Future in flux How to outmaneuver uncertainty in a new era of travel - Accenture
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Future in flux How to outmaneuver uncertainty in a new era of travel
How has China’s
travel industry been
performing?
Across the globe, the travel industry has been severely impacted by the COVID-19 pandemic,
and China has been no exception. Both domestic and international tourism suffered significant
declines. In the first half of 2020, domestic tourists made 1.2 billion trips, a 62% drop year-on-
year,1 while outbound international trips numbered only 0.5 million, a 78% drop year-on-year.2
Monthly Travel Willingness Index (TWI) for Chinese consumers
5
3.76 3.9 3.74 3.77
3.6 3.63 3.64
4 3.47
3.27 3.3
3.04
3 3.58
2 2.68 2.58 2.6
2.41 2.49
2.3 2.23
1 1.73
0.99
0.69
0
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov
2019 2020
Year-on-year comparison (2019 vs. 2020)
-20 +9%
0
-20
-40 -33% -26% -34% -30%
-39% -34% -39%
-60 -50%
-80 -70%
-77%
-100
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov
Source: 2020 Travel Willingness Index (November) 3
2 Future in Flux: How to outmaneuver uncertainty in a new era of travel
However, thanks to a centralized pandemic response
system, coupled with the general public’s compliance
with rigorous countermeasures such as mask-wearing,
the COVID-19 pandemic in China is largely under control
across much of the country. As a result, the travel industry
has started to rebound back, in terms of both traffic and
spending.
The China Tourism
Academy projects
Domestic travel has recovered to nearly pre-pandemic that travel
levels, with 48 million passengers having flown on industry revenue
domestic routes in China in 2020, representing 98% of
traffic during the same period in 2019.4 The China Tourism
in the second half
Academy projects that travel industry revenue in the of 2020 will be
second half of 2020 will be approximately 2.12 trillion yuan, approximately
representing a 231% increase from the first half. Domestic 2.12 trillion yuan,
hotel occupancy has also rebounded from as low as representing a
10% during the height of the pandemic to around 60% in
recent months.5
231% increase
from the first half.
However, due to travel restrictions imposed by the
government, there are still headwinds for international
travel, which accounted for 14% of mainland China’s travel
industry in 2019.6 Markets with a higher dependency on
international travel and transit passengers such as Hong
Kong and Taiwan have still been severely impacted. In
September 2020, Hong Kong’s inbound and outbound
passenger air traffic totaled 100,000, a 97.9% year-on-year
decrease.7 Although there have been discussions between
these markets and other neighboring countries on
establishing “travel bubbles” for travelers that remove the
requirement for a 14-day quarantine (see Exhibit 1), they
have not been implemented yet on a broad scale.
3 Future in Flux: How to outmaneuver uncertainty in a new era of travel
Exhibit 1: List of international travel policies announced or under discussion
Territory / Country Policy discussed Status
China Bilateral “Fastlane” to allow for essential Implemented in
Singapore business and official travel between six Jun 2020
Chinese provinces and Singapore; visitors
to China must be sponsored by a Chinese
company or agency but are not subject to
quarantine
Mainland China No quarantine required for visitors who show Implemented in
Macau negative test results within the last seven Sep 2020
days
Mainland China No quarantine required for Hong Kong Implemented in
Hong Kong residents in Guangdong and Macau; subject Nov 2020
to presenting negative test results within the
last three days under “Return2HK” policy
Mainland China No quarantine restriction for tourists with Implemented in
Singapore “Air Travel Pass,” who remain entirely within Nov 2020
Mainland China for the last 14 days and
present negative test result upon arrival
China “Fastlane” for business travelers on short- Implemented in
Japan term trips or workers assigned overseas who Nov 2020
produce negative test certifications
Hong Kong Bilateral air travel bubble with no restrictions Originally to be
Singapore on travel; visitors are not subject to launched on November
quarantine but must show negative test 22 but postponed till
results (max of 200 passengers each way / 2021 due to “4th wave”
day) of cases in Hong Kong
Source: Accenture analysis, 2020
4 Future in Flux: How to outmaneuver uncertainty in a new era of travel
What are the future
scenarios for the Chinese
travel industry?
