Peak travel season presents a double-edged sword: soaring revenue but also a heightened risk of operational hiccups that can tarnish your brand and hit your bottom line.
Delayed flights can create a chain reaction—missed hotel check-ins, disrupted car rentals, and botched dining reservations.
The fallout? Negative reviews and social media outcry can cost you revenue. The solution lies in proactive management, using advanced technology, thorough planning, and a focus on customer experience.
In this article, we'll arm you with practical strategies to master the challenges of peak travel season, backed by real-world examples.
The holiday season is set to bring a surge in travel, affecting flights, hotels, and car rentals alike.
Here is the data you need to understand the scale of the upcoming peak travel season and how to prepare for it:
The holiday season is crucial for airlines, often making up a large part of annual revenue. Year-to-date data for 2023 shows a 4.1% increase in total travel spending, suggesting the potential for a notable uptick in holiday travel.
While the holiday season remains critical for airlines, the industry faces a series of challenges that could temper revenue gains. Notably, there are capacity constraints and downsized networks which have increased ticket prices.
According to the International Air Transport Association (IATA), the average operational profitability of the sector is expected to recover to 2.8% in 2023, with net profits just above 1%. This profitability is especially vulnerable to shifts in jet fuel prices, which account for 20-25% of total operational costs. However, with forecasted net profitability so low problems like payment disputes and eCommerce fraud could easily push airlines into the red.
Data from STR for the week ending April 15, 2023, reveals an increase in year-over-year occupancy rates for both the U.S. and global markets, excluding the U.S.
Specifically, the U.S. hotel industry had an occupancy rate of 64.2%, marking a year-over-year increase of 2.3 percentage points.
Similarly, the global occupancy rate, excluding the U.S., rose to 64.5%, a notable 10 percentage point increase compared to the previous year.
While no regional U.S. market has reached its 2019 occupancy levels, many have significantly reduced their deficits compared to pre-pandemic rates.
Despite the effects of seasonal fluctuations and specific holidays like Easter and Passover, the industry demonstrates resilience and is preparing for positive growth in the upcoming peak travel season.
Online travel agencies (OTAs) have shown significant year-over-year growth, particularly in the U.S. market, where total gross bookings surged by 51% in 2022 compared to the previous year. A shift toward mobile bookings is evident, with 47% of OTA bookings in 2022 executed via mobile devices, a nearly 10 percentage point increase from 2019.
However, this growth trajectory comes with its own set of challenges, including an uptick in chargebacks. According to Justt's 2023 Chargeback Pulse report, 70% of businesses in the Travel & Hospitality sector lose over 1% of their revenue to chargebacks.
Cruise lines face unique challenges during peak travel seasons. According to Justt's 2023 Chargeback Pulse, 52% of travel and hospitality respondents that handle payment disputes for their organizations believe not all their needs are being met, with 58% citing a lack of manpower as a significant issue.
This is particularly relevant for cruises, where the demand for payment/chargebacks department staffing sees a moderate increase during peak seasons, in-line with the more dramatic staffing needs of the cruise ship itself.
During the cruise industry's annual Wave season, which typically spans from January to March, there has been an 81% increase in bookings compared to the same period in 2019, exerting significant additional strain on resources.
Mastercard's latest data reveals a year-over-year rise in travel spending. According to Mastercard's Q3 2023 Earnings Call, cross-border travel spending in the third quarter reached 124% of 2019 levels. This increase represents a significant uptick in travel-related expenditures and serves as a critical indicator for the travel and hospitality industries, signifying a resurgence in consumer confidence.
However, it also brings challenges, such as increased demand and potential service disruptions. Focusing on collaboration between the Payments and Customer Support departments can help manage the surge effectively.
The travel industry has seen its fair share of turbulence in recent years. From natural disasters to geopolitical tensions, disruptions have become the rule rather than the exception.
Technology has also been a double-edged sword—enabling new efficiencies and creating vulnerabilities. Travel and hospitality businesses need to understand these disruptions to survive.
Here is the roadmap to navigating the complexities of disruptions in the travel space:
The COVID-19 pandemic has had a profound and multifaceted impact on the global travel and tourism industry. Alongside causing an unprecedented drop in demand and challenging businesses with stringent health and safety regulations, it led to a surge in customer chargebacks and forced a rapid reevaluation of operational strategies.
