Accelerating the transition to net zero displacement
The worsening effects of climate change have made decarbonization a top priority for many industries, including global travel and tourism, which accounts for between 8-11% of global emissions.
If nothing is done, the sector’s carbon emissions will only increase as it grows. Travel activity is expected to grow by 85% between 2016 and 2030.
As more consumers, employees, regulators and investors consider reducing their travel, they are also increasing the pressure for the sector to reduce its carbon emissions. In response, more travel agencies have pledged to reach net zero. But obstacles stand in the way. The range of decarbonization technologies on the market is limited and what is available is expensive.
While demand reduction may be part of the answer, there are many practical steps travel businesses can take now to accelerate their journey towards greater sustainability and potentially create value while doing so. McKinsey and Skift Research have set up a report explore four high priority areas for travel companies to focus their decarbonization efforts to catalyze the most meaningful outcomes for the environment, their customers and themselves. This article provides a summary of key information from the report.
Identify and sequence decarbonization initiatives
Knowing the relevant decarbonization levers for your business is a good start, but it is not enough. Many travel companies struggle to implement and balance the trade-offs. A solid plan that considers various potential pathways is essential for success in a quest as complex as deep decarbonization.
The Marginal Abatement Cost Curve (MACC) framework provides a cost-benefit analysis of individual levers and implementation plans, helping companies identify strategic trade-offs between different implementation paths over time . Companies can use the framework as a tool to validate climate-related goals and time their decarbonization initiatives. By evaluating the feasibility and trade-offs between multiple potential paths, companies could be better equipped to select the most appropriate path to achieve their net zero goals.
Partner to accelerate the decarbonization of business travel
Business travel accounts for 30% of all travel spend, making it an important segment for tour operators.
As more and more organizations – businesses and nonprofits – set more ambitious emissions reduction targets, they will almost certainly re-evaluate their travel habits. This opens up opportunities for travel agencies to enter into strong decarbonization partnerships with their corporate clients.
The top 100 corporate travel spenders spent about $12 billion on domestic and international bookings in the United States in 2019. Forty-five of them, together accounting for about half of that business travel spend Airline Business, not only made public decarbonization statements, but also committed to a target year of 2030 or earlier.
These organizations would be eagerly looking for ways to reduce their emissions and would likely be more receptive to striking decarbonization deals with travel companies. To help organizations that travel achieve their zero-emissions goals, travel agencies could expand their range of sustainability-focused product and service offerings. For example, car rental companies could encourage customers to pay for electric vehicles, while hotels could charge a premium for corporate packages that promote low-carbon and sustainable practices.
Travel agencies could also devise other ways to support these organizations in their transition to greater sustainability. These could include designing booking platforms to incentivize users to make more sustainable choices when booking, helping employees track their emissions, and providing greater data transparency for organizations to accurately measure their carbon emissions. carbon from business travel.
Closing the “say-do” gap among leisure travelers
Studies suggest that leisure travellers, who generate 70% of all travel revenue, are also in favor of decarbonization.
A recent McKinsey survey indicates that 40% of travelers worldwide say they are willing to pay at least 2% more for carbon neutral plane tickets.
However, Skift’s latest consumer survey revealed a “say-do” gap; only 14% of travelers say they have paid more for sustainable options when traveling.
There are a number of reasons for this “say-do” gap, including a lack of clear sustainability information, a scarcity of sustainable booking options, and high cost barriers. Many customers also struggle to balance competing priorities when purchasing a travel service or product.
Tour operators can close this gap and help consumers choose more sustainable actions by focusing on three levers: offering more sustainability-focused travel products and services prominently in the booking journey, presenting information on decarbonization convincingly to engage and resonate with customers, and use behavioral strategies. science-based techniques to encourage holidaymakers to make sustainable buying decisions (eg by actively promoting the most environmentally friendly options first).
A methodical approach is required to execute these initiatives while keeping the booking journey transparent for the customer. A dedicated task force, equipped with digital capabilities, consumer insights and sustainability expertise, could be set up to test and refine these changes for smaller sample groups in each market segment. customers before the implementation is extended.
Building new sustainable travel options for the future
Instead of reacting to the latest developments in the net zero transition, the travel industry can be a proactive force and pioneer sustainable products and services. Not only will this reduce the industry’s carbon emissions, but it will also allow individual travel businesses to create new revenue streams that could be redirected to other green business opportunities.
There are as many possibilities as there are types of travel agencies. An airline may consider taking a more active role in the Sustainable Aviation Fuel (SAF) value chain, perhaps investing in production plants to increase supply of alternative fuels or launching an airline green which deploys smaller alternative propulsion aircraft. Hotel and accommodation companies can launch eco-friendly hotels or brands, applying the latest design approaches and green technologies. Larger, more established travel agencies and booking platforms could provide standardized environmental, social and governance (ESG) measurement services to smaller travel companies that lack such capabilities or green travel-focused brands. Finally, credit card companies could partner with airlines and hotels to offer customers a consolidated view of their issuance across all travel providers, giving them additional rewards when choosing more options. durable.
The launch of these new ventures will likely require companies to create special initiatives outside of the current core business. The teams running them will need to be empowered to experiment and learn from short iterations and pilots without the pressure to be immediately profitable. Fortunately, early examples of travel agencies applying green business development principles are showing promising results, which should pave the way for others.
The full report concludes by offering a checklist for travel agencies to track their readiness in each of the four strategies and maximize their chances of a successful and profitable trip to net zero. Companies that act now could gain a competitive edge over their peers, while those that hold back and wait could see their value proposition erode as they are left behind.
