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“This summer may be the greatest summer of travel we’ve ever seen” (Peter Kern, CEO of Expedia)

LA TRIBUNE – After two difficult years, how do you see the travel market developing this summer?

PETER KERN- First of all, there is a lot of accumulated demand. We saw it all over the world, people were waiting to travel. For several quarters, we’ve been expecting this summer to be perhaps the biggest summer of travel we’ve ever seen.

That’s not the case everywhere, with markets still shrinking due to Covid like in Asia or Latin America, but in much of the western world and North America we expect it to be a been very, very strong. People have booked early and prices continue to be quite high.

Is the market ready for this massive return in demand?

There are still fewer planes in the air than before the crisis, especially on international long-haul, with a shortage of pilots and crew, but we expect capacity to come back from here at the end of the summer. Major US companies are putting more planes in the air this summer, especially in August, so it’s going to get better.

Similarly, large hotels cannot open at full capacity due to a lack of staff. Rather than trying to fill up completely, they increase their prices and aim for 70% filling in order to be able to provide service with the available staff.

So there are a number of structural reasons that continue to keep prices high. We expect them to be very high even though financial markets and other things look a bit stretched at the moment.

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Can the rise in ticket and hotel prices increase further without restricting the development of demand?

I think fares have gone up a lot and there isn’t an infinite space for that to continue, especially in the current economic climate. Unless the economy stabilizes again and everyone feels confident. Prices are likely to stabilize a bit rather than go higher, except perhaps in a few small segments like very high-end luxury. At the moment I also don’t expect it to go down, there is no evidence that it will go down.

Instead, we should see a rebalancing between high and low. For a long time, the demand for cities was low, while the demand for beaches and vacation spots has increased enormously. Now we see the cities going up.

Beyond the summer precisely, isn’t there a risk of contraction because of economic stagnation and inflation?

We have yet to see the impact on travel demand. I think it’s definitely too early to tell. What we observed during the Covid, at the macroeconomic level, is that consumers bought more things for their home: clothes, shoes… And they spent less on travel. What we all predicted was that this would reverse as opportunities to travel opened up, people would buy fewer things for their homes, and more trips to make up for lost time. We believe this will continue through the summer.

Longer term, I think that’s a mixed question. We may see consumers starting to be a bit more price sensitive. After doing a few trips this summer, they think gas is expensive, products are expensive… But we’re also going to see other segments increase. There are areas that have been very low, like business travel, which are really starting to rebound.

So there will be a mix and we think there will still be strong demand, with perhaps adjustments in travellers’ expectations. They may go down a level in terms of comfort, but there is still a high demand for travel. We therefore expect these trends to continue. But obviously, we are not economists. If there is a major global recession, who knows… Hopefully it won’t happen for all of our good.

Read also: The summer will be beautiful and hot for Lufthansa and Air France-KLM

Do you see changes in travel habits?

When people were able to travel again, there were a lot more domestic journeys in the United States but also in Europe. They took the road a lot to a mountain, in the countryside, rather than a plane to cross the country or go abroad.

As destinations opened up, people felt they could go to other places without having to wear masks everywhere, they started flying again. First on the domestic market, with an industrial response to this demand. Airlines adapted to serve the destinations where people could go. They took planes that would normally have flown internationally and redeployed them for domestic travel. In the United States, for example, airlines have taken planes that went from New York or Miami to Paris, and turned them into planes that went from New York to Hawaii, from Los Angeles to Hawaii or from Dallas to Hawaii.

Since then the international has opened up. Trends are favourable, but it takes time for patterns to evolve and airlines to meet demand. We’ve all seen the big summer coming for a while, but companies couldn’t just say ‘we’re going to put more planes’. They have to prepare, find pilots, change schedules, etc.

Gradually the mix is ​​moving towards more international, which is great. I’m sure you felt that in Paris there are many more foreign travelers than six months or a year ago.

How have you adapted to these changes?

