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The Phocuswright Conference Reveals Five Things that will (or won’t) Happen in 2023

Published November 2022

Conference Wrap Up 2022

By: Lorraine Sileo, Founder, Phocuswright Research and Senior Analyst, Phocuswright


See all of the session videos from Center Stage, Innovation: Launch and Innovation: Summit here.
Executive Interview: What's New at Google. Nelson Boyce, Managing Director, Travel, Google. Interviewer: Pete Comeau, Managing Director, Phocuswright.


Once again more than 1,200 travel industry cohorts converged at The Phocuswright Conference, this time back in Phoenix, AZ. For many, it was a time to reconnect with old friends and colleagues we might still have missed, but also a chance to meet the new faces of our industry. There were many people there for their first Phocuswright Conference, each cutting their teeth on great networking and content. As for the old-timers, it was truly a time to celebrate a full (mostly) comeback for our recently beleaguered industry. But nothing is the same. There will always be shadows lurking (new variant? political upheaval?) and challenges ahead. Thankfully, surviving the pandemic made everyone in our industry more confident than frightened. They got smarter, leaner, more efficient, but also more attentive and respectful of their surroundings, whether that be the environment or their people. This year was a surprising boom year sustained by high consumer demand. The prevailing attitude: 2023 could be more of 2022, not less. Old or new to travel, there were a few truths that came out of the event, leading to the following predictions:
    Five things that will (or won’t) happen in 2023:
  1. Momentum Replaces Recovery
  2. Sustainability at a Crossroads
  3. Blockchain, Web3, NFT, Metaverse – Follow the Leader
  4. Stop Comparing to 2019
  5. The Future is Asia - Again

1. Momentum Replaces Recovery

This year there was less talk of recovery (except for Asia!) and more about momentum into 2023 and beyond. The industry has nearly recuperated fully from the pandemic – at least in terms of revenue. Hotel room revenue is running about 10% ahead of 2019 highs, and airlines are also ahead by about 4%. OTAs are catching up, too. Consumer demand brought everyone great relief and confidence to move ahead with their growth plans. But taking great risks, making big acquisitions, or investing heavy in technology might have to wait. An industry burned (three times in the last 21 years if you count 9/11 and the great recession) will not be fooled by the early comeback but made better and stronger for it. Even though the signs are that an impending recession and high inflation are not stopping consumers from buying travel, a slowdown is inevitable, but not worrisome. The return of international and business travel should sustain momentum if leisure demand slows. But what does normalized growth look like?

As the industry moves from recovery, to normalized growth, to a possible recession, the future is murky. But consumers are resilient, especially when it comes to travel. Travel is “the only part of consumer discretionary spend that is holding up,” said Mark Mahaney, senior managing director of Evercore. Still, he wonders what workforce reductions, already seen among tech giants Amazon and Meta, will mean for future vacation plans. Will there be enough demand to go around? All three hotel leaders on the “Holding the Line” panel were optimistic about 2023, with Choice already exceeding its 2019 revenue. “I think the hotels know how to do this… they’ve been able to adjust, they’re in a good position if it (the recession) comes,” said Robert McDowell, chief commercial officer, Choice Hotels International.

Rightfully, others are concerned. The challenge will be in the first quarter, which could be “a bit of a bloodbath,” predicted Timothy O’Neil Dunne, principal of T2Impact, in the Pundits & Predictions panel. Tim Hughes, VP Corporate Development for Agoda, agreed that “we are in for a long-term struggle,” but “the human desire to travel is insatiable.” Flo Lugli, principal of Navesink Advisory Group, acknowledged that in past downturns people just traded down, but still traveled. All pundits agreed that people might use trains instead of planes or choose short haul vs. long haul. “They won’t stop traveling, they will just find different places to do it,” Hughes concluded.
Charuta Fadnis, Senior Vice President, Research and Product Strategy, Phocuswright
Networking
Coney Dongre, Research Manager, Phocuswright

2. Sustainability at a Crossroads

The theme of sustainability ran throughout the event. Varying statistics showed that consumers not only believe in making environmentally conscious choices but in some cases are willing to pay more for sustainable options. It is high time that the industry responds with more action and fewer platitudes. But will they? Next year companies will have to decide, are they going to act or just let someone else do it?

