December 12, 2017
2017 is shaping up to be a record-breaking year for the travel industry. Between January and August, destinations worldwide welcomed an incredible 901 million international tourist arrivals. That’s a 7% increase on 2016 and well above the growth of previous years.
This strong performance might come as a surprise to many given the challenges the sector has had to navigate. From Brexit uncertainty, civil unrest and a new US president, it has been far from plain sailing. And there have been inevitable winners and losers. However, the overall growth is a testament to the industry’s ability to respond. Here’s a recap of some of the highs and lows over the past year, and ways travel companies can continue the growth trajectory in 2018:
Asia and the Middle East dominated fast-growth destinations: International travel has continued to increase at pace, with consumers looking for more exotic and culturally rich destinations. Mastercard’s 2017 Destination Cities Index indicated that Asia and Middle East destinations were the ones to watch, with Osaka, Chengdu, Colombo and Abu Dhabi featuring high on the list of fast-growth destinations over the past 12 months. This trend shows no signs of abating, bringing with it exciting growth opportunities for travel companies to do business in new markets. However, companies should be taking the simple step to re-examine cross-border payment strategies to satisfy customer demand while keeping the costs of international transactions low. As well as expanding payment options to match preferences in new international markets.
Airline collapses delivered a warning over supplier default: The collapses of Monarch and Air Berlin were distressing for thousands of travellers and employees. The move into administration from Monarch alone was expected to impact 860,000 people who lost bookings, 110,000 holiday makers overseas and of course its 2,100 employees. But the impact extends far beyond holidaymakers and employees, with supplier default having a knock-on effect on many other individuals and businesses. Our own analysis shows 28 airlines ceased trading in 2017 alone. Travel companies must learn from this and look to digital payment methods to protect themselves and their customers from supplier default.
Currency volatility dominated: From Brexit fallout to an unexpected win for President Donald Trump, major political and economic events across the world have seen currencies fluctuate dramatically. This volatility has become the new normal, making it increasingly difficult for travel companies to predict the final cost of a holiday months in advance. They are already operating at tight margins and a sharp drop in the value of currencies could represent huge losses when it comes to settlement. Some companies pass this on to customers which ultimately doesn’t benefit anyone. This highlighted the need for companies to protect themselves from future currency fluctuations through how they pay, such as locking in FX rates at the time of booking.
Brexit uncertainty continued: Despite being nearly 18 months on from the UK’s vote to leave the EU, we are still a long way from really knowing exactly how the travel industry will be impacted. The recent news that airlines are drawing up plans to alert passengers that advance bookings cannot be guaranteed after Brexit highlights the level of uncertainty that has prevailed in 2017, and demonstrates how travel companies have been using this time to prepare for all eventualities.
The travel industry has done well to continue to grow against a backdrop of complex economic and political factors. I have no doubt 2018 will also bring its fair share of challenges, but the lessons learnt from this year will give travel companies the tools they need to they to minimise the impact of global events, while maximising the opportunities of growing international markets present.
For more comment and insight take a look at our other blogs.
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