The Great Merging

As the pandemic has merged all our boundaries of work and personal lives, in many cases permanently, and as technology and life conveniences recalibrate to address this lived reality of ours, the global travel industry is going through its own version of what we’re calling The Great Merging.

Lines have already blurred beyond recognition between our personal and professional lives over the last two-plus years and it is showing up in profound ways in the global industry at the center of selling this dream.

Nowhere is this more profound in the spring of 2022 than in the lodging sector – in fact we’ve created a whole conference just around this happening this week in New York City – between hotels and short-term rentals, offering a touchstone example for all of travel. But more on that later.

More broadly, how we live, work, socialize and travel have merged into each other as we come out of the pandemic. This has material implications for all parts of the travel ecosystem, from how it is researched, designed, marketed, sold, consumed and shared and how the industry is structured to cater to the world in which travelers are driving this merged future of travel.

This was awhile coming.

Ever since the start of Skift a decade ago, we have been covering the collapsing of industry silos, mostly because consumers have been in charge. One of my favorite early lines while pitching Skift to investors and indeed readers through our coverage was to break the silos in travel and focus on trendlines in travel, beyond the headlines. Here’s why, I wrote back then: “We are fanatically focused on the changing consumer behaviors across all sectors, not just travel — whether because of digital tools or globalization or other generational factors — rather than what silos are doing talking among themselves, and how that affects travel and its future.”

We were also covering the changed travel purchase cycle, a totem the travel industry had held on to for decades prior to the world becoming digital. We argued that through the phases of dreaming, planning, booking, destinations were all blurring into each other and consumers were jumping across all of these using all the digital tools at their disposal.

We were also early in picking up the trend of the rise of local in hospitality, the variety of ways that hotels — mostly boutiques — were trying to connect with their communities to bring together guests and residents in the pursuit of localism. Then a hotel giant like Accor adopted this wholesale with their “Augmented Hospitality” approach, through which the hotel of the future had a bigger role to fill as a community hub and everyday problem-solver for locals.

Of course, the blurring of lines between leisure and business travel — that awful moniker “bleisure” — has been around since then as well, as we wrote back in early 2013, back when millennials were starting to become all the rage amongst travel marketers: “Millennials raised on intuitive, leisure-oriented travel experiences have come to expect more from corporate travel.”

Then the rise of Airbnb and Uber, two companies that were never started or marketed as travel startups when they launched, but have forever changed how travelers consider their stay and mobility options against the more traditional options. What started as alternative accommodations with Airbnb and the “sharing economy” moved mainstream by the mid-2010s. What started as ridesharing with Uber, Lyft and others became ridehailing and changed how we think about, not just car rentals or taxis, but also the on-demand-ification of the world itself.

There were hints of this Great Merging even in the then-gimmicky world of digital nomads; startups started to emerge in mid-2010s, though most of them petered out in a market still too early.

The pandemic accelerated a lot of these trends, all at once. All of the aspirational examples above became realities to confront in the travel industry, in many direct and indirect ways. Evidence is now emerging that these new realities are changing how travelers think about their travel and how the industry is responding in various ways, changing not just their offerings but also their economics forever from here.

The Silos Are Collapsing

The clearest evidence of this came in American Airlines’ latest quarterly earnings call in mid-April, where Chief Commercial officer Vasu Raja spoke at length on The Great Merging. It is worth quoting this in full:

“We spent a lot of time on this question about what is the actual trip purpose and how does that change? And the reality is it’s changing in a meaningful enough way where we no longer think it’s spurious and start a trend. For example, historically, only about 20 percent to 25 percent of the trips in the airline were something that we call blended, where somebody was traveling for both business and leisure.

“Now, for about five to six months, about 50 percent to 55 percent of the trips in the airline are blended … that’s playing out in a lot of different ways for us, which are both opportunities and a little bit unprecedented, right? We are seeing different sales days becoming big sales days, different travel days becoming big travel days. So the nature of what we call leisure demand and business demand is changing.

“Those blended trips that we have in the system are coming in at yields that are 75 percent to 85 percent of what were true business-only trips, but they’re coming through lower cost of sales channels and off of negotiated discount. So the net yields of them are very often the best things in the system.