Accenture has developed four future scenarios for the global travel industry that reflect various
potential outcomes and impacts of key external factors that influence global travel demand (see
Exhibit 2).
Exhibit 2: Our four potential travel futures8
01. 02. 03. 04.
Remarkable Collective Market Darkest
recovery coexistence mayhem days
Travel companies Along with the world, Amid permanent The uncontrolled virus
must act to take full travel companies volatility, travel upends the industry,
advantage of a burst learn to coexist companies must and travel companies
in pent-up demand, with the virus shrink and refocus on must radically rethink
which largely returns through discipline remaining areas of their business models.
to 2019 levels by and containment, demand to survive. Many fail.
2022. and travel makes a Some companies fail.
tentative return.
Given the rebound in domestic travel, we do not expect the “darkest days” scenario to transpire
for China. Rather, we expect that at least for the domestic travel industry, a “remarkable recovery”
or “collective coexistence” future scenario is quite likely. However, the international travel market
still remains volatile since the virus is not yet fully contained globally. Therefore, for the international
inbound and outbound travel market, the “market mayhem” future scenario remains a possibility in
the short and medium term.
5 Future in Flux: How to outmaneuver uncertainty in a new era of travel
What shifts in market
dynamics and customer
behavior have occurred
in China?
Although China is on the way to recovery, things will not exactly go back to the way they were
before. The pandemic has transformed the way Chinese consumers travel and what they
expect from travel companies. We’ve identified several key shifts in local market dynamics and
customer trends that have implications for the specific actions that travel companies should
take to prepare for the future travel scenarios described.
Increased emphasis on domestic
spending
Consumer confidence is starting to rebound. In May, the Chinese government
issued the directive of “domestic circulation”, which prioritizes domestic
consumption over foreign trade to drive future economic growth. Given the
limited opportunities to travel overseas where the pandemic is still spreading,
we expect that domestic travel will account for a significant share of Chinese
consumer spending going forward. We have already started to witness this:
During the recent October national holidays, spending on domestic travel was
467 billion yuan, representing 70% of 2019 levels. 9
Reservation-based planning
Prior to the pandemic, Chinese consumers were more accustomed to buying
tickets to tourist attractions on the day of their visit. However, new government
measures such as capacity limits at tourist attractions and real-name pre-
registration for ticket purchases mean that consumers now plan and make
reservations ahead of time, and often through digital channels. During the first
four days of the October national holiday, Ctrip recorded a 100% year-on-year
growth in online reservations for tourist attractions on its platform, hitting a
record high. 10
6 Future in Flux: How to outmaneuver uncertainty in a new era of travel
Self-guided and contactless travel
Having survived a major pandemic, Chinese consumers now have a much
higher awareness of the importance of hygiene than in the past. Recent
research showed that 40% of Chinese travelers listed COVID-19 prevention
and control measures as their most important concern when planning their
travels.11
Furthermore, before the pandemic, Chinese consumers preferred traveling
in large groups as part of a guided tour. However, there is now a rapidly
emerging, clear preference for private, self-guided tours that allow people
to avoid crowds when they travel. Many wish to reduce unnecessary direct
contact with other travelers or staff as much as possible across their entire
journey.