Those most passionate beseeched the industry to pay attention to sustainability, or else. The loudest voice came from Hopper founder and CEO Fred Lalonde, whose company plants trees for each trip to offset CO2 emissions (with 13 million trees already in the ground). “I am basically challenging all the CEOs of the other companies… start offsetting all the CO2 of your customers right now, off your P&L.” It’s an “emergency”, he implored, so “we have to stop screwing around and get it done.” But it’s still difficult to convince the rest of the travel industry to act. While Expedia CEO Peter Kern feels “pressure to do more, we’d like to do more,” he also cites too much “greenwashing” around ESG. Until there is “auditable, real and definable” data around actions and results, the industry won’t take serious action, adding it likely will come from government regulators instead, as we see in Europe.


Executive Interview: The Next Big Thing. Fred Lalonde, CEO & Co-Founder, Hopper. Interviewer: Mitra Sorrells, Editor In Chief, PhocusWire.

And in a sobering observation, Futurist Rohit Talwar said, “There is no one in the world looking at climate change in any depth who believes now the current actions we’re taking are going to get us anywhere closer to net zero.” He advises companies who aren’t “all in” to at least plan a strategy just in case it (reversing climate change) doesn’t happen.

Networking

3. Blockchain, Web3, NFT, Metaverse – Follow the Leader

Perhaps the most controversial topics are the impact of new technologies such as blockchain, web3, the metaverse, and NFTs on the future of travel. If you are a futurist like Talwar, you believe that travel companies need to pay attention or fall behind. Phocuswright senior technology analyst Norm Rose likened industry skepticism to these technologies to similar doubts surrounding e-commerce 20+ years ago – and look what happened. Keep your eyes and ears open! As for blockchain, Rose’s panel featured three companies already using the technology in one way or another – Dtravel, Blockskye and Arise Travel.


Executive Panel: Blockchain - Game Changer or Bust? Panelists Brook Armstrong, Co-CEO, Co-Founder, Blockskye. Nadim El Manawy, CEO, Arise Travel. Cynthia Huang, Head of Demand Growth, Dtravel. Moderator: Norm Rose, Senior Technology and Corporate Market Analyst, Phocuswright.


Others don’t want to be forced into adopting unproven technologies when there is so much more work to be done operationally. In other words, let’s fix what’s still broken, before we invest in what’s next. What this means is that companies won’t jump in feet first just to try things out [recent losses by Meta (Facebook) and FTX (crypto) raised a red flag]. Overall, the industry strategy is to learn, ask questions, and put new technologies into future plans. When it comes to web3, crypto and blockchain, perhaps being a trailblazer is not that important. “Some of these technologies in due time will be relevant,” said Damien Scokin, CEO of Despegar.com, who is a “firm believer in NFTs for air tickets.” But he agreed with Mathias Hedlund, CEO of Etraveli Group, to “choose not to be first.” “Focus on the simple stuff and be more pragmatic,” Hedlund said. Perhaps Steve Hafner, Kayak founder and CEO, said it best. “Anything you don’t understand, you shouldn’t invest in.”

Executive Interview: Disrupting Disruption. Steve Hafner, CEO, KAYAK. Interviewer: Lorraine Sileo, Founder, Phocuswright Research and Senior Analyst, Phocuswright.

Obviously, the industry is not ready to go full throttle into web3 and the like, considering its other priorities. But everyone is watching – and someone, anyone, can take the lead. “This is the future we’re talking about,” implored Rose. “And it’s happening now.”

Executive Panel: Street Talk. Panelists: Naved Khan, Sr. Analyst, Truist Securities. Mark Mahaney, Senior Managing Director, Evercore. Lloyd Walmsley, Managing Director, UBS. Moderator: Charuta Fadnis, SVP, Research and Product Strategy, Phocuswright.

4. Stop Comparing to 2019

Let’s stop comparing the health of the industry to 2019. First, many segments (e.g, air, hotel) are already past that. And secondly, some effects from the pandemic are here to stay. That means, there will be less normalizing, and more record-breaking.

