Editor's note: This is the second of a two-part series on the future of the travel industry. Both parts were condensed from an 8,000-word report issued last month by Forecasting International, which for the last two decades has tracked major trends that are reshaping human history. The list evolves as old trends run their course or new trends are recognized.
For this year's report, Forecasting International selected 10 of the most important trends affecting five crucial hospitality and travel industry segments: airlines, cruises, hotels, restaurants and travel.
It is important to note that this year Forecasting International did not include the continuing threat of terrorism among the trends it tracked. "We have said everything about terrorism that needs to be said," explained Forecasting International's president and the author of the report, Marvin J. Cetron. "And there is no reason to overdramatize this issue. True, the world contains many would-be terrorists. Yet there are only a few hundred of the trained, supremely dangerous variety responsible for the 9/11 attacks. Most are hiding in the backcountry of Pakistan, unable to do much harm. ... The chances of being struck by terrorists are considerably slimmer than those of being struck by lightning. It is time to turn our attention to more immediate matters."
Last week's installment looked at the impact of five trends on travel: global economies, industrial diversification, growth in tourism, consumerism and energy costs. This week's installment examines the impact of technology, social responsibility, generational changes, regulatory issues and consolidation.
Technology
Technology increasingly dominates the economy and society. Laptop computers and Internet-equipped cellphones provide 24/7 access to email and websites. New materials are enabling stronger, lighter structures that can monitor their own wear and tear. By 2015, artificial intelligence, data mining and virtual reality will help most organizations to assimilate data and solve problems beyond the range of today's computers.
Air travel will benefit greatly from new technologies, though at considerable cost. New safety systems are likely to include improved heads-up displays, collision-avoidance equipment and automated routing. Better sensors at airports will recognize explosives. In-plane safety systems will be mandated at the company's cost, while new GPS satellites will be paid for with user fees.
New self-monitoring materials will be incorporated into critical aircraft components, such as engine mounts, by 2020. Skin alloys will alert mechanics to fatigue and incipient cracks. By 2018, we'll see the first supersonic business jets, with 20-passenger models likely to appear around 2025. By 2030, efficient supersonic travel will begin replacing first-class sections.
The most important technological development for cruise lines will be the continued growth of online booking. Five years from now, the tradition of booking through a travel agent will have vanished, save in the extreme high end of the market, and there is reason to wonder how long agents can survive to serve the luxury market after losing the rest.
Hospitality and travel firms are beginning to tap into the social-networking phenomenon pioneered by sites like Facebook and MySpace. KLM offers customers three invitation-only communities, one for people doing business in China, one for Africa hands and one for golfers. Similar offerings are available from a growing number of specialty sites, and Virgin America installed a social networking system into seatback computers to help people connect with fellow passengers.
By 2012, the "semantic Web" will offer a natural-language interface to the Internet's vast stores of information, enabling a customer to ask for "a week for two in South America next February. We want to explore a rainforest but spend at least three days on the beach at a luxury resort. We can spend $2,500 each, including airfare from Miami."
Social responsibility
Consumers increasingly demand social responsibility. Today, companies are often being judged on how they treat the environment, their workers and their customers. Many are changing their business practices as a result.
In a 2005 survey of nearly 1,200 companies, 81% (98% of large firms) cited corporate citizenship as a priority; 84% said that being socially responsible improved profits. Once the Bush administration leaves Washington, expect government intervention to rebound. To avoid political backlash from the right, regulation is likely to be carefully targeted and limited, at least for a time.
This will bring put more pressure on airlines to minimize fuel consumption and cut air and noise pollution, and any cruise line that dumps waste at sea can expect catastrophic publicity.
Other lines will profit from advertising their "green" credentials, especially if they donate to ocean-oriented environmental groups.
"Green" furnishings and supplies are the trend for hotels. Look for bamboo flooring in the rooms, eggs from free-range chickens in the kitchen and a growing demand from guests for better worker benefits and pay.
Restaurants will find that simple measures like providing water only when requested help to burnish their reputations.
Demands for nutritional information on the menu will eventually be impossible to resist, as will calls for eco-conscious sourcing of foods and supplies, better pay and at least minimal benefits for restaurant workers.
