to business travel entirely. 

Starting with the last category, the cast of business travel pessimists is surprisingly large. Within the travel and tourism sector, Airbnb’s Brian Chesky is probably the most prominent, predicting that business travel will never return to what it was. 

Outside of the travel industry, there is talk of business travel being slashed by as much as half. A combination of costcutting and carbon reduction targets are put forward as the explanation. 

The most prominent exponent of a slow return to business travel is the Global Business Travel Association. It forecast back in February in its annual BTI Outlook that it would take until 2025 for a full recovery in business travel back to 2019 levels. 

Last year saw a drop of 51% and while this year a 21% increase is projected, there remains a long way back to 2019 levels when global business travel spend hit USD1.43trillion. 

Many airlines remain pessimistic for the near term. Star Alliance reckons the decline will be about a third and Virgin Atlantic says a fifth. 

Chief optimist is Ryanair CEO Michael O’Leary, who leads Europe’s biggest airline. He believes that corporate travel will return to pre-Covid levels in 2022. He added the proviso that the pandemic did not unexpectedly worsen and vaccines worked well enough to ensure people could travel without restrictions. 

At Hotel Analyst, the house view is that business travel will surprise on the upside. Corporate balance sheets have strengthened during the lockdowns (on average, and clearly not for most in our sector) and economies are expected to make a sharp rebound. 

This week the UK economics team at Goldman Sachs upgraded their forecasts for the country to a bullish 7.8% improvement in GDP and in the US by 7.2%. This is the sort of growth not seen for decades in the West and while it reflects a rebound from even sharper falls, the momentum could well be infectious. 

The twin impacts of changed corporate meeting habits and enhanced environmental concerns will suppress some demand but the tailwinds of a surging economy ought to overwhelm these headwinds. 

As we say in our story, nobody currently knows for sure. But I suspect that corporates who sit on their hands in this period will regret not pushing harder for growth opportunities. It is a unique, and I hope never to be repeated, chance for outsized expansion. 

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