Insight | Last minute opportunities


Last minute opportunities


APAC Generation Z passengers pioneer a ‘just in time’ spending revolution on travel services

A buying behaviour shift has been identified in a new London School of Economics (LSE) report. It reveals that the last-minute spending mindset of Generation Z passengers across APAC means this group would prefer to buy travel services while in the sky, rather than in the weeks preceding their flight. The report’s authors say this represents a significant opportunity for airlines offering high quality inflight broadband.

The spending habits of Generation Z flyers in the Asia-Pacific (APAC) region offer airlines a lucrative opportunity to transform inflight e-commerce and take revenue from elsewhere in the customer journey.

The research found that this newly emerging demographic cohort, unlike previous generations, are habitual last-minute spenders.

The Inmarsat-commissioned LSE report, Sky High Economics - Chapter Three: Capitalising on Changing Passenger Behaviour in a Connected World, found that rather than buy services for their trip weeks in advance, such as booking hotels or travel insurance, these digital natives would rather wait until the last minute. Or preferably, and where applicable, buy while in the sky.

"This behavioural shift presents an exciting opportunity for airlines"

The report estimates that by 2028 – a point by which Generation Z will form the largest group of global flyers (1.2bn) – Generation Z passengers will delay purchasing holiday items and services worth an average $26 each, choosing to buy while in the air instead. This figure is even more pronounced in APAC, with Gen Z passengers in the region spending an average $30 inflight. With APAC delivering over a third (37%) of Generation Z passengers, this represents a real opportunity for airlines flying in the region.

The report’s author, Dr Alexander Grous, said this dramatic change in purchasing habits presented a lucrative opportunity for airlines that offered a robust, reliable and seamless Wi-Fi connection.

He commented: “Having grown up in a digital world with connectivity at their fingertips, more often than not Gen Z make last minute decisions when it comes to travel planning and preparation. This behavioural shift presents an exciting opportunity for airlines to strike innovative partnerships with global and local retailers that extend the possibilities of inflight spending.”

Indeed, the research estimates that 70% of Gen Z and millennial flyers would prefer to wait and buy travel services while in the air.

The next generation of passengers

Generation Z are a new breed of passengers travelling with the expectation of connectivity. What makes them different to millennials, and how should airlines respond?

The report states that the mindset of this consumer group – who currently spend a collective $3.6bn on items and services in the weeks leading up to a trip and upon arrival – presents a significant opportunity for airlines to monetise this growing trend for last-minute spending.

While seven in ten older flyers, such as ‘baby boomers’ and Generation X purchase travel insurance more than a week before their departure, six in ten Gen Z passengers wait until the days before they leave. A similar ethos is evident in hotel bookings, with 80% of ‘boomers’ and Gen X booking more than a week before they fly, compared with 67% of Gen Z travellers.

A huge new revenue stream has emerged

Inmarsat Aviation President Philip Balaam was quick to recognise the significance of the report and its particular relevance to APAC. He said: “If passengers reject traditional purchase channels in favour of inflight spending to the extent that this suggests in the next decade, the implications for airlines and retailers would be huge. We may be on the verge of a habitual shift in travel spending, much like the movement from offline to online purchasing witnessed on the ground in the last decade. In APAC, the opportunity is even greater – with every Gen Z passenger in the region predicted to spend $4 more on inflight holiday purchases than the rest of their generation each time they fly, there is a huge potential new revenue stream up for grabs.”

Talking about a revolution

Aviation’s digital transformation stands at a crossroads. Bolder thinking, increased innovation and immediate action is required across the sector for its potential to be fully realised.

Inmarsat Aviation’s Vice President, Marketing Communications and Strategy, Dominic Walters agreed, pointing out that developing a connected infrastructure that was built for inflight spending was a win-win for both airlines and passengers.

He said: “With airlines all over the world already ramping up their connectivity offerings, and a growing trend for last-minute spending in younger passenger groups, this is a revolution waiting to happen.”

Underlining this generational shift, the third Sky High Economics report also identified a global market of close to 450m passengers who are both uncommitted to any airline loyalty programme. It found that they would be willing to switch whatever carrier allegiance they currently have in favour of an airline offering high quality inflight connectivity.

This sizeable group predominantly comprises of Generation Z and millennial flyers, and the report found that an annual $33bn market – and rising - is ready to be secured by airlines that offer the Wi-Fi experience these passengers demand.