In this first edition of our Cost of Living series, we look at the travel industry. Based on our own research that surveyed 2,950+ consumers across the UK and US, we provide insights into how the sector has been impacted and how to take advantage of the opportunities on offer. We also take a look at some examples of brands that are getting it right.
As predicted, post-pandemic we’re living through the highest levels of inflation since the early 1980s, and while this has had varying levels of impact on the overall population, the general consensus is clear – consumers are concerned about spending and are cutting back as a result.
But what does this mean for brands? Luckily, it’s not all doom and gloom, and there are a number of opportunities brands can – and should – be taking advantage of in the midst of these challenging times.
38%
Are either significantly worse off or seriously struggling financially
31%
Are planning on spending money on holidays in the next 6 months
44%
Would reduce spending on holidays if money becomes tighter
*Based on a survey conducted by Croud consisting of 2,955 respondents from the UK and US
Let’s set the scene
This year we’re seeing the first peak travel period since 2019, where bookings are expected to reflect those from pre-pandemic times. But despite these high expectations, the notable increase in media costs paired with the cost of living crisis means it’s never been more essential for brands to achieve more with less.
On top of this, consumer sentiment in terms of how brands are expected to respond to the current financial climate – alongside the general lack of trust in travel brands to act in the consumer’s best interest – provides a clear message.
What is your brand doing to actively support consumers during the cost of living crisis? And if you’re not supporting consumers, why should they opt for your brand over others?
88%
Think that it's either somewhat or very important that travel providers are seen to be actively supporting them
31%
Don't trust travel providers at all to act in their best interests
38%
Would reduce spending by looking for cheaper alternatives
*Based on Croud’s survey of UK and US consumers
What’s clear is that consumers are united in their opinion that brands should be actively supporting them. Given the current climate, brands need to keep this front of mind so that they remain relevant and in good stead with the public – those that don’t could be negatively impacted when it comes to trust and reputation, which risks giving their competitors the upper hand.
Shifting behavioural trends
Since public behaviour is constantly changing, it’s essential that brands reflect on their approach to predicting and responding to risk and its impact on consumer behaviour, as well as taking into consideration the impact of generational divide. This point is particularly relevant when it comes to the travel industry.
WARC and Mindshare UK developed a helpful financial tolerance scale which attempts to group the general population into three groups:
- Finance negative – where the cost of living crisis is the main behavioural driver
- Finance neutral – those who feel minimal pressure on finances due to factors such as lack of children, mortgage payments etc.
- Finance positive – those who aren’t as badly impacted and as a result, enjoy a quicker recovery
These three groups are reflected in our survey, with finance negative being the biggest of the three, followed by finance neutral, and then finance positive. Being able to identify who sits in which group allows travel brands to effectively target them, using messaging that resonates with their current challenges and resulting preferences.
To add to this, as outlined in this AdWeek article, some key behavioural trends based on the last recession that we might see re-emerge include bargain hunting, denning (which prioritises the at-home experience) and safe havening (where consumers stick to the brands they know and trust).
This begs the question of how important brand loyalty actually is in the current economic climate. Our research indicates that a significant portion of surveyed consumers (38%) would opt to save money by looking for cheaper alternatives, signalling diminishing value when it comes to consumer loyalty.
20%
Would spend the money they would've spent on holidays on something else
61%
Would reduce spending on holidays in order to save money instead
38%
Would still spend on holidays but look for cheaper alternatives
Our survey indicates that brands should expect a lengthier decision-making process and cater to this user journey as best they can. That means reviewing keyword strategies according to the type of consumer, highlighting the value of choosing your brand over competitors – beyond brand loyalty, and offering support across all touchpoints and stages of the purchasing cycle.
It’s important to note that when it comes to travel, each consumer generation prefers to be targeted in quite different ways. For instance, according to research conducted by QuMind, social media ads are the preferred method of communication for those under the age of 45, however, the use of influencers is far more effective for those under the age of 25. This is an interesting point when put into the context of building brand trust, since influencers are typically more trusted than brands themselves. According to our research, 89% of surveyed consumers in the UK and US either only somewhat trust, or don’t trust travel providers to act in their best interests. Finding a way to build trust is likely to be a key differentiator when it comes to gaining competitive advantage.
Price cuts alone won’t cut the mustard
Our research suggests that when it comes to the travel industry, consumer purchasing behaviour across the UK and the US is, unsurprisingly, heavily influenced by price. Fifty-four per cent of respondents in the UK would think twice about purchasing a holiday if the prices are too high, while 22% would be prevented from purchasing if promotions aren’t strong enough. It’s interesting to note that only 17% of respondents in the UK wouldn’t purchase a holiday because they don’t actually have a desire to go on holiday – showing there is still plenty of appetite for holidays overall, and a big opportunity for travel brands.
