Travel Innovated: Who Will Own the Customer?

Travel Innovated: Who Will Own the Customer?

          
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Travel Innovated: Who Will Own the Customer?

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    Innovation Is Accelerating—Away from Travel Companies

    It is clear that the type of experience Olivia enjoyed is the direction in which travel will move. We base this conclusion on our analysis of venture-capital investment trends in the industry and interviews with more than 30 visionary thinkers (including travel company CEOs and CIOs, start-up CEOs, and others) in North America, Europe, and Asia, as well as on our own experience with a wide range of global airlines, hotel companies, and other travel suppliers. New solutions will solve today’s customer pain points. These solutions will be developed by companies that collect data, manage it effectively, and, more important, break down data silos to develop the most comprehensive—and personalized—picture possible of the travel customer.

    But what role will travel companies play in this evolution? Will they be active in creating the exchange platforms that will be necessary to facilitate the trading and sharing of consumer and operational data in a controlled environment? Or will they let big technology companies and start-ups fulfill that function? Unless travel suppliers are developing the solutions themselves, or partnering with others that are doing so, they risk losing their place in the value chain. Being part of the solution means altering the way they do business, such as by looking at their role in the various stages of the travel journey—starting with dream and inspire—differently. They need to rethink their contact and interaction with customers, using the data they have access to as an asset to be put to work and leveraged. (See “An Interview with the CEO of Silvercar.”)

    An Interview with the CEO of Silvercar

    Luke Schneider is the CEO of Silvercar, an innovative service that has reimagined the car rental process to be wireless, paperless, and painless, giving the customer control over the entire experience, from accessing the car to receiving the receipt. In a recent interview, he discussed where travel is headed.

    Luke, you are constantly thinking about how to make travel easier and more convenient. How much do you think will change in this respect in the next five to ten years?

    No question that travel will become far more convenient. People will spend far less time trying to travel and more time actually traveling. We’re already seeing change, and it will only accelerate.

    If we look at the myriad products and services involved in a trip right now, they’re all decoupled and patched together with flimsy systems. This leads to angst, frustration, even anxiety, on the part of the traveler. The time is right to put all of the cornerstones of travel—air, ground, hospitality—together on a platform that really works for customers.

    On top of that, there is a big opportunity for the Internet of Things to remove friction with new services, such as intelligent itineraries that allow planes, trains, and automobiles to communicate with one another, enabling graceful resolution of travel disruptions for customers. Or how about smart concierge services that manage the details (hotel check-in, restaurant reservations, parking, and so forth) for travelers based on their physical location? Or autonomous electric vehicles available 24-7 through a phone that’s already in the traveler’s pocket? My guess is that a lot of investment will go to integrating the consumer travel experience—catching up with past investments in trip planning, OTAs, and the back end.

    What does this mean for travel companies? Who will gain, and who will lose, going forward?

    It’s going to have profound implications for who plays in the industry.

    The winners will be the companies that can make customer relationships better. So far, those tend to be new entrants. Look at Surf Air or Rise, which offer new air-travel models. They succeed because they control the customer relationship.

    Ground transportation has been an asset-management industry; traditional car-rental companies manage their fleets. At Silvercar, we said let’s turn that on its head to make it a customer service industry. We want to build strong, long-term customer relationships by offering a rethought, better product and process.

    As change plays out, you will see tech companies trying to get smart about owning and managing travel assets while travel asset owners will struggle to figure out how to get into technology.

    Is it all about new entrants? What can travel suppliers do to stay relevant?

    They can help drive change, not just watch it happen. But that’s going to require commitment and a thoughtful approach. It’s really hard to create a start-up inside a big company—most attempts fail under the weight of their parent. It may be that the best approach for travel suppliers is to partner with start-ups, much more than they do today.

    Whatever course they choose, the most important point they need to understand is to start small. Start with one innovation, try to make it work, then move to the next. Don’t go for the national championship in the season opener. Instead, win the opener, then win the conference rivalry, then win the conference, then win the championship.

