Phocuswright Europe 2023 Post-Show Report: Phocuswright

In its first time in Barcelona, Spain, Phocuswright Europe struck an upbeat and lively tone, just like its host city. With Covid worries mostly gone, most conversations were about the lingering effects of labor shortages and meeting high demand. Clearly travelers have been unfazed by the gloomy economic forecasts predicting a slowdown or recession, preferring to live in the moment and enjoy life’s adventures; even business travelers are back on the road with gusto. Whether you are an airline, hotel, short term rental provider, railway, car hire or anyone else in travel, business is good. Just how good? “Better than 2019” according Raúl González CEO Barcelo EMEA, speaking on the Leadership in Complex Times panel, musing that the predicted recession everyone talked about last year is still just talk.

*Raúl* González, CEO, EMEA, Barcelo Hotel Group

*Raúl* González, CEO, EMEA, Barcelo Hotel Group

Healthy industry growth doesn’t mean there wasn’t plenty of discussion about the uncertain future of travel distribution, including the moment’s “appropriately hyped” technology of generative AI. Because while AI wasn’t the only topic at Phocuswright Europe, it was certainly the dominant one, as it was woven into all conversations from startups and financing to accommodations and air travel. Several companies talked about practical uses of generative AI happening now, including customized hotel recommendations, flight search and comparative results. Amir Segall, commercial director of Airbnb, spoke about using AI to “create a more human connection between guest and host,” especially if they don’t speak the same language, as well as other applications such as organizing reviews and customer support. Most conversations were about the future, and how AI can shake up the status quo as new applications take hold. “We don’t plan to replace our employees with chatbots,” assured Segall.

Amir Segall, Commercial Director, Airbnb

Amir Segall, Commercial Director, Airbnb

Another difference at this year’s event was the air of confidence among the travel providers in attendance and on stage. While last year everyone felt like a survivor, licking their wounds from years of Covid restrictions, this year’s conversations focused on accomplishments and lessons learned. Will there still be issues with service and labor shortages this summer? Yes. Are some suppliers still shocked at the rates they can charge (and receive) from motivated travelers? Yes. Are travel companies still being cautious about overspending, especially if there is a sudden bubble burst? Of course. Managing a booming business does not come without a price. Inflation has taken a bite out of profits, and rising labor costs remain a concern as companies increase wages to attract (and keep) valuable talent.

Arjan Dijk, Senior Vice President & Chief Marketing Officer, Booking.com, Lorraine Sileo, Founder, Phocuswright Research and Senior Analyst, Phocuswright

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

Timing is Everything

There was also consensus that companies with the best data wins. That could be good news for intermediaries such as Tripadvisor and Amadeus. Meanwhile companies such as Kayak, Trip.com and Expedia are already incorporating AI into trip planning and recommending alternatives if plans suddenly change. As Boris said, “brand and content” will be the key differentiators in the space. But he’s not concerned about being in front. "We can’t wait too long but there is no rush to be first,” he said. For some businesses, however, investing in generative AI is not a choice, and everyone is speculating who will win or lose. “Will OTAs be needed in the future?” pondered Johanna Von Herman-Kim, director of operations at Ennea Capital Partners, on the Investor View panel.

And if AI doesn’t threaten humanity as Awaze CEO Henrik Kjellberg fears (and by a show of hands most attendees don’t think it will) climate change just might. Bernadett Papp, a senior researcher with the European Tourism Futures Institute, warned that climate change can have “devastating impacts on travel destinations.” Everyone agreed the industry must take action to achieve zero emissions by 2050, but there is a need to do so collectively, or little will change. Meanwhile, the focus on rail as a replacement for air travel (including new rules in parts of France that ban some short-haul flights where there is a rail alternative) can further boost the thriving rail industry. Offering a dose of reality, however, the switch from air to rail is “not so significant overall” and is limited to certain parts of the world, stated Luis Moroto, Amadeus president and CEO.

Bernadett Papp, Senior Researcher, European Tourism Futures Institute, Choni Fernández, Customer & Sustainability Director, PortAventura World, Hazel McGuire, General Manager, UK & Ireland, Intrepid Travel, Madeline List, Senior Research Analyst, Phocuswright

Bernadett Papp, Senior Researcher, European Tourism Futures Institute, Choni Fernández, Customer & Sustainability Director, PortAventura World, Hazel McGuire, General Manager, UK & Ireland, Intrepid Travel, Madeline List, Senior Research Analyst, Phocuswright

John Boris, Chief Growth Officer, Tripadvisor

Luis Maroto, President & CEO, Amadeus IT Group SA, Linda Fox, Senior Europe Reporter, PhocusWire

Lisa Katsouraki, SVP Corporate Development, Etraveli Group

“We are entering a new era where free money is over.”

Bobby Demri, Managing Partner, ROCH Ventures

Funding Hits a Low Point

While the current business environment is good, will there be enough money to support future innovation and expand the marketplace? The big players such as Expedia and Booking are confident in their financial positions, but start-up funding has decelerated. Phocuswright analyst Mike Coletta revealed new data showing that travel investments for 2023 are pacing to be the lowest in 7-8 years. “Funding is the tightest it’s been in a while, and travel startups need to get back to the basics, if they haven’t already, and be prepared to weather this storm,” he said. Investors concur: “We are entering a new era where free money is over,” said Bobby Demri, managing partner of ROCH Ventures, on the Investor View panel. Investors want to place their bets on travel, which recovered from Covid faster than other industries, but are waiting since there must be a balance between “reality and crazy valuations of the past five years,” Demri added. Money is there to support unique ideas with solid business plans and great leadership teams, not copycats or pie in the sky technologies. Christoph Schuh, partner at Lakestar, warned they won’t invest directly in generative AI but only in businesses where AI can complement an existing offering.

Mike Coletta, Manager, Research and Innovation, Phocuswright

Mike Coletta, Manager, Research and Innovation, Phocuswright

Other topics at Center Stage included mobility, short term rentals, the Asia comeback, activities, leadership, drone delivery, airline trends and the future of OTAs. And while AI was a big topic, most speakers avoided the hype but reveled in the timing. Is it possible that we are in the cusp of another era, just like the spawning of the consumer Internet 30+ years ago? We may not know where generative AI is going, who will win, whether it will produce new players or embolden current ones and change the travel ecosystem forever. There are more questions than answers right now. But the consensus was less about fear and uncertainty and more about exploration and discovery. Ready or not, the industry is gearing up for its next adventure, and that makes the future of travel even more interesting.

Johanna Von Herman-Kim, Director of Operations, Ennea Capital Partners, Christoph Schuh, Partner, Lakestar

Bart Buerman, Founder, Bart at Work, Mitra Sorrells, Editor in Chief, PhocusWire, Linda Fox, Senior Europe Reporter, Derek Catron, News Editor, PhocusWire