As shoppers embrace online transactions, the travel industry stands to greatly benefit.
Currently, only 37% of travel bookings are done digitally, according to McKinsey.
But the pandemic could soon change that as new, digitally savvy consumers are eager to travel.
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It’s been a big year for digital businesses as more consumers have shifted their spending online amid the pandemic.
For example, e-commerce spending has exploded to new heights, growing about 27.6% to reach $4.28 trillion in 2020, according to eMarketer. The market research company additionally estimates that 7.4 million consumers made an online purchase for the first time in 2020.
And, analysts argue, that shift in spending could give a boost to at least one category that has traditionally lagged behind others in terms of digital adoption: travel.
According to an April 2020 McKinsey report about the Covid-19 pandemic, only 37% of travel is currently booked online, compared to 73% of banking transactions, 61% of grocery purchases, and 45% of apparel purchases.
For travel, digital adoption includes everything from hotels and airfare to cruises.
But, that low rate of digital business could reverse for the travel industry as more consumers have grown accustomed to doing more of their spending online during the pandemic. About 75% of people making use of digital channels for the first time during the pandemic said they would continue to do so once the threat of the virus recedes, according to McKinsey.
In another McKinsey report, this one based on a late February 2021 survey of 2,000 US consumers, “adventures and tours” was one category where respondents said they would continue to focus their spending online even after the pandemic was over.
Gordon Haskett analyst Robort Mollins said this spells big opportunity for online travel agencies like Expedia and Booking.com, especially as older — or otherwise less tech-savvy— consumers start to use more digital tools than they did before.
“There really is so much room for adoption in the space,” he said. “Those adoption rates will tick up over time. I think you could see it getting a little bit accelerated, just because of the recent reliance on digital services such as grocery delivery like Instacart or even DoorDash and things like that.”
Mollins is especially optimistic about Expedia Group’s future given its focus on the US market, which may see a quicker travel recovery than other countries due to its relatively fast-paced vaccine rollout.
Expedia Group generates revenue from advertising and by buying up hotel room inventory and listing it at discounted rates. It also charges hoteliers a commission fee equal to a percentage of the value of a reservation. In addition to Expedia, the company owns Hotels.com, Vrbo, Travelocity, Egencia, Hotwire, Orbitz, Ebookers, Cheaptickets, CarRentals.com, Expedia Cruises, Wotif, and Trivago.
Like the rest of the travel industry, its business suffered in 2020, with revenue falling 57% year over year to about $5.2 billion.
Recent surveys from travel industry players indicate that there is a large amount of pent-up demand for vacations. For example, a recent Expedia survey of more than 2,000 American consumers found that 61% were likely to take a trip of at least 300 miles away from home in the next 12 months.
Once they do make those trips, they may be more likely to make the arrangements online.
“If you can bank online, you can order your groceries online, why can’t you book a hotel or a trip online? You absolutely should be able to,” Mollins said. “I do think you will see some of those Covid-driven digital adoption gains trickle over to the online travel segment in the coming months.”
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