Chinese consumers' expected travel product preferences,
next 12 months
Self-driving tour 71.5%
Exclusive small
group
65.5%
Semi-guided tour 54.5%
Group tour 11.0%
Source: 2020 ITB China travel trends report12
“Bleisure” travel
The pandemic has accelerated the transformation of how and where people
work. As people increasingly work remotely, they seek flexibility and autonomy
in choosing their ideal workspace. In essence, they are redefining what it
means to “work from home.” A new “bleisure” trend has emerged in which
people combine both business and leisure when traveling. According to a
market survey of 200 Chinese travel agencies/companies, two-thirds of those
surveyed believe that more corporate travelers would arrange personal trips
during their work travel in the coming year.13
7 Future in Flux: How to outmaneuver uncertainty in a new era of travel
What actions should
travel companies take
going forward?
In response to these new local dynamics, Chinese travel companies have
the opportunity to take action in five areas: Traveler Experience, Retail
in Travel, Intelligent Travel Services, Intelligent Operations and Living
Systems. Across these areas, we’ve identified several no-regret moves that
companies should start considering, regardless of the travel future. There are
also several measures that are relevant for specific scenarios; these are more
aggressive or bolder moves that companies should take, depending on how
positive or negative the outlook is.
8 Future in Flux: How to outmaneuver uncertainty in a new era of travel
01 Traveler experience:
Elevate travel experiences with new
technologies to address new behaviors
Demand will rebound to varying degrees based on each future travel scenario. Regardless,
when they do travel, customers will have heightened expectations about their end-to-end
experience, particularly with regards to health and safety. Many companies have already
leveraged the latest technologies to launch services that do not require person-to-person
interactions. Beyond this, they can use technologies such as 5G and virtual reality (VR) to offer
travelers an enhanced experience in a combined real/virtual environment without additional
human contact. These technologies not only address travelers’ demand for contactless
services, but also provide an enriched and immersive experience.
An example of how companies have successfully integrated the offline and online
travel experience for customers is the “Digital Yunnan” project. The province of Yunnan
partnered with Tencent to develop a mobile app that enables customers to watch live
broadcasts of famous tourist sites in the province, book tickets for various attractions,
and navigate the area with easily accessible information on restaurants, hotels and even
nearby restrooms. This fulfills customers’ desire for self-guided travel by giving them
necessary information to help them plan without having to directly interact with others.
Screen captures of Digital Yunnan mobile app interface
9 Future in Flux: How to outmaneuver uncertainty in a new era of travel
For its recent “Fantasy of the Inner World” exhibition in June 2020, which featured art from
Vincent Van Gogh, the National Museum of China used technology to transform the way
visitors experience the artwork. As the original paintings could not be displayed locally in
China, the museum used 360-degree holographic panoramic laser-projection equipment
to display and magnify the artwork on the ceiling, wall and floors of the museum to
enhance the way customers could interact with the art. Instead of a tour guide, customers
used VR headsets, which provided visual storytelling to help them understand the origin
and meaning behind the artwork.
“Fantasy of the Inner World” exhibition hall
10 Future in Flux: How to outmaneuver uncertainty in a new era of travel02 Retail in travel:
Develop or reshape value propositions across
the purchasing journey to stimulate demand
Regardless of the extent to which travel demand rebounds, companies need to be creative
about how they entice customers to engage with their brand and, more importantly, complete
the purchase.
This can be achieved by adapting the overall purchasing journey. Customers may have a
desire to travel, but they may not be confident enough to complete the purchase given market
uncertainties. Companies can motivate and encourage customers to actually spend and
complete the purchase by reaching them through new channels and touchpoints.
Live-streaming has always been a popular form of entertainment for Chinese consumers, as
evidenced by Douyin, China’s TikTok. In its live-streaming broadcasts, Ctrip featured James
Liang, the Trip.com Group Chairman, who dressed in traditional Chinese gowns and other
outfits as a way to drive traffic and entertain viewers through cultural appreciation. In one
hour alone, Ctrip was able to generate 27 million yuan in sales by using entertaining content
to reinforce and encourage customers to travel more. 14
Screen captures of livestreaming broadcasts hosted by Ctrip featuring James Liang,
Trip.com Group Chairman
11 Future in Flux: How to outmaneuver uncertainty in a new era of travelBeyond the purchasing journey, companies need to think about how to restructure their
existing offerings and/or explore new consumption opportunities. Given that customers
have changed their travel behavior, revenue earned through traditional sales touchpoints
and products may be more limited going forward. By adapting their propositions, companies
will also drive loyalty among their existing customers, who expect brands to recognize their
evolving behaviors and needs and retain their relationships with the brands who best address
them.
