What does the Covid-19 vaccine mean for travel?

14 Dec 2020 · 8
At long last, this year has yielded some hopeful news! In a historic moment, Pfizer was the first to announce a vaccine that protects 90% of people from COVID-19. That was shortly followed by similar announcements from Oxford University and Astra-Zeneca, Moderna, and Gamalaya. I think we can all breathe a collective sigh of relief that this dystopian nightmare is almost over.
It’s no secret that the travel industry suffered greatly this year. In my own company, we experienced a drop in bookings of over 95% at the peak of the crisis back in April. But I’m really proud to say that this did not break us. If anything, TravelPerk is emerging stronger from the ashes.

Changing how we measure success

In the time we now call “B.C”—_before COVID—_we measured our success with gross merchandise value (GMV). With bookings almost entirely gone, we couldn’t keep doing that. Instead, we decided to measure travel budget under management (TBUM)—the sum of our customers’ yearly travel budgets, as a great leading indicator of future revenue.
Another important thing we did was to analyze our customers’ needs in a COVID and post-COVID world. We identified two “epochs” - the “new normal” and the “next normal”. The “new normal” was all about learning how to navigate life during the pandemic. The “next normal” is everything that comes after.
So, what are the trends that reflect the “new normal”?

Trend 1: The need for flexibility

A key indicator that customers are looking for more flexibility is that demand for FlexiPerk has gone up. This is a part of our service that enables customers to change or cancel any part of their trip at any time, without incurring additional costs or penalties.
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The share of purchases coming from this service was highest at the peak of the pandemic in April to June. Since then, we have sustained higher levels of FlexiPerk GMV when compared to the figures from January and February. This indicates that FlexiPerk customers were more comfortable booking travel in the face of uncertainty. That’s why we think that the need for services that enable companies to book flexible business trips will be higher than it was pre-COVID.
In the summer months, we saw a drop in our GMV share generated from FlexiPerk. This could be because customers not using FlexiPerk felt secure traveling without coverage when the restrictions relaxed. That being said, the service’s GMV share remained higher than in pre-pandemic times. We observed that this was due to FlexiPerk customers continuing to travel consistently, and other customers converting to the service during the pandemic.

Trend 2: Shorter flight search windows

During the first wave of the pandemic, we saw that many travelers were searching for flights more than one month in advance. In fact, between 36% and 60% of weekly searches were done for flights more than a month away! That’s a lot higher than usual, highlighting the low flight availability during the pandemic and people’s desire to plan trips for afterward.
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This trend has changed since the summer. In fact, less than 10% of searches on our platform are conducted for trips more than a month away. We also noticed that searches for trips less than 6 days away are now almost equal to searches for trips between 7 and 30 days away. This is an important change from pre-COVID times, when the majority of travelers searched for trips 7 to 30 days away.
That tells us that the search window is now shorter than before COVID and at the peak of the pandemic. This could mean that travelers are waiting to book closer to their departure dates in case there are any health restrictions and changes that could affect their trips.

Trend 3: The industry will need to learn to live with cancellations

Cancellations for flights and hotels in April rose to 90%, which makes sense given that we were all in lockdown. These rates stabilized from July to October, and we’ve seen another spike in cancellations in November as a result of the second wave. Back in July when the restrictions were relaxed, flight cancellations decreased substantially and rose again by 4% since then. Of course, this cannot be compared to the cancellation rates during the first wave. It does, however, indicate that customers are more mindful of their possibilities when traveling.
Even though flight cancellation figures are more stable, they are still three times higher than they were before the pandemic started. This tells us two things. First, customers will need more “elastic” trip options to account for the uncertainty brought on by the virus. Second, they are more safety-conscious and are likely to cancel a trip than run the risk of exposure to COVID-19.

Trend 4: Trains are increasingly a better option for domestic travel

We’ve noticed a large uptick in certain flight routes being replaced by trains on a regional level. For example, our data shows that in Germany, 80% of domestic trips are booked on trains rather than on planes. This trend remained throughout the summer when flights became more available again. Pre-COVID, around 66% of domestic trips in Germany were booked on trains.
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This shows us that customers are more comfortable taking trains than flights for domestic trips, possibly because of a perceived higher level of safety from infection. It could also mean that people are changing the way they travel within their own countries. We believe that the ease and efficiency of travel by train will likely extend its popularity for domestic travel well after the pandemic. As an added bonus, trains are also great for travelers looking to reduce their carbon footprint!

Trend 5: Companies are stepping up their duty of care game

Back in the summer, we conducted a survey about travel protocols in the post-COVID era. Our research showed that 50% of companies have implemented new protocols for business trips in the next normal. About 47% of these policies include quarantine and health protocols, and information about restrictions in different countries. This implies that companies are thinking about what business travel will be like going forward. It also shows that health and safety will play a larger role in corporate business travel policies.

Other things we’ve noticed

Car rental cancellation rates

Cancellation rates for car rentals have been more stable and lower at the height of the pandemic than flights, hotels, and trains. This could be because people associate the relative privacy of rented cars with safety from infection.

Longer trip duration

Trip duration increased during the COVID-19 crisis. Our data shows that the average business trip lasted 4.4 days in the pre-COVID era, and rose to 7.6 days in the first wave. They dropped down to about 5 days in summer, and are now back up to 6 days in the second wave. Travelers could be staying at their destinations longer because of possible quarantine requirements. Companies could also be sending their employees on longer trips to avoid the “back and forth” of shorter trips. We do believe, however, that trip durations will go back to normal as this is what happened in the summer.

So, what does that mean for the “next normal”?

We’ve spoken to our customers and spent the year analyzing the market. That’s how we identified 6 factors that will define travel in the next normal. Here’s a quick overview of what we predict they’ll be, and how we’ve future-proofed our product as a response:
  1. Flexibility - Travel will need to make room for changes in trip schedules and last-minute bookings. So, we developed —a way for you to change and cancel whatever you need, no questions asked.
  2. Safety - Travelers will be more concerned about cleaning procedures, transmission levels, and exposure to others. In 2020, we created and   to keep our users up to date on any health-related travel conditions.
  3. Savings - The time has come to be creative about saving money, which is why we launched our to help you save up to 25% of your travel spend. We also negotiated special rates with our partners.
  4. Sustainability - The travel industry as a whole is shifting towards “green” travel. With , we help our customers offset their carbon footprint for each business trip taken.
  5. Efficiency - We’re always working to empower our customers to book autonomously. Our platform is a one-stop-shop for everything related to business travel—we even try to make it easy for companies to integrate TravelPerk into their workflows through APIs.
  6. Inventory - People are going to want more options than they did before. We are expanding and enriching our offer through special rate partnerships with hotels and airlines, , and a growing , to name a few.

Final Words

The vaccine is a sign that we can all slowly start getting back to our lives. This year felt like someone hit “pause” on the world, and now we’re trying to start it back up again. I’m thrilled that we’re ending the year on such a positive note and can go into 2021 with a new world to look forward to.

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Written by
TravelPerk Co-founder & CEO
Train Plane Travel

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