    Historically, established travel companies have been responsible for much of the industry’s innovation: think about SABRE in the 1970s and Orbitz in the early 2000s. But the consumer experience remains fragmented. Massive amounts of data generated by travelers about where they go, how they go, and what they like to do while they are there are grossly underutilized because the data is either uncollected or isolated from other data in individual company silos. Travel companies have lost some of their innovative edge; they have neither built strong innovation capabilities internally nor made external investments to acquire these capabilities. None of the most disruptive innovations of the past decade (such as metasearch, on-demand transportation, and North America’s primary in-flight Wi-Fi technology) have been the product of travel suppliers.

    As a result, start-ups and technology companies are now driving the innovation in the industry. Search engine operators and social networks such as Facebook, Instagram, and WeChat have already established advantages in key phases of the travel journey—inspiration, search, and sharing. That leaves travel suppliers and intermediaries with two related necessities: maintaining “ownership” of their customers and data, and needing to collaborate with others to break down silos, improve the customer experience, and generate new sources of revenue.

    An Interview with the Executive Chairman of Surf Air

    Sudhin Shahani is the executive chairman of Surf Air, a California-based “all you can fly” airline travel club that offers its members unlimited flights for a flat monthly fee. In a recent interview, he spoke about the future of travel.

    What do you see as the biggest changes that are likely to take place in travel over the next five to ten years?

    There will be dramatic change in every phase of the travel experience for both leisure and business travel. Leisure travel will become more convenient and more personalized, and there will be more premium, personalized services for the business traveler.

    Looking at leisure travel, virtual reality will be a fully developed tool that helps travelers to experience anything, anywhere, and to decide if it’s the right choice for them. But it won’t be a substitute for the real experience, of course, so it will increase the demand for leisure travel.

    The planning and booking processes will be much less fragmented. They will be more curated, based on where friends and similar consumers have gone and what they liked.

    On the day of travel, I think you’ll see a smoother, more automated airport experience. I also think you’ll see much more point-to-point travel, using a wider set of smaller airports that are easier to get to and less congested than the big airports are today.

    There’s also a lot of excitement among investors about innovation in local travel tools, for both leisure and business. So far, nobody has solved the problem of bringing local information—about activities and events, for example—to travelers, and making it easy to navigate. That’s a big opportunity that investors are hungry for.

    Finally, better communication tools, such as Internet-based conferencing, may reduce the need for face-to-face business, and therefore reduce the overall demand for business travel. But I expect much of the high-value business travel to continue, and those travelers will likely pay more for a better experience.

    Who do you expect to lead this innovation—existing travel companies, start-ups, technology companies, or others?

    I expect start-ups to drive most of the innovation in travel. They have many advantages over big established businesses. Start-ups are agile, they take risks, and they’re good at seeing how innovations in one industry can be applied to an entirely different industry. It’s harder for big established companies to drive or scale up innovation. That said, established travel companies have lots of opportunity to identify and work with start-ups to deliver innovation to their customers. Because this approach isn’t business as usual for the established companies, it’s challenging for them—but it’s worth the effort.

    Assuming these trends play out as you expect, what are your recommendations for current travel suppliers?

    These companies should do more to work with promising start-ups at an early stage—even when the start-up is still too small to capture a lot of attention. This is a great point in their life cycle to partner with them, run local pilots, and test if the innovations are operationally feasible and valued by customers. I also believe that travel suppliers should participate more often in venture capital funding, which helps them to get a better look at start-ups and their innovations at an early stage of development.

    All of this will require openness among travel suppliers to experiment with new ideas, even new business models that may look disruptive to their own. But the innovation is coming—with or without them. The sooner they understand what it will look like, the more they can shape it, and the more quickly they can deliver it to their customers.

    Protecting travel companies’ business will increasingly require an aggressive, thoughtful innovation strategy. For many companies, it may also require shifting from playing defense against innovative attackers that wield new ideas and models to going on the offensive by adopting the attacker mentality and looking for ways to disrupt their own industries. There are many areas in which suppliers can play to win—although they are more likely to play through partnerships than directly, since these areas are far from travel companies’ core capabilities. For example, United Airlines in the US and EasyJet in Europe have partnered with Jumio, a company whose technology lets customers use their mobile devices to scan their passports to check in for international flights. Suppliers looking to develop or access such new capabilities will need to employ new models, such as taking an agile approach that recognizes failures early, learns from them, and moves on; partnering with others, including, potentially, intermediaries and competitors; investing in a portfolio of start-ups; and acquiring young companies with key capabilities. (See “An Interview with the Executive Chairman of Surf Air.”)