Caution and Covid: how a behavioural revolution is driving long term trends in the accommodation rental sector
For research development, PACE Dimensions conducts interviews with industry leaders to build thought leadership on strategically important topics, sectors and markets. This article draws on a recent interview Henrik Kjellberg, group CEO at Awaze. He tracks the Covid blips and meaningful changes impacting the travel industry in a post-pandemic world.
The accommodation rental sector was not too long ago dubbed an ‘alternative’ option on the major OTAs. A separate thought, without too much attention. Fast forward to today, and it’s a natural part of the travel mix. Henrik Kjellberg, group CEO at Awaze – owners of brands such as Hoeseasons, James Villa Holidays, Cottages.com, Novasol and until recently Landal GreenParks – explains the shift as similar to the mainstream status that boutique and independent hotels now occupy alongside chain brands. “Twenty years ago it was considered adventurous to choose a boutique hotel,” he explains. “But today, it isn’t at all. The accommodation rental sector has had a similar awakening over recent years and it’s now just another type of stay.”
Domestic travel trends: the Covid upswing
In fact, the sector has traditionally leant itself to domestic travel, and that is just one factor driving its success during the challenges years of the Covid-19 pandemic. “We’ve seen growth through the pandemic, despite having periods when we couldn’t open” explains Kjellberg; a statement that only a handful of travel industry CEOs have been able to make. “Our peak seasons over the summer months have sold out. Crossing international borders is challenging, and focusing on domestic stays is the narrative throughout Europe. Our brands are geared up for that. Generally our properties are relatively isolated, they lend themselves to social distancing and they are geared up to arriving by car. Any aspects of travel that can be deemed risky in this environment are already removed.”
Industry commentators have been quick to point out that more people holidaying domestically as a result of Covid-19 is a big opportunity for operators to recruit those people into changing their holiday habits for the long term. Kjellberg is more cautious, and keen to point out that the knee-jerk trends we see now are not necessarily embedded in our future. “We need to be really careful about what is a Covid-trend, and what is here to stay,” he outlines. “The booking patterns we’ve seen in 2020 and 2021 are immediate responses to restrictions and rules, emerging around what is possible. We need to disentangle the data from Covid to understand the future.”
How the travel industry is changing: tracking pre Covid trends
A more meaningful trend, driving changes pre-pandemic is the rising awareness of sustainability and the impact of international travel. In his native Sweden, ‘flygskam’ or flight shame is a real movement, felt culturally and reflected in travel data. For the first time in many, many years in 2019 domestic flying in Sweden decreased and airport passenger numbers in the Scandinavian country fell significantly. Adding more years where people have stayed at home, albeit through forced changes, there is an emerging suggestion that holidaying domestically is a trend accelerated by Covid.
Kjellberg says, “I do believe that many people have developed a taste for holidaying closer to home during Covid. There are more counties in the UK than countries in Europe, and so many areas to explore. Globalisation will continue, but I think there will also be a counter-trend for hyper local experiences. These trends were emerging pre-Covid, with brands in retail, arts, crafts and food performing well in this space. For example, microbreweries have never been more trendy and the experience economy is accelerating. People want to spend on experiences and not stuff. That’s hugely interesting for our brands.”
Covid impact: blip versus transformation
Philosophically referring to the Covid-19 pandemic as a ‘blip’, Kjellberg is keen to point out that macro-economic trends influencing the growth of the travel industry have not fundamentally been harmed. “Growing middle classes ensures that GDP continues to grow, and these swathes of society want to spend money on travel. However, the staycation is now better positioned than ever for taking a decent proportion of this spend,” he outlines. “Rather than Covid impacting international travel, it is the habits and conscience of younger generations who are adopting quickly to environmental trends that is something to be very aware of,” Kjellberg continues.
The pandemic has also allowed changes in how the business operates, dubbed a ‘transformation period’ by Kjellberg. “We have closed some offices because having people working at home has been successful, and we’ve also integrated many elements of our UK and Danish office functions. A new office has opened in Manchester and we’re recruiting and creating 70 new roles. We have been able to use this time to take some risks that otherwise would have been tricky to manage alongside the day-to-day,” he explains.