“One of the things that we found is that increasingly, those surveys are starting to change because people are saying they’re flying both for business and leisure or it’s one person in the itinerary, but they’re leaving on Thursday, coming back on a Monday and going to Pensacola. So a lot of things are starting to change, and that’s actually a pretty promising thing.

“Heathrow and Madrid are very premium demand consumptive and we are seeing a lot of premium demand, even though we aren’t seeing large corporate travel quite come back into international the way we’ve seen before.”

Amidst all this, the two main lodging sectors in travel, the hotels and short-term rentals, are also merging in ways that the traditional distinctions between them are becoming obsolete and the world of blended hospitality is emerging. Companies like Sonder, Selina, Blueground, Habitas, Life House and others personify this and even large hotel companies like Accor and Marriott are making these blended efforts a bigger part of their portfolio, directly and indirectly. 

Hotels are responding to the new reality of blended travel and work personas, taking advantage of their meeting spaces in ways they haven’t before. Take this latest move from Hyatt, which has launched “Work from Hyatt: Offsite,” a corporate retreat concept “created in response to the evolution of remote work and growing demand from businesses to connect with colleagues in person.” Of course the logic on the sale is a lot more clear now, post-pandemic: “Remote work has changed the nature of the modern office and while we’ve gained work-from-anywhere convenience, we’ve lost some energy that only in-person collaboration can ignite,” it says. 

As our Corporate Travel Editor Matthew Parsons wrote earlier this year, “Travel firms are gearing up for a busy year booking company retreats and off-sites, because team meetings are moving on from U-shaped tables and an overhead projector to ranches, sites in the woods and beyond.”

A slate of new startups and communities are emerging that are intent on coaxing businesses into the great outdoors, the best example being UK’s Outside that is building a membership community that “connects entrepreneurs, leaders, fresh air thinkers, idea explorers, tech folk, creatives, innovators and business activists.” It hosts regular group walks and designs bespoke field trips to nurture business innovation.

This merged world of work and travel is now driving the comeback of business travel a lot faster than many of us imagined when we first entered our lockdown life. And it is expanding the travel pie, which is what a recent survey by Deloitte pointed out, best illustrated by this chart from the report in Figure 2.

Our own work at Skift Research has also unearthed evidence of this around the world, as this chart from our five-country study reveals, the main takeaway being that the majority of remote workers have taken more trips as a result of work flexibility, regardless of the countries they reside in.

This Great Merging is also showing up in a distributed work world, where companies large and small are figuring out how to center travel as a way to build company culture, what AMEX GBT calls “centering travel within organizations is the way forward to reframe business travel from a transactional mechanism to a transformational tool.” A recent white paper from the company has a handy chart that illustrates this role of merging travel into everything a company does, across departments and functions.

As for the cliche of digital nomad lifestyle, it is becoming increasingly a reality beyond just the digital nomad visas launched by many destinations during the last two years, including early adopter Bermuda, Barbados, Puerto Rico, Estonia, Mauritius and more. There are efforts like this one in Europe that are trying to push for a pan-European digital nomad visa. Such a visa would have the potential to unlock vast amounts of travel, as well as knowledge exchange, enabling remote workers to travel freely through Europe, the backers argue. 

More nuances are emerging from cross-collaboration of previously separate sectors of travel in this Great Merging, with evidence emerging in new collaborations between resorts and accommodation providers to help full up low-seasons with digital nomad travelers. A good example is Austria-based Falkensteiner Hotels & Residences which has teamed up with Grabahome, and is looking to fill its properties with remote workers during the low season.

Even the hotel owners and investors are getting in the game, and the latest move from Pebblebrook Hotel Trust, which owns about 55 hotel and resort properties across U.S., speaks to it: it is adding treehouses, glamping units, teepees and villas in its portfolio, some as part of its existing resorts where they have ample space, and considering standalone in the future. One example: the company-owned Skamania Lodge was built as a conference center when large corporations would hold off-site training sessions on a regular basis. “As more training moved online over the last decade, Pebblebrook has transformed the property into a more leisure-focused, experiential resort. Now it is spending about $10 million to $12 million for three new treehouses, glamping units, a multiple-bedroom villa and a pavilion on property,” reports HNN.