While tourists from China and India will still be eager to see Paris and Orlando, more experienced Europeans and Americans will be looking for the last few elephants, coral reefs and indigenous populations still living as their ancestors did. They will want the people and sites they visit, not just the companies arranging their vacations, to benefit.
Generational changes
Generation X and the Millennials are growing in influence. Members of each group (roughly the over-35s and the 20-somethings) have much more in common with their peers than with their parents, and their values are remarkably uniform across the globe. Socially and in business, they are nearly color- and gender-blind. Generation X is starting businesses at an unprecedented rate, while the Millennials appear to care for little but the bottom line.
As business travelers, these generations might put up with delays caused by a massive snowstorm, but they won't like waiting for hours because the airport's departure schedule is overbooked. Scheduling problems, faulty service and other problems that today's consumers would accept with minor grumbling will cause tomorrow's travelers to plaster their displeasure all over the Internet.
When Millennials have a problem with an airline, they do not bother only the people at the ticket counter; they grab their cellphones and call or text the frequent flyer department to apply pressure for a favorable resolution. Ditto for hotels. Satisfying such customers will be a constant challenge.
Restaurants need to be aware that unlike previous generations, the Xers and Millennials tend to mix and match food types. A typical meal might begin with Mexican nachos for an appetizer, then move on to a Thai fish dish with couscous from Algeria and a Chilean wine. Restaurants will need both imagination and broad familiarity with the world's exotic flavors.
Still, these new generations are enthusiastic travelers, willing to drop everything when a friend suggests an adventure. This might not make them ideal employees, but it does make them great customers.
Regulatory changes
Government regulations will continue to grow.
Between 1996 and 2001, more than 14,000 new regulations were enacted in the U.S., and European Union bureaucrats are churning out rules at an even faster rate. This is not all bad. A study by the Office of Management and Budget estimated that major federal regulations enacted in the decade ending September 2002 cost between $38 billion and $44 billion per year. However, the estimated benefits added up to between $135 billion and $218 billion annually.
New airline regulations will focus on safety and customer convenience. The most costly will be installation of an effective bomb-detection system for checked bags.
Other rules are likely to require more crashworthy seating, new user fees and schedules that relieve peak-hour congestion.
A regulation proposed in November would require foreign-flagged cruise ships leaving the U.S. to spend at least 48 hours in a foreign port and require that the amount of time at the foreign port be equal to at least half the total time spent in U.S. ports of call.
The rule could devastate profits at U.S. home ports. Juneau alone would lose an estimated $68 million in one summer. We predict that if enacted, this regulation will be rescinded quickly.
Restaurant operators trying to avoid adding nutrition information to menus are fighting a losing battle. This could easily sink the market for some traditionally popular but unhealthy dishes and raise demand for fish, vegetables and other healthy alternatives. Expect significant menu revisions.
The biggest regulatory changes ahead are the global move to biometric passports, prompted largely by fear of another major terrorist attack.
Within the U.S., Department of Homeland Security initiatives will require anyone seeking to enter the U.S., including returning Americans, to have a biometric passport.
Consolidation
Institutions are undergoing a bimodal distribution: The big get bigger, the small survive and the midsize are squeezed out.
Economies of scale enable the largest companies to win out over midsize competitors, while "boutique" operations can take advantage of niches too small to be efficiently tapped by larger firms.
We expect airlines to continue merging. At the same time, small startup carriers keep appearing, taking advantage of routes and niche opportunities that their predecessors do not consider sufficiently attractive. In the U.S., Delta and Northwest have already announced their intent to merge.
We have long seen the same trend in the cruise sector. Carnival Corp. and P&O Princess joined forces in 2003. There will be more such examples in the future.
Likewise, hotel chains have been merging constantly since 1924, and there is no sign that the dealmaking will stop in the near future.
For the industry at large, big companies will continue to snap up midsize competitors or drive them out of business.
New companies will prosper in niche markets. Some will remain small and highly profitable. Others will grow until they attract the attention of the giants. A very few could become giants themselves. Look for the fastest turnover in the online travel search and marketing operations, where niche startups abound.
All segments of travel and hospitality have been in ferment for as long as we can remember. They will remain in ferment long into the future.
Marvin J. Cetron, Ph.D., is the president of Forecasting International and a widely respected consultant on global, regional and local security issues.