Many view risk primarily through the lens of mitigation and reaction. While this remains crucial, the travel industry needs to shift its collective mindset. Instead of focusing solely on mitigation and reactive measures, travel providers need to create resilient businesses that inspire customer confidence.

In the first three instalments of our Navigating Risk blog series, we explored the risks travel providers like you face [Navigating Risk: An Overview of Travel Industry Risk], how to mitigate risks with data [Navigating Risk: Managing Travel Industry Risks with Data], and how payment and financial protection solutions create a stronger travel ecosystem [Navigating Risk: Safeguard your Travel Business with Payment and Protection Solutions]. In this, the final instalment of the series, we explore what the future could hold for risk in the travel industry.

Traveller Expectations are Changing

As traveller expectations change, so do the risks you need to be prepared for. Here are several examples of how traveller expectations are changing the risk environment: 

Sustainability

For example, travellers are increasingly mindful of sustainability. A 2022 survey found that 81% of travellers believed that sustainable travel is important—but it’s not all talk. In 2022, 78% of travellers planned to stay in eco-friendly accommodation. It’s not a niche area anymore.

The risks associated with sustainability are numerous. For example, if you don’t demonstrate a genuine commitment to sustainability, opting instead for greenwashing (whether intentional or unintentional), you’re putting your company’s reputation on the line. A report by Mintel revealed that 66% of respondents agreed that “many travel companies are guilty of greenwashing, presenting themselves as more environmentally friendly than they are.”

But that’s not all. Travel companies also face regulatory risks, such as carbon taxes, emissions regulations or even restrictions on areas struggling with over-tourism. While it’s impossible to predict what regulations could come into being, preparing for various eventualities doesn’t hurt. 

A growing number of businesses are investing more time and energy into proactively monitoring, measuring, and analysing their carbon footprints. This practice not only prepares businesses for future regulatory changes but also shows customers that they’re serious about their environmental impact.

Flexibility

The chaos and unpredictability of the pandemic prompted a preference shift. Post-pandemic, consumers valued flexibility above almost everything, with one in three travellers prioritising flexibility over all other factors. However, offering travellers more flexible options comes with risks. For example, offering flexible cancellation policies can be risky financially. Without the ability to retain significant deposits, cancellations and refunds can strain cash flow.

However, you can take steps to mitigate risks associated with offering your customers flexible options. For example, dynamic pricing that adjusts automatically based on demand can increase revenue opportunities and offset losses from last-minute cancellations and refunds. Airlines and hotel chains are offering tiered options with varying flexibility, meaning passengers pay a premium for flexibility. While flexible options are a big pull for consumers, they need to be managed appropriately to mitigate the associated risks.

Major Technology Disruption Looms

Over the past 20 years, the travel industry has been at the forefront of technology disruption. However, adoption has been uneven. While major industry players have jumped on the latest technology trends, smaller travel businesses are typically much slower to adapt. Over the next five to ten years, artificial intelligence and wider automation are set to transform the competitive landscape. Let’s explore the possible implications for risk management:

Artificial intelligence

AI has been around for a long time. However, since the release of ChatGPT in November 2022, generative AI use has proliferated in businesses across all sectors. AI use is particularly prolific in the business travel sector, with 70% of companies using AI to manage some aspects of business travel.

However, it’s important to recognise that using AI irresponsibly is fraught with risk. Around two-thirds of respondents to a survey conducted by Amex said safety and security were key concerns when using AI-powered solutions for business travel. It’s no secret that AI poses serious security risks if implementation is not properly managed. This was put into sharp focus in 2023 when several major companies, including Amazon, Apple, Spotify, Verizon, and Wells Fargo, limited their employees’ use of the platform due to security concerns.

If AI systems collect and process traveller data without robust security measures in place, sensitive data could be exposed. This could range from information such as names and dates of birth all the way to payment information and passport numbers. This risk is very real because one report revealed that almost half of senior executives suspect their colleagues have unintentionally shared corporate data with ChatGPT. This is why it’s vital to establish a clear AI security policy early on that covers people, processes, technology operations and other relevant business areas.

Automation

While AI tends to capture most of the attention, the wider spread of automation will have a major impact on the travel industry and the risks associated with running a travel business. For example, as a travel business owner, there will come a time in the not-too-distant future when you start weighing up whether to automate certain roles. This holds many risks, but failing to do so may mean you risk becoming uncompetitive.

In the face of unstoppable automation, it pays to invest in upskilling your employees and training them to manage automated systems effectively. Not only does this reduce the risks associated with being over-trusting with automated systems, but it also reduces the impact of job displacement.

Future Regulatory Changes

The fluidity of regulations is a challenge for businesses across all industries, travel included. Travel providers face many levels of risk when it comes to regulations and their response to them, including the following:

 

• • Compliance risk due to the failure to understand and adapt to new regulations.

• • Operational risk due to changes to business models, service offerings or pricing structures.

• • Reputational risk due to non-compliance, which has the potential to destroy consumer trust.

UK travel providers face regulatory changes in the near future. In 2023, the Department for Business and Trade announced that it is considering substantial reforms to the Package Travel Regulations (PTRs). The consultation into the reforms yielded some interesting insights, including proposals relating to linked travel arrangements (LTAs) and insolvency protection.

The Department of Business and Trade recognises that it can be difficult for travel companies to source insolvency protection. As a result, the department is considering whether to add more flexibility to insolvency protection mechanisms for non-flight packages.

Regulatory changes, while they may hold positives for travel providers, also present significant risks. To mitigate risks relating to future regulatory changes, it’s important to stay updated on proposed changes through reputable industry bodies, such as ABTA. It’s also good practice to be proactive. Don’t wait for changes to be enforced—proactively assess how proposed reforms might impact your business and develop comprehensive contingency plans to mitigate potential risks.

Final Thoughts: Navigating Travel Industry Risk

Throughout this Navigating Risk blog series, we’ve explored the risks travel providers like you face on a day-to-day basis. While essential, focusing solely on risk mitigation limits providers’ ability to thrive in the long term. To successfully navigate travel, the industry needs to undergo a collective risk mindset shift.

The travel providers leading the charge aren’t simply reacting to risk. Instead, they are proactively building resilient businesses. They are doing this by viewing sustainability as more than a fleeting trend but a core value that is here to stay. They are embracing consumer preferences for flexibility by using data-driven pricing models and tiered options to give travellers what they want and mitigate associated risks. They are facing technology disruption head-on, protecting themselves against AI misuse and acknowledging the opportunities and risks of automation.

While it’s not possible to limit all risks or be prepared for every eventuality, businesses that take a proactive approach are the best equipped to deal with problems when they arise. There is no way to know exactly what the future holds for the travel industry, but building a resilient business will help to prepare you for whatever comes next.

Thank you for reading our Navigating Risk blog series. We hope it inspired you to take steps to create a more resilient travel business. At Trust My Travel, we can help you safeguard your business with our payment and protection solutions. To learn more about how we can help you, visit our website or contact our team today to discuss your options.