Future of travel: 'vacc-ications', higher airfares and cheaper hotel rooms - Business Extra Podcast

The future of travel in the wake of the Covid-19 pandemic will be characterised by higher airfares, cheaper hotel rooms and fewer but longer trips, according to industry expert Sadiq Gillani.

Speaking to the Business Extra podcast's Mustafa Alrawi and Kelsey Warner, Mr Gillani, a lecturer at Stanford University's Stanford Graduate School of Business, outlined what we are likely to experience when travelling as the recovery picks up pace.

There will be an imbalance of capacity, for example, when comparing airline seats with hotel rooms and cruise cabins. This is because most carriers have grounded parts of their fleet but few hotels have shut down permanently, he said.

Even as demand comes back at the end of this year and into next year, it will take airlines a long time to build back up to where they were before the pandemic, in terms of capacity.

“So that means that at least for the next couple of years, we're likely to see much higher airfares coming globally, as a result. Now, if you look at hotel rooms, it's actually quite different … you're likely to see cheaper hotel rooms, because the demand still will not come back, and particularly the business traveller, which is a huge component of both sectors, but particularly on hotels, it's not coming back,” said Mr Gillani.

“Hotels are going to have to [offer a] discount to be able to attract people back in. And also … there may not be air service as much as before into certain destinations, which again, means that the hotels will have to [offer a] discount.”

Fewer but longer trips will also be a feature of the post-Covid travel landscape, he said.

“So already during the pandemic, we've seen people travelling for twice the length they were before, so an average of nine days instead of four days. And they're taking obviously fewer trips … So this has quite a big impact on the way people travel,” said Mr Gillani.

This, coupled with the requirements for PCR testing unlikely to be disappearing soon, means people will be more circumspect about when and how they travel, resulting in “more meaningful trips and travelling with purpose”.

“It also means that they're going to be willing to pay more for luxury and splurge” to compensate, such as for seats in premium cabins, he said.

Flexible booking and cancellation terms and the popularity of staycations are also likely to remain features of travel for some time.

The first trip taken by people after they are fully inoculated against the coronavirus will also become a new opportunity for the industry, he said.

“I think there's also an interesting piece around ‘vacc-ications’. That's the first vacation people would take after they're vaccinated. We're seeing those first flights. And those first trips after having in many cases people haven't travelled for no one or some cases will probably 18 months before their first trip. And that first trip will be very memorable,” said Mr Gillani.

While all airlines have been affected to differing degrees by the crisis caused by the pandemic, "the immediate winners are the airlines with large with large domestic markets, particularly the US carriers" because of the levels of government support they received, he said.

"So those will be the short term winners, US carriers and low-cost carriers. The longer term winners, I see coming out of the crisis, to be those who could maintain a large fleet network because there'll be a shortage of capacity."

However, innovation could take a backseat as the industry grapples with an overall debt burden that has doubled.

"I think that the innovation will come with those from strong balance sheets, because, again, because of this debt burden, most airlines around the world have kind of suspended all investment when it comes to technology innovation, because obviously, they've been fighting for that survival," said Mr Gillani.

"US carriers and Middle East carriers ... they're the ones to watch when it comes to driving innovation."

In this episode:

The future of travel (0m 36s) The trends showing the future of travel (1m 58s) Emerging new archetypes (9m 31s) Revenge travel (16m 10s) The winners out of the crisis (22m 30s)

You can watch Sadiq Gillani's speech at the Stanford MBA reunion here.