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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    Where the Innovation Action Will Be

    As a result of our interviews and our experience in both the travel and technology industries, we see three areas—two in leisure travel and one in business—that are ripe for innovation and disruption over the next several years: travel inspiration (the first vital phase of the travel journey), booking transparency, and unmanaged business travel. (See Exhibit 3.) The speed and extent of change in each will be determined in part by how and how much traditional travel companies, technology companies, and start-ups interact in areas such as sharing data and co-investing in shared infrastructure.


    Travel Inspiration. Information distribution is shaped more by who supplies it than by what the consumer wants or needs. Consumers suffer from information overload, and they struggle to find information tailored to their preferences or needs. The CEO of one start-up said, “Inspiration is a big gap.... We all feel that TripAdvisor is for a different customer than me.”

    Two-thirds of the experts we interviewed think that within ten years, consumers will be able to source their travel inspiration using tools that provide far more integrated and personalized experiences. These tools might even be aided by biometrics or virtual-reality devices that use sensors to pick up breathing patterns or heart rates to detect what individual consumers respond to, and then serve up content that’s relevant for them.

    Some experts expect that the new tools will be developed by start-ups. Companies such as Gogobot and sites such as—which provide consumers with recommendations for hotels, restaurants, and activities based on input from like-minded individuals—have already begun to curate travel information tied to consumers’ preferences. WayBlazer pursues a similar idea using IBM Watson cognitive computing technology. Start-ups such as these, however, need to capture a significant share of travel search and booking in order to make money, and this model has yet to be proven.

    Other experts expect consumers to source information from peers’ posts on social-media sites, such as Facebook and Instagram. They argue that the existing digital giants are most likely to develop or acquire the technology needed to provide consumers with personalized travel inspiration based on their social-media activity and other inferred preferences. The strong advantages of existing digital giants give these companies yet another big edge in this area.

    From the customer’s point of view, the inspiration phase of the travel journey is critical. This is when dreams crystallize, plans form, and decisions are made. The subsequent steps are largely executional. If the tech giants (or start-ups) succeed in gaining advantage in the inspiration phase, travel providers will not only lose ownership of customers, but they will also risk commoditization of their product. The only question will be how the new players decide to monetize their advantage—by continuing to follow their current advertising model but with better targeting and higher conversion rates; by extending the advertising model to include deep links in mobile apps and other ways of tightening their influence over consumers, thus heightening their value to their corporate customers; or by actually making travel purchases on any given consumer’s behalf—at a substantial commission. The ramifications of each alternative are progressively more disruptive for travel providers.

    Booking Transparency. When searching and booking travel today, consumers struggle to find information on attributes other than price, such as seat choice on an airplane or amenities at a hotel. And it is nearly impossible to know where and when to purchase travel tickets in order to get the best deal.

    Efforts over the years by travel providers and others to address the transparency issue have not yielded the desired results. GDSs, OTAs, and metasearch sites and apps all have limited capabilities; they enable consumers to compare only the most basic information, such as schedule, availability, and price. Consumers are frustrated, and providers are commoditized—they are unable to put value and experience front and center in consumers’ considerations. IATA’s New Distribution Capability (NDC) initiative is the most recent attempt to address the transparency conundrum.

    More than half of the experts we interviewed believe that new tools will be in place in the next ten years, giving consumers far more transparency in the booking process with respect to both price and nonprice attributes. As one start-up founder told us, “In the coming years, we will see big VC investments in search based on nonprice attributes, such as airplane seat types and configurations.”

    Some predict that venture capital–backed start-ups will lead this innovation, inventing new booking ecosystems that use predictive algorithms to suggest itineraries, increase transparency on price and nonprice attributes, and provide consumers with secondary markets for selling or exchanging tickets or reservations when their plans change. We are already seeing inventive start-ups in this area, such as Routehappy, which says it seeks to build “the definitive platform to provide data, content and tools all focused on differentiation” for both consumers and travel suppliers, and Flyr, which uses data analytics to predict airfare price direction. (The jury is still out on which technologies or players will ultimately prevail.)

    Other experts think that technology companies will leverage their strengths to lead in the development of new tools, with the ultimate goal of performing some functions of a travel agent and using predictive analytics to optimize the timing of bookings and offer greater flexibility to change or cancel tickets sold as nonrefundable.

    Start-ups, which do not have legacy businesses or platforms to protect, are more likely to seek inventive ways to break down and combine data silos. That said, once they mature, start-ups are likely to be acquired by larger technology companies. This represents a significant potential threat to traditional travel suppliers—unless travel companies decide that they, too, want to play in this game and then back that decision with serious financial investment.

    Unmanaged Business Travel. One-third of the experts we interviewed felt that new tools will reshape business travel just as profoundly as they will leisure travel in the next ten years. Unmanaged business-travel planning today is difficult and time consuming, with few, if any, search and booking tools geared for the business traveler. As one start-up CEO said, “There are more unmet needs in business travel than leisure.... Today nobody is really focusing on unmanaged travel.”

    Once again, views are split: some believe that innovation will be led by venture-funded start-ups, while others believe it will be led by technology. In the former scenario, start-ups develop new tools that enable business travelers to tailor their travel experiences within price limitations, offering a choice between traditional and P2P suppliers. In the latter scenario, established companies with time-and-expense or business-software suites (such as Concur and Microsoft) build ever more convenient planning and day-of-travel tools into widely used tech platforms. The advantage generated for established technology companies by being deeply embedded with enterprises and business travelers today will be hard for others to overcome.