Marriott has recently launched a new program called “Work Anywhere,” which brings the
office to the hotel. Under this program, there are three initiatives: Day Pass, which provides
guests with access to a hotel room for the day and includes business center services; Stay
Pass, which provides access to a hotel room for 36 hours and includes business center
services; and Play Pass, which targets the “bleisure” traveler by offering businesspeople
and their families child care services as part of their stay.
12 Future in Flux: How to outmaneuver uncertainty in a new era of travelJinling Hotel Group created a new consumption opportunity by launching a food-delivery
service from its seven hotels in Nanjing in the first quarter of 2020. By repurposing kitchen
and frontline staff, the Group earned 8.4 million yuan in revenue in only 22 days. The
Chinese government has been supporting airline companies to pursue similar consumption
opportunities by granting them Food-Production Licenses that allow them to produce and sell
food beyond the restricted area in the airport.
Companies can also explore forming partnerships or alliances with each other or with
companies outside travel in order to create new demand. For example, hotels such as Hilton,
South Pacific and Grand Metropark have signed up some of their properties in China to a
delivery platform run by Meituan. This allows them to deliver their dining services to local
customers.
Finally, when the economy is close to or at full recovery, companies can be even bolder and
innovate new product and service offerings for customers beyond traditional travel products.
Doing so will not only help maintain engagement and awareness with existing customers, but also
attract customers who previously did not interact with the brand as travelers.
AirAsia recently developed Ourfarm, a B2B e-commerce platform for the Malaysian market
that leverages its cargo, logistics and payments capabilities to help Malaysian farmers connect
with—and sell fresh fruits and vegetables to—hotels, restaurants and supermarkets. With this
platform, AirAsia created a new proposition that not only helped them reach a new group of
customers, but also expanded their offerings beyond traditional travel into a new retail space.
Screen captures of the Ourfarm online order platform
13 Future in Flux: How to outmaneuver uncertainty in a new era of travel03 Intelligent travel
services:
Leverage data analytics to support business
and operational strategies
Regardless of the travel future, the pandemic has altered the way customers travel to such a degree
that companies cannot solely rely on their past understanding of customer behavior. Leveraging
data analytics tools will help companies gain the necessary insights into what customers want and
structure their offerings accordingly.
China Eastern has been stressing the importance of omnichannel data analytics to improve
customer understanding and product customization. Earlier in the year, as the pandemic was
coursing through China, the airline used analytics to identify an untapped opportunity: weekend
travel. Based on this insight, the company designed and launched the “All you can fly” Weekend
Pass, which allowed customers to enjoy unlimited weekend flights for the rest of the year for
3,322 yuan. Over 150,000 people used these passes in just two weekends—a strong indicator
of the offering’s success.15 Other airlines soon followed suit and China Eastern subsequently
launched a promotion for unlimited weekday flights to target business travelers as part of the
broader “bleisure” trend.
Screen captures from China Eastern’s website explaining how to
redeem the “flight pass”
14 Future in Flux: How to outmaneuver uncertainty in a new era of travel04 Intelligent operations:
Realize operational efficiencies through
cost-reduction initiatives
Companies should not only think about how to stimulate demand, but also focus on driving
operational efficiencies. The degree to which companies should prioritize these initiatives depends
on the overall market outlook. Under the “remarkable recovery” and “collective coexistence” futures,
companies should explore strategic cost-rationalization opportunities, but not necessarily invest in
major operational transformations. By targeting specific components of their back-end operations,
they can realize operational efficiencies without having to undertake a large-scale effort and by
potentially leveraging existing digital solutions.
