Passenger Travel
Overview
One Minute Read
Transportation is responsible for 25% of CO2 emissions worldwide (28% in UK) and serious technology & behaviour shifts will be required to meet targets. The industry is also reacting to fast-evolving consumer digital behaviour which is influencing how transportation is planned, purchased and consumed. This combination of strict environmental regulation and digital transformation will affect every part of transportation as it evolves into a sustainable Mobility Ecosystem. COVID-19 has exposed the the vulnerability of travel services. With the market stabilising post pandemic, the concern is that a likely recession will limit the ability to recover and invest at a time that the industry needs to transform.
Industry Description
Passenger Travel consists of organisations involved in the selling, marketing & operation of passenger transport and travel services.
The industry relies on the four modes of transport; automotive, aerospace, marine and rail. in 2018 it was estimated that there were nearly 50 trillion passenger kilometres travelled globally. In the UK 15% of this travel is on public transport whilst the rest is mainly in private cars.
Drivers
Shaped by the global megatrends and now the pandemic, the industry is being shaped by five major drivers:
Demand - Passenger transport will increase from 44 trillion in 2015 to 122 trillion passenger‑kilometres in 2050 (China and India will account for a third of the total). Private vehicles will remain the preferred mode of personal travel worldwide. Travel in cities will shift towards public transport and shared mobility, which will account for 50% of total passenger‑kilometres by 2050. 873 billion passenger kilometres were travelled in Britain in 2019, an increase of 11% from 2009. 84% of passenger kilometres made by cars, vans and taxis. Demand has been significantly impacted by the pandemic and disruption especially in air travel continues to cause challenges.
Customer Expectations – Digital consumers and rising customer service expectations (driven by the likes of Amazon and Apple) is raising expectations for customers, both for business and consumers.
Resilience – Reliability, safety and security are key issues in travel. The complexity of transportation systems means that technology can play a significant part in controlling risks and improving reliability. In addition risks of terrorism are a serious problem faced by the industry.
Sustainability – Transportation is responsible for 25% of CO2 emissions worldwide (28% in UK). Pressure will come from customers (seeking to reduce their footprint), investors and government through net-zero commitments, especially in local travel and aviation.
Profitability – Despite growing demand, many firms are suffering from eroding margins. EBIT margins range from -1% to 8%. Capital and fixed operating costs are high, and companies are struggling to differentiate. The pandemic has significantly impacted travel firms; cruise lines, airlines and travel companies, whilst the UK rail franchises had to be suspended. Demand is returning but there will be continued profitability challenges and the need to balance cost with investment.
Transformation
The industry will experience a decade of transformation that will create a mobility ecosystem.
Transformation will require a shift to the design & development of:
Digital Engagement,
Sustainable Transportation,
Automation,
Internet of Things,
and ultimately shifting business models to participate in Mobility as a Service offerings.
These changes will impact into the wider transportation market, smart cities and energy industry.
Digital Technology
Digital transformation will drive needs for Business Applications to help connect the different players in the ecosystem and help improve utilisation, capacity, visibility and efficiency. Data Management will enable the physical world to be measured, monitored and controlled, and Artificial Intelligence will optimise utilisation, efficiency and automation.
Cloud computing is required to support innovation, flexibility and customer experience, Internet of Things to connect vehicles and transport infrastructure, a Digital Workplace to enable an agile workforce, whether at home, in the office, in the vehicle or at a hub, and Networking & Communications to deliver a consistent and reliable experience.
Security, Compliance & Data Privacy is also critical as transportation is a critical infrastructure targeted by terrorist and criminals. Remote working, connected vehicles, IoT, cloud and APIs all open up new attack surfaces and potential for security breaches.
Finally, IT Governance & Management will be essential to manage the change and ensure value for money.