In further good news for the Awaze Group, factors that commonly drive short-term booking patterns – such as the weather – are not having an impact at the moment. Kjellberg explains, “Usually when the weather is good, we see good bookings. But in early 2021 the weather has been terrible and we still experienced very strong bookings. This is a circumstance trend, most people can only really travel domestically so the weather isn’t going to change what they do. It’s the kind of trend that we need to be careful about, it doesn’t tell us anything about travel when borders reopen.”
Careful monitoring: spend and trip type
Similarly, Kjellberg urges caution when looking at how pricing has been impacted by the pandemic especially where price points have moved up. “Our data is showing that even though prices are increasing, people are still prepared to book and they are ready to spend. When our parks can open, both bookings and spend are off the charts.” These factors are most likely heavily influenced by curtailed spend in other areas due to lockdowns and restrictions. Dubbed ‘revenge spending’, there is careful consideration required as to how sustainable current pricing levels will be in the long term when demand normalises. Kjellberg sums up, “At the moment, the data in any trend is driven by what people are allowed to do.”
Excited about heading off on a trip to the Cotswolds for the weekend soon after we talk, Kjellberg points out how his own travel habits are just one example of how travel patterns could emerge as international restrictions ease, “International travel will not disappear, but I do think that in general we will see fewer trips abroad and more trips that are closer to home.” It is trip-type that Kjellberg is most concerned about when it comes to planning for the long term future. He explains, “I may take several trips a year but my accommodation needs for each trip are wildly different. For a city break I may look for a five-star hotel, but when I go on a biking holiday I’m totally OK with roughing it. Travel businesses need to evolve from selling by consumer type, to identifying the trip type.”
Read more: A few of the trends and insights from our latest webinar ‘Five things about the travel and hospitality industry’s recovery you need to know’
Travel industry disruption and change
And it is having the products and experiences to deliver for different trip types that has partly been fueling the growth of the hotel industry. As Kjellberg points out, pre pandemic RevPAR had increased every year for the last ten years. And that is despite the arrival and growth of brands like Airbnb, who despite being hyped for disruption, didn’t really make a negative impact. He explains, “Both hotels and the accommodation rental sector can continue to grow alongside each other. The rise in high quality, high end products in the accommodation rental sector – which has outpaced hotel industry growth during the pandemic – means that accommodation rental is part of the consideration set for more people now. The hotel industry has a history of responding well to change, and it will be interesting to see where hotels go after this in terms of ticking boxes for travellers whose habits may be changing.”
Aside from the pandemic, the biggest change in terms of how people book and travel in the last ten years – and continuing to have an impact – is the mobile phone according to Kjellberg; “The number of touch points consumers have with a travel brand before they book is increasing. Amazon gives us one-click shopping, but in travel it is going the other way. Travellers want to enjoy their trip before they even depart, and there are great opportunities for rich content – from drone photography to reviews.”
There are also shifts and differences in the booking window with the Awaze brands seeing a shorter lead times and shorter trips booked more often via mobile devices than desktop. “The challenge,” Kjellberg continues, “Is knowing who looks at great content on a mobile device and is inspired, and then moves to a desktop computer to book. We need to have the right content and information for the different booking journeys, to be aware of how mobile touch points continue to drive decisions, even if the actual booking is not made on a mobile device.” Continuing to invest and evolve around buying behaviours, the business is exploring mobile wallets for upgrading on-resort for some of its brands.
For Kjellberg caution is everything when it comes to beginning to think about a new normal. There are changes in travel booking patterns and consumer spend throughout the last 18 months that are driven by extreme circumstances. The Awaze Group is carefully deciphering the Covid knee-jerk patterns that are long lasting simply because of the duration of the pandemic, and the real trends that were already emerging and are now deeply rooted in buying behaviour. Kjellberg sums up, “It’s about looking past what has been immediate and impactful, and what will be longer lasting. Until the data points out that something is driven by more than Covid, we have to plan that it may disappear.”
To delve into trends across different sectors of the travel and hospitality industry, PACE interviews effective business leaders who highlight their latest insights, and share a view on the opportunities and issues. For further information on PACE Dimensions research capabilities please click here.