Automated services that companies have launched not only address customers’ needs for
contactless experiences, but also yield benefits in terms of cost and operational efficiencies on the
back end.
FlyZoo Hotel, an Alibaba Future Hotel in Hangzhou, has successfully automated its front-end
hotel services. With these services, travelers are able to enjoy a seamless check-in experience
via a mobile app and artificial intelligence (AI) facial recognition. They can order room services
through voice AI and robots and check out using an invoice machine. With these technologies,
FlyZoo Hotel is able to reduce its staff-to-customer ratio to 0.5, as compared to 2.0 for a
traditional hotel.
FlyZoo Hotel service delivery by robot
15 Future in Flux: How to outmaneuver uncertainty in a new era of travelAirlines have also realized operational efficiencies by enhancing their back-end
infrastructures. China Eastern launched an internal communication system called MUSS,
which automatically pulls all cabin, ground service and luggage-handling staff serving the
same flight into a group chat for more efficient preflight communication.
Under the “market mayhem” future scenario, in which revenues do not rebound, there should
be an all-out focus on aggressive cost-reduction initiatives. This means streamlining business
processes through outsourcing and reducing the number of fixed workforce positions, thereby
reducing labor costs. With these measures, companies can shore themselves up for the short-
to-medium term without sacrificing the ability to “keep the lights on.”
16 Future in Flux: How to outmaneuver uncertainty in a new era of travel05 Living systems:
Migrate and transform legacy IT systems
to enable a more nimble and efficient
organization
Companies should also consider revamping their underlying system infrastructure. Depending
on the overall market outlook, this can be to either support the increased demand that comes
with a positive recovery, or to enable a more agile organization if demand is at a standstill.
Under the “remarkable recovery” or “collective coexistence” futures we anticipate, demand for
travel will return. But given shifts in customer behavior, we expect a surge of activity on digital
platforms. Migrating to cloud architectures will help companies cope with this increase in
traffic. Cloud computing enables more efficient use of resources, thereby helping enterprises
to respond quickly and efficiently to customer needs and also expand their scope of services.
Shiji Group has signed a partnership with The Peninsula Hotels to provide the hotel group
with Shiji Enterprise Platform, a scalable, secure and modern hospitality cloud technology
platform. The platform provides state-of-the-art technology and architecture and allows
connectivity between systems to facilitate strategic business success.
However, under the “market mayhem” scenario, scalability and agility are crucial for survival. In
that circumstance, migrating to the cloud should not be the focus. Rather, companies should
pursue a full transformation of core systems and infrastructure in order to equip themselves
to react to high volatility, while also realizing significant cost savings necessary for long-term
survival.
17 Future in Flux: How to outmaneuver uncertainty in a new era of travelChina’s travel industry has rebounded faster
than travel industries in most countries thus
far. Amid this recovery, companies need to
quickly prioritize actions that both stabilize
their short-term future and sets them up for
longer-term success. Those that don’t will
lose out on the new business opportunities
that will emerge with new customer
expectations and market dynamics. Those
that do will reap the benefits of first-mover
advantage and play a vital role in leading the
industry towards recovery.
18 Future in Flux: How to outmaneuver uncertainty in a new era of travelReferences
1 China Tourism Academy, “China Domestic Travel Development Report 2020”, September 14, 2020, at
http://www.ctaweb.org/html/2020-9/2020-9-14-13-2-83232.html
2 Beijing Municipal Bureau of Statistics, “Outbound Tourism organized by Travel Agencies”, July
20, 2020, at http://tjj.beijing.gov.cn/tjsj_31433/yjdsj_31440/ly_32068/2020/202007/