If travelers are hoping that rising travel prices will subside in 2023, forget it. According to the experts, higher prices are here to stay, mostly because there is no evidence of a significant dip in demand AND because the labor shortage is not improving fast enough. Assuming continued supply shortages (e.g., airplane parts), demand will likely exceed supply into 2023 and perhaps later. Travelers will have to make concessions (buy cheaper?) or do without other extras in their lives to make travel happen.

Even so, prices will have to moderate, even if they don’t fall back to 2019. ADRs are already at all-time highs – how much farther can they go? But Mahaney said ADRs are expected to stay strong, even with recessionary pressures. Lloyd Walmsley, managing director of UBS, agrees, especially as broader inflation raises all prices, regardless of demand. “I don’t think we are going back to where we were in 2019 on prices.” In other words, 2019 is no longer the bellwether of “normal,” – too many extraordinary forces are at play to even compare.


Executive Panel: Street Talk. Panelists: Naved Khan, Sr. Analyst, Truist Securities. Mark Mahaney, Senior Managing Director, Evercore. Lloyd Walmsley, Managing Director, UBS. Moderator: Charuta Fadnis, SVP, Research and Product Strategy, Phocuswright.

Executive Interview: Ground Realities and Super-Charged Opportunities. Rajesh Magow, Co-Founder and Group CEO, MakeMyTrip. Interviewer: Siew Hoon Yeoh, Founder, WIT and Editorial Director, Northstar Travel Group Asia.
Winner: Summit - Most Innovative Startup of the Year Award: Swayed Intelligence
Swayed is also the recipient of the Thayer Ventures Award
Runner up: Summit - Most Innovative Startup of the Year Award: Nectar
Winner: Summit - People’s Choice Award: Nectar
Winner: Launch - People’s Choice Award: @hotel by TripScout
Runner up: Launch - People’s Choice Award: CELITECH

5. The Future is Asia - Again

Finally, there is Asia, the last stop for pandemic recovery, and the most anticipated. Asia slowly reopened (“first in, last out”), and Japan, southeast Asia, Korea, and India are hot once again. India, which fell off the travel radar due to the pandemic, is ready for an awakening, according to Rajesh Magow, co-founder and group CEO, MakeMyTrip, with 600 million Internet users and a growing middle class of 250-300 million people. Japan is “prepped and ready” and considered a bargain for visitors, according to Kei Shibata, co-founder and CEO, Venture Republic Group. But the missing chunk is China. When China outbound reopens fully, the travel market should be booming, speakers agreed.
Wheel the World. Alvaro Silberstein, CEO, Wheel the World.
Phocuswright Research: Spotlight on Short-Term Rentals. Madeline List, Senior Research Analyst, Phocuswright
Networking. Meneliik Graham, Investor, Bain Capital Tech Opportunities. Christopher Jallah, Senior Business Development Manager, Emerging Travel. Derrick Barker, CEO, Nectar (Winner: Summit - People’s Choice Award: Nectar and Runner up: Summit - Most Innovative Startup of the Year Award).
Kei Shibata, Co-founder & CEO, Venture Republic Group.
Mary Li, CEO, Atlas.


“The world is going to see pent up demand coming from that part of the world again,” said Magow, adding that India has been intent on filling in the gap. Mary Li, CEO of Atlas, predicts that with 155 million outbound travelers on the sidelines, once opened, “the next surge is China.” “It will be demand like none of us has ever seen,” declared Hughes. Siew Hoon Yeoh, founder of WiT and editorial director for Northstar Travel Group, Asia, reminds us that, once again, “the future is Asian.”

Phocuswright Innovation: Launch PhocusGroup.

These are just five themes from The Phocuswright Conference, which also featured an array of titans (e.g., Tripadvisor, Google, Expedia, Sabre, Kayak, Facebook) and many more trailblazers, each focused on fintech, activities, rentals, and more. This was a Phocuswright Conference to remember, proving there is no rest for a travel industry that has moved on from recovery, only to face more and greater challenges – whether environmental, economic, or competitive – as it surges ahead.

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The Phocuswright Conference
November 13-16, 2023
Ft. Lauderdale/Hollywood, Florida
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