Throughout the COVID-19 pandemic, people have touted the idea of ‘pent up demand’ in the travel industry. “Folks are sick of being stuck at home and as soon as travel restrictions are lifted they’ll rush out and book travel,” or so the theory goes.
But according to Sandra Thomas-Comenole, host of the Behavioral Economics In Marketing podcast, most of the people saying this don’t have a background in economics. They may not even realize that ‘pent up demand’ is an economics concept. So she got to wondering, “is there?”
As a market researcher with a masters degree in economics and 15 years of experience working in travel and tourism, Thomas-Comenole set out to study Are we experiencing pent-up demand in the travel industry?
What is pent up demand?
Thomas-Comenole explains on her podcast that:
“Pent up demand is a build up of demand for goods and services in an economy where consumers are unable or unwilling to make purchases to satisfy the demand at the present time.”
In the case of the COVID-19 pandemic, both “unable” and “unwilling” have come into play as travelers have had to deal both with government restrictions on who can travel to where, as well as personal fears about whether or not travel is safe.
But simply delaying purchases for a period of time does not equate to pent up demand.
“Pent up demand is generally indicated by a relative period of growth that follows a restriction in sales,” says Thomas-Comenole.
So, can we expect such a period of growth after the pandemic finally ends?
What the research says about pent up demand for travel
“I went looking for evidence of whether there was [pent up demand] or not,” says Thomas-Comenole. She did this by looking at different destinations that opened up to U.S. travelers during 2020. “I wanted to see, did people just bum rush those destinations? Or did they trickle in slowly? Or what?
“What I found was that in each of the different studies I did, the diffusion of pent up demand looked quite different. And that was the key finding; that, yes, there is pent up demand. But it’s going to be different for every sector of the industry, every source market, every destination.”
How to understand pent up demand for your destination
Because pent up demand will affect each travel business differently, it’s important to understand how pent up demand will diffuse for your specific sector, destination, and source market.
“You can get a bigger piece of the pie if you know what [the diffusion of pent up demand] is going to look like, when it's going to hit, and who is going to be traveling first to your sector, your destination”
“You can get a bigger piece of the pie if you know what [the diffusion of pent up demand] is going to look like, when it's going to hit, and who is going to be traveling first to your sector, your destination,” says Thomas-Comenole. To find that out, she suggests studying markets similar to yours that have already opened.
Look at data such as the occupancy rate at different star level hotels in the representative destination and how those occupancy rates compare to 2019. This will tell you which key demographics are traveling to that destination: Is it the luxury consumers who are making a comeback? Or is it the backpackers?
Not sure where to begin? “I would absolutely recommend that [you] hire a professional market researcher because this is a very crucial time. And it's definitely worth that expense to get good data,” says Thomas-Comenole.
Why travel sentiment surveys are a poor indicator of pent up travel demand
There are a lot of consumer sentiment surveys out there purporting to tell us how people are feeling about travel right now. Unfortunately, says Thomas-Comenole, you really can’t rely on that data.
“I took some of the longitudinal consumer sentiment surveys and compared that data to the TSA checkpoint data (so the people that were actually traveling via plane) and ARC purchase of travel. And what I found was that while both of those data sets increased dramatically over the three or four month period I studied, the travel sentiment did not.
“So people may say that they're interested in travel or they might say that they're not interested in travel but that doesn't necessarily mean that when it comes to purchasing a ticket that it’s the same.”
The good news is that, right now, it appears the sentiment surveys may be underestimating the demand for travel.
How to leverage pent up travel demand
According to Thomas-Comenole, if you want to take advantage of pent up demand now is the time to be doing lead generation.
“A lot of a lot of companies have pulled back on their marketing budget. This is the time to start spending that money again,” she says. People are open to travel messages right now. You’ll want to get in front of those who are reading about travel and searching Google for travel because they are the ones who are open to booking future travel right now.
In terms of specific lead generation tactics, Thomas Comenole suggests pay-per-click ads on search engines could be highly effective. “Those people are looking for travel. They are searching out travel packages. You can highlight keywords like ‘travel package to this place’ or ‘hotel in this specific location’ and you know you're getting the people that are looking to at least hear about travel, and think about travel, and plan travel. But also if you get the keywords just right a lot of those people are also just ready to book.”
The travel recovery will require a collaborative approach
According to Thomas-Comenole, if travel is going to come back, it’s going to take a lot of collaboration.
“Travel is just a massive industry and there’s so many players and stakeholders and it’s going to take widespread collaboration across geographies and across sectors to bring back travel,” she says. “There’s a lot of false information and travel shaming. But to rebuild economies on a micro and a macro scale travel needs to come back.”
On a more macro-level you might consider reaching out to your tourist boards, lobbying groups, or governmental organizations to see how you can collaborate to spread the word about safe travel and promoting what your destination has to offer.
On a more micro-level, you might work with complementary businesses to cross promote services: a tour working with a hotel or a restaurant working with an event venue to offer package deals and make referrals.
Thomas-Comenole also recommends collaborating with the media to tell stories that paint travel in a positive light. This would include traditional news media, but also influencers and other non-traditional media.
What lasting trends will COVID-19 leave us with?
I asked Thomas-Comenole what insights she can offer on the future of travel. She says that domestic travel isn’t going anywhere, at least not in the near future.
“I think the domestic Market is going to be promising throughout 2021,” she says. “People will be more open to traveling domestically wherever they're located. I think that will be a bigger thing going into the future. I don't think it'll be quite as big comparatively to 2020, but I definitely think it’s going to stick for a while.”