Accelerating the transition to net-zero travel

Worsening climate change has made decarbonization a priority for many industries, including international travel and tourism, which account for 8 to 11 percent of global emissions. ¹ If nothing is done, the sector’s carbon emissions will only increase as it grows. Travel activity is expected to grow by 85 percent from 2016 to 2030. ²

As more consumers, workers, regulators and investors consider reducing their travel, the sector is under increasing pressure to reduce carbon emissions. In response, more travel companies have pledged to reach net zero. But obstacles are obstacles. Carbonization technologies available on the market are limited, and what is available is expensive.

While demand reduction may be part of the answer, there are many practical steps that travel companies can take now to accelerate their journey toward more sustainable travel and create value while doing so. McKinsey and Skift Research produced a report that explores four high-priority areas for travel companies to focus their decarbonization efforts to achieve the most beneficial results for the environment, their customers, and themselves. This article provides a summary of the report’s key findings.

Identify and sequence carbonization initiatives

Knowing the carbonation levers relevant to your business is a good start, but not enough. Many travel companies struggle with implementing and balancing business fluctuations. A strong planning balance across different potential pathways is critical to the success of a mission like deep carbonation.

The marginal cost curve (MACC) path framework provides a cost-benefit analysis of individual controls and process plans, helping companies identify strategic trade-offs between different implementation paths over time. Targets and timing of carbohydrate motivation. By evaluating the feasibility and trade-offs between multiple potential paths, companies can be better equipped to choose the most appropriate path to reach their net-zero goal.

Partner to accelerate the decarbonization of business travel

Business travel represents 30 percent of all travel expenses, making it an important segment for travel companies. ³ As many organizations—both businesses and nonprofits—set themselves more ambitious emissions reduction goals, they’re definitely evaluating their travel habits. This opens up opportunities for travel companies to enter into stronger carbonation partnerships with their corporate customers.

100 Highest Spending Businesses of 2019 Organizations spent nearly $12 billion on domestic and international bookings in the U.S. in 2019. Of these, 45 – nearly half of this commercial air travel spending – have not only increased public carbon emissions, but have committed to a target year of 2030 or earlier.

These organizations are eager to find ways to reduce their emissions and will be more receptive to decarbonizing deals with travel companies. To help travel organizations achieve their net zero goals, travel companies can expand their product and service offerings with a focus on sustainability. For example, car rental companies can encourage customers to pay for electric vehicles, while hotels can command premium corporate packages that promote low-carbon and sustainable practices.

Travel companies can design other ways to move these organizations towards greater sustainability. These could include designing booking platforms to force users to make more sustainable choices in bookings, helping employees track their emissions and providing greater data transparency so organizations can accurately measure the carbon emissions from corporate travel.

Close the “talk” gap between leisure travelers

Research shows that leisure travelers, who generate 70 percent of total travel revenue, also support carbonation. ⁴ According to a recent McKinsey study, 40 percent of travelers worldwide say they would be willing to pay at least two percent more for carbon-neutral flight tickets.

However, Skift’s latest consumer survey revealed a “do-it-yourself” gap. Only 14 percent of travelers report paying more for sustainable options when they travel. ⁵ There are several reasons for this “do” gap, including a lack of clear information related to sustainability, a lack of sustainable registration options, and high cost barriers. Many customers struggle with balancing competing priorities when purchasing a travel service or product.

Travel companies can bridge this gap by focusing on three levers to offer more sustainable travel products and services prominently in the booking process, providing decarbonization information in a compelling way to engage and resonate with customers and help consumers choose more sustainable actions. Scientific techniques to encourage leisure travelers to make sustainable purchase decisions (eg by proactively promoting the most environmentally friendly options first).

A methodical approach to implementing these initiatives is essential throughout the booking journey for the customer. A special task force armed with digital skills, consumer insights and sustainability expertise can be set up to test and refine these changes for small sample groups within each customer segment before implementation is scaled up.

Build new sustainable travel options for the future

Rather than reacting to new trends in the transition to net zero, the travel sector can be a proactive force and pioneer sustainable products and services. Doing so will not only reduce the industry’s carbon emissions, but also create new revenue streams for individual travel companies that can be diverted to other green business opportunities.

There are as many opportunities as there are types of travel companies. An airline may consider playing a more active role in the sustainable aviation fuel (SAF) value chain, perhaps investing in manufacturing facilities to increase alternative fuel availability or developing a green airline that deploys less alternative aircraft. Hotel and accommodation companies can promote green hotels or brands, implementing the latest design approaches and green technologies. Larger and more established travel agencies and booking platforms can provide green travel-focused brands with standardized environmental, social and governance (ESG) measurement services for smaller travel companies that do not have such capabilities. Finally, credit card companies can partner with airlines and hotels to provide customers with an integrated view of their travel suppliers’ emissions and offer more rewards when they choose more sustainable options.

Starting these new businesses may require companies to create unique initiatives outside of their current core business. The teams running them need to be empowered to learn and learn from short iterations and pilots without the pressure to become profitable quickly. Fortunately, the first examples of travel companies applying green business building principles show promising results, which should pave the way for others to follow.

The full report concludes by providing a checklist for travel companies to monitor their readiness for each of the four strategies and increase their chances of a successful – and profitable – journey to net zero. Companies that operate now may gain a competitive advantage over their peers, but their value may erode as those that stand still are left behind.

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About McKinsey & Company

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