The pandemic slashed worldwide travel and tourism spending from nearly $5 trillion in 2019 to $2.33 trillion in 2020, resulting in the loss of an estimated 62 million jobs within the sector. Digital transformation has become imperative for survival, introducing new phenomena like digital health passports and virtual tourism, valued at an expected $24 billion by 2027. Understanding these impacts is crucial for both crisis management and future planning.
Southwest Airlines experienced a significant disruption in its flight schedule, accounting for more than 90% of all U.S. flight cancelations on Wednesday, December 28.
This disruption strained resources and highlighted gaps in contingency planning. For travel executives, it's a case study of the need for robust strategies during peak seasons. The ripple effect touched various departments, exacerbating issues like workforce shortages and inter-departmental friction, notably with Finance.
The November 2022 incident of a Chinese rocket's debris falling into Spanish airspace led to mass flight cancellations. This event is a vivid example of how external factors can disrupt travel.
The Suez Canal blockage in March 2021 had a ripple effect on global logistics, including air travel. The canal is a critical route for the transportation of aviation fuel, and the blockage led to delays and increased costs that impacted airlines.
According to Lloyd's List, the blockage held up an estimated $400 million an hour in trade. For airlines, this meant potential disruptions in fuel supplies and increased operational costs.
The ripple effects are immediate and far-reaching when travel disruptions strike during peak season. Your operational efficiency takes a hit, customer satisfaction plummets, and your bottom line suffers.
Here is the roadmap to navigate these challenges effectively:
The fallout is immediate and far-reaching when disruptions hit during peak travel season.
One of the most glaring consequences is reputational damage. Negative customer experiences can quickly spiral into social media firestorms, eroding brand equity that took years to build.
Another casualty is reduced customer lifetime value. Disruptions often lead to canceled bookings and lost revenue, not just for the current transaction but for future ones. Customers with a bad experience are less likely to return, affecting long-term profitability.
These disruptions put immense pressure on frontline workers. They bear the brunt of customer dissatisfaction and are often left scrambling to manage the chaos, leading to burnout and high turnover rates.
When disruptions hit during peak travel season, compensating affected consumers becomes a priority. It's more than just refunds and vouchers—it's about retaining customer trust.
For instance, airlines often offer meal vouchers, hotel accommodations, or alternative flights to mitigate the inconvenience. However, these gestures are table stakes in today's competitive market.
What sets you apart is proactive communication. Use real-time data analytics to predict disruptions and inform customers before they even contact you. A dedicated section of your mobile app or automated SMS updates can achieve this.
Chargebacks are a growing concern, especially during peak travel seasons. According to consumer survey stats, there was a noticeable uptick in travel-related chargebacks in the US and UK last year.
Most travel and hospitality businesses have low chargeback win rates, according to the Chargeback Pulse report. Unsurprisingly, close to 70% of travel and hospitality businesses lose over 1% of their revenue to chargebacks.
Seasonal surges in chargebacks can lead to business’ placement in credit card networks’ monitoring programs, which require the payment of extra fines and fees. Unsurprisingly, the Chargeback Pulse found that over 90% of travel and hospitality businesses are using post-transaction chargeback prevention tools. This helps keep these businesses below the threshold chargeback to transaction ratio for the monitoring programs even if it doesn’t necessarily solve the issue of revenue lost due to payment disputes.
Anticipating disruptions during peak travel season is crucial for maintaining operational efficiency and customer satisfaction.
Start with frontline employee training. Equip your staff with the skills to handle high-stress situations and customer complaints. This is not just a nice-to-have; it's a necessity.
Next, focus on scaling your payment operations. Ensure that your systems can manage increased transaction volumes, particularly during peak seasons. This scaling can be achieved through various strategies:
Plan out and pay attention to your communications strategy. A well-thought-out communication plan can be the difference between a minor hiccup and a PR disaster.
By proactively addressing these areas, you're not just preparing for disruptions but building a more resilient, customer-focused business.
To learn more about how your company can tackle travel chargebacks, read the Justt blog.