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The travel sector 2023 - What’s happened, what’s coming & how can travel companies prepare?

As we approach the second quarter of the year, it’s time to take stock of the story in travel so far. Firebird co-founder Ian Finlay joins fellow Directors Chris Thompson, Matt Purser and Mark Bush for a candid discussion of key themes, challenges and recommendations.

“For many companies, 2019 might as well be a million years ago!”

Q. What has the start of 2023 been like for your contacts and clients?


Ian Finlay:

Across all of my portfolio, January was strong. As ever post-Covid it’s difficult to know what the right comparison year is: January 2022 was impacted by Omicron; January 2021 was the third lockdown. Early 2020 is probably the most relevant as it was pre-Covid, but for many companies their data was affected by how they treated postponements and refund credit notes (also known as RCNs) – meaning many have to go back to 2019 for a comparison. And that might as well be a million years ago!


February has seen something of a slow-down, which feels bigger than the normal post-January dip.


Chris Thompson:

I’d agree that it has generally been a strong period. The ski sector was very well sold prior to the winter, though poor snow hit demand in the new year– particularly for lower resorts. Saying that, it was not a huge issue, as most people didn’t have a huge amount left to sell by that point.


Tailor-made tours are doing well. Confidence seems to be there for big-ticket trips now, too. I’d say that margins are holding up well for operators – particularly those selling to the US outbound market for trips to Europe and further afield.


Matt Purser:

January was everything we hoped it would be – the strong sales many saw in December were an early peak but didn’t tail off, continuing in to the new year. Keeping an eye on the average selling price has been interesting. While this has gone up, it hasn’t necessarily meant more profit for companies.


Mark Bush:

From a data perspective, it’s been a very positive start to the year for the companies I work with. I would say this is in large part down to them becoming more data-led, looking harder at attribution, and making way for the arrival of Google Analytics 4, as well as the cookie-less future.

“There’s been an unprecedented interest in data tools like media mixed modelling”

Q. Was the start of the year as expected for the sector?


Matt:

In some ways, the big-ticket trips Chris mentioned did even better than expected, with customers wanting to tick off their bucket list.


Chris:

Despite the current economic pressures, there was confidence that there would be plenty of consumers with disposable income coming out of the pandemic. Broadly speaking, that has been the case.


Matt:

I’ve been speaking to insurance companies recently, and the good news is that they’re underwriting more and more travel businesses now because of how resilient the industry is. The appetite is back. A similar message has been coming from merchant acquirers: there’s been less failure than we thought might happen, which is positive for operators and consumers.


Ian:

Yes, all the companies I work with were confident about January given the strong December we had: this was reflected in their marketing campaigns. The February dip wasn’t anticipated though. My business clients are now working on improving their conversion rates and getting more bookings out of the existing enquiries they have.


Mark:

Following on from that, I’ve seen an unprecedented interest in certain data tools like media mixed modelling (the gold standard), with clients wanting to become better able to predict the success of different marketing channels and campaigns.

“Trying to second-guess what consumers are going to do can be impossible”

Q. Has anything surprised you in terms of consumer behaviour so far in 2023?


Ian:

One should never really be surprised by anything that happens in travel! I haven’t been surprised to see people accepting high prices: I think there is a general understanding of the pressures on price driven by the economy.


What has been surprising is the general shortening of lead-in times. We saw this last year which was understandable: people waiting and waiting to make sure that they would actually be able to depart. I’ve been surprised to see it this year so far though, with customers booking trips very close to their departure date – some even in the same month.


Matt:

Trying to second-guess what consumers are going to do can be impossible. On that lead-in time point of Ian’s, though, I think big knocks to consumer confidence usually take a good few years to properly recover from, as we wait to re-establish normal.


Chris:

There’s a bit of me that is surprised at how resilient the sector has been, given the well-publicised doom and gloom… perhaps we all just need a holiday!

“Mass market and fly-and-flop holidays could have a tough time”

Q. What sectors will be particularly strong or weak in 2023 and beyond?


Chris:

Anything tailor-made and high-end should continue to do well, although I think there may be a bit more price sensitivity going forward.


Looking ahead to the summer, mass market and fly-and-flop holidays could have a tough time. Expect to see a fine balancing act as operators try to juggle capacity versus demand at the same time as maintaining a margin.


Matt:

While online tour agencies (OTAs) have generally had a record-breaking start to the year, these tend to be in the lower average price bracket, which potentially means a difficult summer ahead for them. Among the demographics hit hardest by energy bills, travel will not be a part of their essential consumer spend – which will of course affect certain sections of the industry.

“Having good management information is going to be critical this year”

Q. What advice do you have for travel and leisure businesses right now?


Chris:

Embrace the current momentum, but assume nothing about how the market may look in 9/12/18 months. Retail spend is starting to come under pressure and some of that might start to impact travel.


Matt:

Considering management information and focusing on your KPIs will give you crucial details on what is and isn’t working. Thinking about flexible models would also be my recommendation, so businesses can dial things down when the situation calls for it, or, on the flip side, dial up.


Ian:

Agreed. Having good management information is going to be critical this year – even more so than normal. The better you are able to understand what channels are converting, which sales people are converting, what is happening with lead-in times, et cetera, the better you will be able to drive performance in what I think is going to be yet another unusual year.


The Firebird Partnership offers bespoke advice to support travel, leisure and education businesses with any aspect of growth, strategy, sales and fundraising.


Working alongside external experts, its specialist Directors lead the 12 modules of Firebird’s Foundations for Growth programme – with core focus areas including Product, Brand, Finance & MI, Regulatory and Culture – in a unique three-month review process for businesses.


Learn all about Foundations, and get in touch with Firebird, at www.firebirdpartnership.com

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