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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    Three Trends Will Shape Future Innovation

    Our research into travel investment and innovation surfaced three key trends, each of which has big implications for current travel companies. First, the pace of travel innovation, already fast, is likely to accelerate. Innovation cycles in travel are short and getting shorter as new ideas rapidly find (or fail to find) markets, winners mature (and often are sold), and others pivot or move on. Think about OTAs such as Orbitz, Travelocity, and Priceline in the first few years of the 2000s and tools such as metasearch a bit later. In each case, the winners were quick to establish themselves, the losers to get consolidated, and investors to move their capital on to the next opportunity. Peer-to peer (P2P) companies such as Airbnb are hot now, but one can already see the P2P concept beginning to mature. (See Exhibit 1.) Any established travel company looking to participate in innovation by partnering, investing, or acquiring must be agile—with resources, teams, and decision-making processes that allow for rapid action.

    exhibit

    Second, despite the investment attention that the travel sector attracts—and the number of start-ups it spawns—there is still plenty of opportunity for innovation. On the basis of extensive analysis of funding for travel start-ups over the past decade, we see limited investment in a number of areas that many consider high potential. One is personalization of travel—providing customers with the ability to customize their travel itineraries more easily. We expect that new inspiration and booking sites will marry data with predictive analytics to tailor recommendations and provide concierge-style packages. Another area is better integration across the travel journey. Back-end technology tools that are invisible to the user will improve integration across modes and providers, enabling sharing and collaboration among suppliers and creating a more integrated experience for the consumer along every step of the travel journey. Yet another area is business travel, where new tools will reshape a difficult and time-consuming booking process. Established travel companies have an opportunity to lead innovation in these areas, but history suggests that start-ups and tech companies will actually pave the way.

    Third, although investment in start-up companies and ideas does take place in the travel industry today, technology companies, rather than travel suppliers, almost always take the initiative (See Exhibit 2.) Corporate investment has provided 19% of the total investments in travel start-up funding rounds in recent years. Technology companies, however, made the vast majority of these travel investments and acquisitions; we saw only a few investments by travel suppliers. There are clear opportunities for collaboration and more investment by travel players that can both learn from and shape innovation.

    exhibit