As everyone is abundantly aware, the global recession has hit the travel industry rather hard.  Many economists and political leaders are suggesting the worst is over. However, it seems to TravelDividends that there is little clarity as to how quickly the major world economies will recover, or regardless of its length, how well the travel industry will ride out the remainder of this economic storm.

With an aim towards mitigating the considerable risks associated with the economic meltdown, most industry players – travel suppliers and travel affiliates alike – have already implemented some emergency measures in their businesses. Whether  we  are moving towards ‘recovery’ or still in the throes of  uncertain market forces, TravelDividends sees more complexity, risks and opportunities ahead for travel affiliates, travel suppliers and affiliate networks.

To help better navigate the current industry uncertainty and, within that context, more clearly assess the costs, benefits and risks associated with any further strategic or tactical measures they may be thinking of undertaking for their business, here are five questions TravelDividends believes executives in the travel affiliate industry should be asking themselves.

1. Have we taken advantage of the shifts in travel consumer attitudes and behavior? Long skeptical of the pricing integrity of both travel supplier and travel intermediary (online and offline), travel consumers have become even more focused on assuring that they’re getting the best price and value for the travel products they purchase.

According to a recent consumer survey by Skyscanner, a UK discount airfare site, airline “…customers were not swayed by customer loyalty programmes, brand building or improvements to the overall customer experience.”  Instead, 37% of the survey participants chose price as the most crucial purchasing criteria – and a more sobering statistic for airlines – a mere 6% said they choose an airline based solely on brand loyalty.

Today, whether travel affiliate or travel supplier, trust and confidence are key determinants for many travel consumers to click the ‘buy’ button in your website’s booking path.   Towards that end, you should be asking yourself several questions: How well do we understand our customers, and their needs?  What have we been doing to help foster their trust and confidence in our brand and products?  What approaches to understanding our customers’ attitudes should we take that we haven’t?  How can we leverage these learnings about our customer to increase our conversion and customer retention rates?

2. How resilient is our product portfolio? There is little sentimentality when it comes to product portfolio planning; jettisoning underperforming products and freeing-up resources and management attention to invest in promising new products and markets should be a top priority for travel affiliates, travel suppliers and affiliate networks.

Assuming you agree, how is your company managing the product portfolio planning process today?  How well does your product and service offering match with the needs of your customers?  In terms of  your supply chain, what risk exposure might your company have relative to the health and stability of your suppliers (e.g., airlines, hotels and resorts, tour operators, etc), or strategic partners (like technology providers, affiliate networks or advertising agencies)?  How well do you understand and are managing both of these key fundamental bastions of your business?

If the economy and competitive landscape remains volatile (think beyond the current financial crisis – God forbid, but what if another 9/11 or pandemic H1N1 Virus type incident hits the travel industry?), how will your company fare?  What contingency plans do you have in place should this worst case scenario ‘happen’?

3. What should our short- and medium-term priorities be? Most companies retrench during recessions, and look to cut costs across their enterprise (e.g., marketing expenditures, product development, and headcount).  However, according to research conducted by consultants McKinsey & Co, companies that made disproportionate investments in these same areas during past downturns were the winners once the economy revived.  For many travel suupliers and travel affiliates, too much of a focus on cost reduction may render them incapable of satisfying consumer demand for their products and services when the ‘good times’ return.

What cuts, investments or priority shifts have you made in your business the last year…and what actions should you be taking over the next 6-18 months to assure you are best prepared to succeed whenever the current crisis finally passes?

4. What role should strategic partnerships and alliances play in our business? The travel industry has always been a big proponent of strategic alliances, partnerships and joint-ventures; in fact, if you think about it, the participants in the travel industry’s value chain (though at times at war with each other) have historically prospered when they’ve optimized their symbiotic business relationships.

Being a relatively new industry, the travel affiliate channel (and affiliate marketing in general) has not had sufficient time to build deep business relationships with travel suppliers the way that, for example, travel agents have.  Also, from TravelDividends’ perspective, the affiliate marketing industry’s stubborn overreliance on secrecy and opaqueness prevents it from fully establishing itself as a premier distribution channel for many travel suppliers.  This needs to change – and change fast.

With this point in mind, there are several questions you should be asking yourself, whether you are a travel supplier or travel affiliate.  How should I approach travel industry related strategic partnerships, alliances or joint-ventures?  What criteria am I looking for in a partner?  What benefits is my company ‘bringing to the partner’s table’ – and what am I looking for in return?

In our experience, businesses that emerge from a recession with strong strategic partnerships have a sizeable competitive advantage over those that pursued a more ‘go it alone’ strategy.

5. How might the current economic crisis play-out? The range of possible answers to this question could be endless: Are we now at the proverbial ‘light at the end of the tunnel’, with the worst behind us; or, are we in store for a ‘double-dip’ recession; are we looking at a prolonged recovery period (like that experienced during the Great Depression); or something uniquely different from past economic downturns?

The key question for you to consider here is: Which economic scenario – or better yet, which scenarios – should I bet on as being most plausible, and what potential  impact and implications does each hold for my business?  Additionally, you should also be asking ‘what performance targets should I set for my business in terms of each scenario’, and ‘what strategies and tactics must I develop and have ready to implement, to assure I reach my targets in the event that that scenario happens’?

In times like these, scenario strategy planning is the best tool any company (large or small) can use to help assure that the business can appropriately navigate the economic and competitive turbulence, manage accompanying risk or appropriately leverage emerging opportunities.  It also will help you answer the preceding questions – and many more about how to best manage your business in both times of crisis and more stable, fluid environments.

And for those of you thinking that scenario strategy planning is essentially the contingency planning element of your normal strategy process, you’re wrong – it’s a totally different approach to setting business and organizational strategy.  If you’ve never used scenario strategy planning in your business, now is the time to do – it’s never too late to start.

TravelDividends hopes you find this article useful as you work through today’s volatile economic and competitive landscape.  We’d like to hear your opinions on this post, as well as what you and your company are doing to position yourselves for success at the ‘end of the rainbow”.  Please email us your comments, suggestions and thoughts…as always, we appreciate hearing from our readers.