A Conversation with Carl Michel, Chairman of A-Rosa Cruises and Ursula Silling, CEO of Branchspace
Travel dynamics are changing. Customer engagement beyond the travel experience and dynamic and real-time propositions are crucial to gaining customer loyalty with travel coming back to full force. But having a purpose as a company both in terms of social responsibility and planet is crucial to attract and retain staff as well as customers.
The airports around the world are full and airlines, that just last year were having a hard time for not having many travelers, are now in trouble keeping up with demand. Travel experts were forecasting a great desire for travelling in this post-pandemic era, but is this perfect momentum being explored by travel retailers to introduce innovative solutions?
Our CEO Ursula Silling had the pleasure to have a conversation with Carl Michel and talk about what’s changing in the travel industry. Carl and Ursula each have more than 30 years of experience in aviation and travel. Carl is currently in the cruise business as Chairman of A-Rosa.
Where is the travel industry, especially aviation, going in this post-pandemic time?
Carl: I think it has been a phenomenal and exciting time. Maybe it was scary for some businesses who had to take a lot of debt in order to survive. For the ones who did survive there is some good news, as they’re in a good position to benefit from the consumer coming back.
Travel will return, but what’s interesting is how behaviours have changed after these two years of hiatus in travel. A number of things come to mind. The first biggest problem is loyalty has broken down effectively. We’ve lost two years of regular repeat purchasing, so now some people have to rethink the habit of deciding why were they loyal to an existing partner, and what has that company done for them. Companies have to figure out how to reengage these customers and quickly understand what their needs are now, which may be different from what they were two years ago, and they need to think about how to keep customers interested and involved. I think that’s a huge challenge for some companies because we were not used to losing these habits of repeated purchases.
Another important thing is environmental concerns have come right up the agenda. It’s a big challenge for businesses to know if there is a willingness to pay and change behaviours. Some of these sustainability questions may be faced in an early stage. I think there is a willingness to do very minor changes as straws change from plastic to paper, but straws aren’t a big deal. The important questions are if people are willing to pay more for sourcing local food for instance or having everything recycled instead of one-way packaging.
Then there are the things we don’t see like aviation fuel which is a big question. Will people pay more depending on the type of fuel airlines use? I think price preparedness is still quite low on that, so airlines and travel companies have to be careful to be making progress, but not to be rushing too far ahead.
Ursula: Yes, it’s a question of whether they will simply feel guilty to fly, so they’ll rather travel more locally and avoid medium-haul or long-haul due to some uncertainty like the experience of not being able to come back if anything else happens so they want to feel more secure. I think the biggest issue is that even if the industry is committed to move to net zero by 2050, in the meantime emissions will still be rising. The starting level has already increased, so it’s getting more difficult. The industry needs to send very strong signals to show where we are going. There are a lot of initiatives like “zero avia” with hydrogen to power aircrafts.
The other thing is that the pie is probably smaller, at least for some time, so loyalty and customer experience become even more important. Engaging the customer beyond the pure travel experience and, whether it’s a flight or a cruise, engaging with also other activities. That’s something many other industry players haven’t really learned and are not used to, so there’s this whole skill question as well.
And digital is an opportunity that many airlines had not embarked on before the pandemic, but now they are realising that it’s definitely not a choice anymore. They have to cope with this now as fast as possible, and they’re facing quite a lot of challenges and almost need to maybe step back and ask how to start, how are we going to get our shopping window in order. How do we make sure we understand our customers better so that we can get more tailored offers? And all historic data and insight is being thrown overboard and gets irrelevant. There were already lots of indicators that historic data was getting less and less meaningful as customers are changing so much with this international lifestyle and globalization.
Now, for sure, travel decisions are made even in more real-time which means that the risks from the players in terms of last-minute bookings are almost the norm. So how do I ensure they do decide for me instead of others? How do I differentiate? How do I create a great digital experience? Customers are used to this with Google or Amazon every day.