This is corroborated by a survey conducted by Opinium, where 57% of respondents stated that if prices need to go up then brands should keep them at a reasonable level, while 36% felt strongly that prices should stay the same. Twenty-eight per cent of respondents stated that the introduction of more promotions would positively influence their purchasing behaviour.
But price alone won’t cut the mustard. It’s important that brands justify price increases with as much value as they can offer. The same survey conducted by Opinium also indicates that respondents would appreciate more rewards for existing customers’ loyalty (30%).
However, given the tendency to look for the cheaper and better value options as a result of the cost of living crisis, while loyalty programmes are something that may help to retain existing customers, they should also be something that prospective customers can benefit from. For example, instead of solely rewarding keen travellers, could your brand offer loyalty programmes for new or less frequent consumers? Some options could include free cancellation or upgrades to airport lounges – but this will heavily depend on understanding your audience and how you segment your offer.
According to research conducted by QuMind, there are several added benefits that respondents look for when buying a holiday, such as meals included (18%), free cancellation options (18%) and free hotel upgrades (15%). So, in order to gain competitive advantage, it’s important that brands look to provide consumers with value for money, flexibility and practical ways they can potentially add more value to their purchase.
Long story short, brands need to highlight their value to consumers – why should someone go for your brand over others? What incentives actually make sense and resonate with them and their challenges?
The possibilities are endless – and consumers are all here for it. As marketers, our role is to foster feelings of trust, reassurance and support – and this is key when it comes to differentiating your brand from competitors in an increasingly crowded and aggressive market.
Achieving more with less
So given high consumer expectations, how can travel brands ensure that they’re achieving the most while keeping their costs down?
Travel Weekly recently reported on a survey conducted by Azerion where respondents were asked to identify what type of content influenced their travel purchase decisions. Advertising was cited as being an important factor, as well as content more generally, such as travel articles. This suggests that consistently providing useful content, alongside brand advertising, is particularly important when it comes to influencing consumer behaviour. It’s also important that brands play the long game – even if someone isn’t ready to purchase right now, it’s crucial that your brand remains front of mind for when they do come to book.
Online platforms such as Pinterest are recording 105% increases in searches for ‘dream holiday’, as well as searches such as ‘budget planners’. This suggests that while consumers are impacted by the cost of living crisis, they do still want to go on holiday but want to do so in the most cost effective way.
How travel brands are responding
Need a bit of inspiration? Sit back and take a look at these examples of travel brands that have pivoted their marketing to appeal to holidaymakers during the cost of living crisis.
Tui’s Next Summer Sorted campaign
Consumers worried about big upfront costs have their concerns managed with Tui’s Next Summer Sorted initiative. By introducing the option to pay the cost of the holiday in instalments, Tui provides consumers with the flexibility they need to justify and commit to spending on their travel plans.
Great for new customers, Tui is capitalising on the trend of declining brand loyalty, offering an incentive to favour their brand in the sea of competition – after all, based on the results of our survey, 88% of respondents in the US and the UK think that it’s either somewhat or very important that travel providers are seen to be actively supporting them, while 38% of respondents would reduce spending by looking for cheaper alternatives.
Singapore Airlines provides eligible customers with unlimited free wifi
Building on brand loyalty and off the back of customer feedback, Singapore Airlines have increased the value of their offer by providing business class and loyalty programme customers unlimited free wifi throughout the duration of their flight.
In demonstrating to existing customers that they listen to feedback and act on it, Singapore Airlines have greatly improved the in-flight customer experience, providing as much value as they can for money.
Travel Republic x The Sun’s Holiday Giveaway campaign
To celebrate their 20-year anniversary, Travel Republic partnered with The Sun as part of their ‘Power to the People’ manifesto, which aims to provide customers with value for money through offers, great customer service and security when it comes to protecting their trips.
Doubling down on brand loyalty, Travel Republic has offered readers the chance to win one of 50 holidays – catering to short, medium and long-haul destinations. Using an omni-channel approach with content appearing on the radio and press, Travel Republic demonstrates the importance of value-based messaging in order to resonate with their target audience.
Summary
Despite challenging financial times for consumers and brands alike, there are a number of approaches brands can take in order to seize opportunities and gain competitive advantage. While the travel industry has experienced a big hit over the past few years, the bounce back has been strong, and this trend is looking likely to continue into 2023.
Our survey suggests that as a result of financial difficulties from the cost of living crisis, consumers are extending their decision-making process in search of the best deal. They also expect brands to actively support them – despite having limited trust that they will – so brands who cater to this will likely reap the benefits and stand out from the competition.
The key for brands is to identify their audience, segment it according to financial impact, and justify any price increases with added value.
Stay tuned for the next instalment of our Cost of Living series, and in the meantime, don’t hesitate to get in touch for more information on how Croud can help support your brand and help it thrive.