t20200720_1952789.html
3 CAPSE, “2020-11 Travel Willingness Index Analysis Report”, November 3, 2020, at https://www.
capse.net/article/11032
4 Civil Aviation Administration of China, “Monthly Press Conference in October 2020”, October 15,
2020, at https://m.us.sina.com/bg/china/thecover/2020-10-15/detail-ihaazchv4578011.shtml
5 Skift, “Why Marriott Sees a Full Hotel Recovery in China in 2021”, September 11, 2020 at https://skift.
com/2020/09/11/why-marriott-sees-a-full-hotels-recovery-in-china-in-2021/
6 TravelDaily News, “China's recorded a total of 6.63 trillion yuan revenue in 2019 for tourism, and
number of domestic tourists exceeded 6 billion”, June 22, 2020, at https://www.traveldaily.cn/
article/138617
7 Hong Kong SAR Government Civil Aviation Department at https://www.cad.gov.hk/english/
statistics.html
8 Accenture, “Future in Flux: How to outmaneuver uncertainty in a new era of travel”, September 2020
9 China Tourism Academy, “China Domestic Travel Development Report 2020”, September 14, 2020, at
http://www.ctaweb.org/html/2020-9/2020-9-14-13-2-83232.html
10 Ctrip, “Mid-Autumn & National Holiday Travel Big Data Report,” October 10, 2020, at http://finance.
eastmoney.com/a/202010101658547996.html
11 CAPSE, “2020-07 Travel Willingness Index Analysis Report”, July 3, 2020, at https://www.capse.net/
article/10604
12 ITB China, “2020 ITB China Travel Trends Report”, September 1, 2020, at https://www.webintravel.
com/fit-customised-and-bleisure-travel-trends-among-chinese-travellers-in-the-new-
normal/
13 TravelDailyNews,“ITB China Travel Trends Report: Travel products to focus on safety, health, nature
and customization”, 26 Aug 2020, at https://www.traveldailynews.com/post/itb-china-travel-
trends-report-travel-products-to-focus-on-safety-health-nature-and-customization
14 Shine News, “Ctrip scores big with livestreaming sales event”, April 3, 2020, at https://www.shine.
cn/biz/tech/2004035652/
15 TTG Asia, “Success of China Eastern’s unlimited flight passes prompts copycats”, July 17, 2020 at
https://www.ttgasia.com/2020/07/14/success-of-china-easterns-unlimited-flight-passes-
prompts-copycats/
19 Future in Flux: How to outmaneuver uncertainty in a new era of travelAuthors About Accenture
Robert Hah Accenture is a global professional services company
Managing Director with leading capabilities in digital, cloud and security.
Accenture Strategy Lead, Greater China Combining unmatched experience and specialized skills
robert.y.hah@accenture.com across more than 40 industries, we offer Strategy and
Consulting, Interactive, Technology and Operations
Marco Siu services—all powered by the world’s largest network
Director - Accenture Strategy, Greater China of Advanced Technology and Intelligent Operations
marco.m.siu@accenture.com centers. Our 506,000 people deliver on the promise
of technology and human ingenuity every day, serving
Yuxing Jiang clients in more than 120 countries. We embrace the
Director - Accenture Strategy, Greater China power of change to create value and shared success
yuxing.a.jiang@accenture.com for our clients, people, shareholders, partners and
communities.
David Lau
The company has been operating in Greater China for
Manager - Accenture Strategy, Greater China
over 30 years. Today, it has more than 17,000 people
david.t.lau@accenture.com
servicing clients across the region with offices in the
cities including Beijing, Shanghai, Dalian, Chengdu,
Guangzhou, Shenzhen, Hong Kong and Taipei. As a
Contributors trusted Partner of Choice for digital transformation,
Accenture is bringing more innovation to the business
Angela Tang, Kako Zhao and technology ecosystems and helping Chinese
enterprises and the government to embrace digitization
and enhance global competitiveness to succeed in the
new era.
For more information about Accenture, please visit its
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Greater China homepage www.accenture.cn.
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