From the story, quoting Pebblebrook CEO Jon Bortz: “The world evolves, and consumer tastes and desires evolve … I think we have to evolve with it … We’re following the customer and the whole idea of experiential travel, which is why we have so many independent, unique experiential properties.” What hotels do and what companies such as Airbnb do are melding together, and the line between the two continues to blur, he said. As Pebblebrook adds cabins or villas, it may decide they can only be reserved on a weekly or monthly basis, becoming more like a vacation rental than a typical hotel, he said.

One of the biggest implications of this Great Merging is on how the travel product offerings get broadened and merged, and travel brands should be prepared to offer services across the full travel value chain, including transportation, accommodations, in-destination activities and food and beverage. The early trend towards travel subscription offerings — and the best kind of recurring revenue for travel companies — is where these are showing up in the most potent ways. 

Inspirato, the luxury travel subscription service is the purest-play example of this, where this slide below from its recent deck as it went public on the stock market shows the end-to-end product integration that these services allow, in many ways inverting the travel purchase cycle we wrote about at the start of this essay.

The Big Questions in a Merged World

Things are all changing so fast that it is hard to have definitive answers of the implications of The Great Merging and how it manifests in travel behaviors, especially as the specific travel behaviors have blended in with living and working behaviors. What we do know is that the travelers are in charge and what most travel brands can do is learn from their own lived experiences and from their customers. The key word here is “lived.”

So what are the big questions, the big unknowns of The Great Merging?

• Will the Great Merging enable more travel, or more efficient travel, or both? What will its impact be on climate change and the building backlash against travel’s extractive effects on the planet?
• What will be the next phase of personalization in travel for these blended personas?
• How will travel companies across the spectrum respond and offer services in the big business of enabling company culture beyond the early examples outlined in the essay above? 
• How will customer service adapt in this new landscape and what type of new talent will be needed in the travel industry?
• What opportunities exist for investors and developers across sectors?
• Will the digital nomad visas really move beyond early adopters and countries already heavily dependent on tourism to a more mass adoption and what services will emerge to cater to this?
• Will the real estate investors start to invest across the spectrum of merged accommodation assets? We have already seen some early evidence of it but nothing at scale yet?
• How will design change for offerings all across the travel ecosystem beyond just thinking of mixed-use as the metaphor?
• How will online travel agencies move beyond the traditional stronghold of transient leisure world and actually build services that cater to this breadth of merged traveler personas?
• Will hotel players besides Accor and Marriott become more serious about expanding their portfolio of accommodations beyond hotels?
• Will the short-term rental players adapt to add more hospitality offerings beyond just new forms of stays?
• How will the economics of airline industry change long term, beyond the American Airlines example? If premium leisure is a real long-term thing, how will marketing and sales of upper class offering change in the sector?
• In an era where off-peak demand is now increasing and people are living and traveling in non-traditional ways beyond peak days, how will demand and its prediction change?
• How will the meetings and events industry change where people are not just asking for more experiential offerings but also mixing events in their personal lives deeper ways than previous?
• Will travel companies walk the talk on the dream of live-work-travel anywhere that many have been selling explicitly and implicitly over the last two years? Airbnb was the first major travel company out with its policy of effectively going permanently remote.
• Will tour companies move into the corporate retreat space?
• What new forms of travel subscriptions services emerge that cater to this blended personas and needs of travelers?
• How will this blended world expand the offerings from travel agencies and their advisors, and vice versa for the corporate travel agencies?
• Will the ongoing financialization of travel help resulting in more seamless payments solve the challenges of distributed workforce and the resultant travel that happens globally? 
• How are the incumbents reacting to this new blended world, and what can we learn from the new challengers in this ecosystem?

Those are just 20 questions – and so many more to come – whose answers will reveal themselves, some sooner than others. The travel brands that will succeed in this Great Merging will either have to specialize on the one thing they do well, or expand to span multiple travel categories, being in the middle is not an option.

The only certainty as we stand here today is that all the threads have been coming together for years, and a jarring pandemic offered us the clarity to see travel’s distinctive lines and barriers fade forever.