Predictions for the travel sector in 2023

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2022 was a strong year for the travel sector. Despite early Omicron concerns, significant post-Covid pent-up demand meant bookings boomed across the year. George Moss looks at how this will continue in his 2023 predictions for the travel sector, considering the impact of cost of living and climate on consumer choice.

1. Demand returns to normal

“We expect to see normalised demand for travel in 2023. 2022 saw what was likely to be excessive demand for outbound travel due to holidays taking place that had been on hold due to the pandemic. We also saw consumers eager to spend some of what they had saved during Covid on exploring a newly opened-up world. This, alongside the cost-of-living increase, means that it is likely that this demand will slightly soften in the new year, especially if fuel prices stay high. However, I don’t expect that the softening will be significant – for a large portion of the population, even if they take fewer additional breaks, people are very protective of keeping their main holiday and are still keen to travel internationally post the pandemic.”

2. Travel tech increasingly important

“Consumer behaviour when it comes to booking holidays is ever evolving. 1/3 of holidays are now booked on mobile, but most customers use cross-device and multiple websites to decide on their plans. Abandonment rates are very high for travel shopping, with 91% of mobile customers abandoning their selected trip as they browse elsewhere, potentially leaving your sale behind.

What that means is that to create a seamless customer experience in the buying process, you need to ensure you have the technology that allows your sales funnel to cover multiple sources, channels and devices. And the experience only starts with the purchase. Over the pandemic, travellers increasingly became used to checking in, ordering services and giving feedback without ever speaking to a human. Operators will need better cloud-based technologies to solve this and create excellent virtual experiences.

Similarly, there will be a drive for efficiency from operators, given the difficulties of hiring in the travel and leisure sector post-pandemic. That means more use of better-integrated tech to solve for and manage the complex products on offer, whether it’s aeroplane seats, self-catering cottages or hotel rooms and ensure a seamless customer experience from booking through to departure or occupancy.

There’s also a need for technology to enable operators to provide this service with fewer staff and less training in an environment where recruitment has been challenging. Software that is well integrated across systems, intuitive for new users and that has limited need for training is likely to facilitate growing businesses in getting their teams up to speed more quickly and to required levels of customer service.”

3. Conversational AI in the travel sector

“As mentioned, post-Covid and post-Brexit, there has been a significant shortage of staff in the travel sector, leading to operators needing to drive efficiencies through technology as much as possible. Chatbots and conversational AI has long been seen as a potential solution to improve customer service, without the need for customers to be stuck on hold for long periods. 64% of people expect a real-time response from travel companies, but currently, 48% of customer enquiries to leading UK travel companies are receiving no response whatsoever according to research by Bots could therefore provide a good solution, but to date, the tech has never quite been good enough for this to feel any better than a second-best option. Many companies use chatbots to offer simplistic routes to booking or as a FAQ search engine, but they are not conversational and consumers know they are chatting with a bot.

In 2023, the possibility for evolution in this space has opened up. There have been significant strides forward in conversational AI technology, notably OpenAI’s Chat GPT engine. This chatbot doesn’t just look for keywords and respond with a fixed database of answers. It generates something different depending on the question, it sounds human and it can fix its own errors if you point them out. Not only can it provide you with pertinent information, but it can also go above and beyond, writing you an itinerary for the area that’s relevant to your interests.

We’re in the early days here, and this generative AI technology that can create original content isn’t yet widely used by companies in the sector. However, the possibilities for the adoption of the tech are an exciting development for the sector that I predict will begin to be rolled out in 2023.”

4. Eco-travel finally makes an impact

“After years of talking about eco-travel, I am optimistic that 2023 may be the year that demand starts to really shift. The nature of concern around the environment means there is sadly never likely to be a single catalyst for that change, but rising concerns supported by government commitments mean we’d hope to see changing demand in 2023. I expect there will be a combination of people looking to reduce costs and reduce carbon footprint, which will drive demand for alternative transport such as trains and ferries. Similarly, you will see more OTAs offer off-setting alongside booking, yet this will be carefully scrutinised by consumers who will be wary of greenwashing.”

5. Staycation v overseas travel

“During the pandemic, many people realised how many amazing destinations we have on our own doorsteps, leading to a long-term boost for staycations. Furthermore, even when the rest of the world opened up post-pandemic, many people still opted to holiday closer to home. Travel disruption due to uncertainty about restrictions and shortages in airport staff – which led to half-term chaos last spring – led to many people seeing outbound travelling as frankly too much hassle. Continuing strike action in the UK and in Europe and higher air travel costs off the back of fuel inflation won’t do much to discredit this view in the near term. With more people looking for cheaper travel options, I expect that there will be continued strong demand for domestic travel in 2023.”

6. Experiential travel

“Despite the likely strength of demand for staycations in 2023, I expect you will also see a rise in popularity for bucket list holidays in the new year. Many people have missed out on years of travelling and will be looking to make up for lost time by ticking those items off, especially within the grey pound cohort. Travel Weekly highlighted that 58% of travellers want to seek ‘out of comfort zone’ holidays in 2023.

Covid gave many people a new perspective as to what they wanted from life and having missed so many experiences in the last two years, I’d expect lots of consumers to be focusing on trying to tick off some of these in 2023. However, with the same research showing that 60% plan to budget more tightly around holidays, it will be providers that can offer smart deals or ‘bucket list on a budget’ that will likely win here.”

George Moss, ECI

About the author

George Moss

"I’m a Partner in the Investment Team and really enjoy leading investments into and working at board level with high growth tech-enabled businesses across a number of subsectors, for example travel, digital marketplaces and healthcare tech."

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