By Mary Li, Founder & CEO at Atlas
For the first time in two years, I’m back in China. It feels so good to be home again – to reconnect in person with the team and my family over the Spring Festival.
With quarantine cancelled here now, there’s excitement in the air around China reopening to the world and people here have taken no time to show just how important travel is to them. Although Q1 flight schedules were fixed before the new year, the early days of 2023 has seen Atlas’s transaction volume from the China market double. Our search traffic and search server deployment have increased by 20% and the conversion rate of search-to-ticket issuance has also increased by more than 50%.
This is just the beginning for China and the signal of the final piece of the Covid recovery pie.
In 2022, global low-cost carrier (LCC) seat capacity grew by 56% since 2020, as compared with non-LCC carriers which only grew 42%. In 2020, LCCs had 43% of overall air passenger capacity and this grew to 45% by the end of 2022.*
With statistics like these, it’s clear to see that the LCC model fared better than their traditional counterparts during Covid. Many were able to gain market share, enhancing traveler loyalty and driving industry recovery.
Given the positive signs that we’re getting back on track across the industry, I wanted to share a few of my predictions for the year ahead…
1. Low-cost carriers will continue their growth trajectory
Whether the predictions of a global recession in 2023 come to fruition or not, I don’t anticipate it will have as large an impact it may have had on the travel industry pre-Covid.
Covid illustrated just how important human connections are. Travel has been sorely missed and despite the state of the global markets right now, people are prioritizing it. You can expect to see more demand this year as more travelers finally get to those people and places they’ve been distanced from for so long.
I believe people will still travel in masses this year. They’ll just be more conservative with their wallets. This is a huge opportunity for the low-cost market to make even more gains. I think we’ll start to see traditional airlines making bigger decisions around their offerings – will they merge closer to a lower-cost model as many have started to do, or will they go more premium? The market will be split between the two, and my money is on low-cost, especially in capital markets like these.
2. Stability will be a key driver of success
Covid also represented an opportunity for airlines and agencies to upgrade their tech stacks, so they could come back faster and stronger. At Atlas, we deal with the instability of LCC websites all the time. But without stability as a core technology competency, you have zero visits, zero searches, zero sales. That’s frustrating and wasteful for travelers and the agencies that support them.
Fulfilment of the influx in demand just from China in the first weeks of January would never have been possible on our platform had we not built the most stable and scalable infrastructure to support our growth.
As travelers return to the market after years of more sophisticated purchasing on eCommerce sites and marketplace apps, their demands for speed and fulfilment will have increased. Airlines and OTAs will need better uptime rates, faster searching capabilities and more stability throughout the buying process to gain market share.
We’re focusing on this too. Stability will be a key differentiator in 2023 and at Atlas, we’re already able to see which LCCs are ready to perform and which ones may struggle. We monitor this for our agency customers and optimize our platform to ensure only the most stable search results are returned.
3. We’ll finally start working together as the eco-system matures
While the debate continues around the value of the agency distribution model for LCCs, my prediction is that we’ll start to see a new wave of leaders in this space recognize the importance of partnerships. The travel industry is an eco-system and like every balanced eco-system, there is enough for everyone. In my opinion, the ‘fittest’ will be the airlines and agencies that embrace collaboration over competition.
I don’t subscribe to the idea that agencies reduce distribution for LCCs. In fact, I think the opposite is true. Agencies provide a very real opportunity for LCCs to access markets and customers they would otherwise never capture. The traveler who knows about an LCC and is comfortable booking direct is not the same person who uses an agent to book. The agency distribution model represents pure upside for LCCs and I think it’s short-sighted to view it from any other angle.
So, with more open business mindsets post-Covid, I think we’ll start to see more LCCs embracing the agency channel this year. And, it’s about time.
But, what do you think? What are your predictions for 2023? Do you agree or disagree with any of mine? I’d love to hear in the comments…
The Year of the Rabbit signifies longevity, hope and prosperity, and we couldn’t imagine a better year for this in travel than now. From all of us at Atlas, we wish you and your families a prosperous year ahead. Gōng xǐ fā cái! 恭禧发财
*Source of LCC statistics above: OAG Capacity Data from 30 December 2022 report (analysis conducted by Atlas January 2023)