We always sold everything. So we didn’t make a major change. We have seen the market and the demand change: many more domestic destinations, shorter routes, more people on the road, more rentals… We are fundamentally designed to help travelers find what they want. We didn’t try to direct them, just meet their needs.

I remember one of our employees asked me early on if we should get into motorhome rentals. I said “maybe, but as soon as the Covid is over, the activity will return to its level of two years ago”. So don’t go crazy and just focus on what you can do. Without doing anything special, we have invested to develop our vacation rental offer and meet a demand that we could not satisfy in certain places.

While prices have already increased, are travelers willing to pay more for more luxurious travel and stay conditions?

During the crisis, people were willing to pay more for what they wanted. To go to Florida for example, where the rules were quite flexible, people were ready to pay anything to go there while the hotels in Miami were absolutely overpriced.

We watched the big American companies: they expected to have a hard time filling the front of the plane because there was a lot less business travel, but these places ended up being filled by travelers Hobbies.

For this summer, people booked months ago, so it will continue. But once again, it’s hard to say whether this will continue beyond that, particularly given the economic situation.

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You mentioned a resumption of business travel. Can you give us more details?

Leisure is already booming, first domestically and then internationally. Domestic travel is likely to stabilize as growth shifts to international. Now let’s see what will happen with the companies.

Barring economic upheaval, for the past few months and for the foreseeable future, everything is fundamentally stronger. Business travel is still weaker than before the crisis but growing strongly, as is international travel.

I have maintained throughout Covid that I believe business travel will largely be back after the crisis. There are still unknowns because of hybrid working, but we believed that people need to travel to be together more often. It will come back. This is not yet the case, but it is on a good trend and we think it will continue.

For us who are global, we still see geographical differences: North America came back quite strongly first, then Europe, while Asia is still in decline and Latin America is starting to go better. They are all different places with different stories.

Think business travel will return to 2019 levels?

I think so. Although I’m not sure if it will be plus 10% or minus 6%, I think we’ll come back to it. There’s already a lot going on. Las Vegas is full of conferences, all kinds of conferences.

Everyone is back in the competitive environment. Faced with someone who is going to jump on a plane and come there, if you are just on Zoom, you will not have the same chances. This spirit is coming back. We are here ourselves (in Paris, editor’s note) to meet hotel partners, airline partners and other types of industrial partners, so that we can all talk and understand each other.

We have observed that there is perhaps less travel in all directions, crossing the Atlantic over two days just for a meeting. But there may be a lot more internal travel for companies because of this hybrid environment, where people spend less time together and have to travel to meet. So there may be a rebalancing in the types of business travel.

Have your relationships with companies changed during the pandemic?

I may be optimistic, but I think our relationship is better than it has ever been. I think to some degree, as an industry, we’ve all realized that we need each other. As if we all had to come together to get through this ordeal.

We came together and aligned around our desire to solve traveler problems and address service issues when everything was upside down. We are partnered with many airlines to help them sell other products, like hotel packages, hotel rooms, etc.

Read also: The incredible comeback of American airlines (American, Delta, United)

During this period, the companies also tried to develop their own sales on their website. Isn’t that a problem for you?

So we had a convention in Las Vegas and one of our main messages to the airlines was that there are reasons for travelers to come to you, and there are reasons for them to come to us. And the best thing we can do is try to help them solve their problems and have successful trips.

We are essentially trying to become a technology partner and, in some cases, a supply partner to the airline industry. Most airlines and hotels are not really technology companies but hospitality companies. With our new platform, which we call Expedia Group Open World, the idea is to give them pieces of our technology to solve problems they can’t handle on their own.

So if you’re an airline and you have direct customers, that’s fine, but if you want to serve them better, sell them ancillary products, do other things, we can help you do that. And we prefer to be your partner in this field. So we think we play an important role, but it’s not necessarily direct competition. And our partnership can be much bigger than just a plane ticket.