Carl: I think the customer experience has changed drastically over the past two years when a lot of people discovered they couldn’t travel or that they couldn’t even get refunds on the money they would spend. People started putting different things higher up on their agenda. Things like instant flexibility and being able to change plans on short notice are much more important than in the past. As people haven’t travelled that much in the last two years, a significant number of people have saved a lot of money. They don’t have to commute to work, they don’t have to buy coffees, so the average person has saved a lot of money. I think that when travel starts to resume in 2022 a lot of people will be focused on the travel experience, making sure the travel experience is much more tailored to their needs. So the companies who are able to respond to that and really understand their customers will profit from that.
It’s also important to think that the customer doesn’t vanish when they finish the trip. They’re still there. Companies that managed to retain loyalty between purchase experiences will do better. What we found in our research in river cruising, which is the sector I’m now involved in, is that customers are very concerned about sustainability, it’s very big on their agenda. That’s great news because companies have been reluctant to make innovations that might be a bit awkward to customers, but they’re now willing to make changes to their lifestyle. The concept of flight shaming is certainly a theme for some people, and I think people will be more conscious about taking trips as often as they did and on shorter sectors such as trains.
Airlines need to be aware that will be on the consumer’s mind. There will be a guilt complex now built into some of the travel. They need to think about how they’re going to make customers feel comfortable about flying again even if they don’t fly as often as they did because patterns have changed. It will be interesting to see how the leisure and business traffic will develop differently at the moment airlines realize that business travel will take longer to recover. They will have to adjust their network and their products because they will get a mix of customers and maybe a bigger mix of long-haul customers travelling leisure but far fewer business travellers.
All these things will be making a very dynamic environment where we can’t just rely on what was true three or four years ago. We’re in a very different world.
Ursula: One for all is not enough anymore it’s almost like every traveller wants to create their own product, their own experience. This also influences the competitiveness. Lots of studies show that it’s not enough to just have an okay quality and the right price, but people now expect much more from a company, and sustainability and social responsibility is one of that. It’s also about that they want to be inspired, and they actually get inspiration every day in all kinds of activities that they are doing, particularly from a lot of innovative tech companies in their daily life, so they expect this from travel companies as well. They also expect good behaviour from the company, from the organization. They decide to buy based on how companies treat their staff, and the vision they create around sustainability. So it’s like they’re taking responsibility and it’s not that easy anymore as a brand in the way they approach customers and personalize in real-time.
There are a lot of cost challenges, as there were before. So if sustainability and taxes come up those who take real initiatives will benefit from it while others who need to be incentivized to change will see that travellers are not really prepared to pay so much more. And expectations keep rising. But, of course, this raises a lot of questions. How can they start to do this cultural transformation in a consistent way?
Carl: The question of how you get staff is actually a big challenge. A lot of travel businesses are struggling now because it’s suddenly not easy to recruit people and retain them, so I think many companies will completely re-engineer the whole people management systems and will create an environment that is actually fun to work in. Airlines and hotels are struggling to find the right people, and customers are even harder to read. The need to personalize offers, I mean really personalize, rather than apply very broad segmentation is greater than before.
In that sense, CRM is still in infant shoes. We still haven’t made enough progress on understanding customer motivations and tailoring very specific offers to customers. There’s a long way to go on this and the companies who really crack this will be winners in the future. There is an opportunity out there for the survivors and for the winners but it’s a tougher environment because it has generally become just much more difficult.
Ursula: Maybe another big upside, another opportunity is innovation has no limits anymore. The technology is out there now that maybe was still missing some years ago. The capabilities are there and the capabilities of sourcing globally are there, so even the staff can be sourced globally, so it can involve others to become innovative. It’s about managing these changes with a very clear vision and the right tools, and also showing proof points. It’s important to be there in these key moments of truth for the customer and for the staff.
Note: this conversation took place in London in December 2021.