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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    Keeping Up with the Start-Ups

    We see four steps that travel companies can take to keep up with innovation and protect their share of the value chain.

    First, they should focus on owning the customer, which means collecting, controlling, and building the infrastructure and partnerships to leverage as much customer data as possible. Doing this requires being part of as many customer transactions as possible, such as through innovative apps and services, even if these apps and services ultimately send business to competitors. Travel companies also need to invest deeply—more so than many have—in understanding the customer experience and unmet needs. If third-party innovations ease friction and capture part of the travel companies’ place in the value chain, then travel operators lose access to both customers and their data. Travel operators may need to collaborate with intermediaries and competitors to remove friction for customers. This will require deep, and probably new, expertise in intellectual property (IP), with a particular focus on how to share data without giving up ownership. Adopting the attacker mind-set will mean looking for cooperative data- and business-sharing models rather than trying to keep the customer inside one’s own system.

    Second, travel companies need to get closer to the sources of innovation—and even participate directly or jointly with any they see as promising. They can use a variety of approaches to learn about, partner with, invest in, and even acquire innovators, working with private equity or venture capital firms to source information about start-ups. Both airlines and hotel companies have established venture labs in the past to explore innovations. Currently, EasyJet is partnering with several technology providers to experiment with the application of innovations such as virtual reality and 3-D printing.

    Partnering with start-ups is a way to outsource innovation so that it does not distract a company’s own organization or require it to develop new skills or teams. The travel company also does not need to own the IP. Companies can consider making their own investments as well—but they should be prepared to take a portfolio approach because some bets will win, and others will inevitably fail.

    Third, travel operators should consider strategies for engaging with the digital giants both now and in the future. Tech companies are already major forces in the industry, and they are likely to get bigger and stronger over time, especially since they have much more experience in, and are more comfortable with, taking on roles—such as start-up investor, partner, and acquirer—that travel companies often find foreign. This makes developing data and IP strategies critical for travel companies, which need to make deliberate decisions about what they will share and what they won’t.

    Fourth, travel suppliers need to actively explore industry-based cooperation. IATA’s NDC is one model. Given the speed and aggressiveness of both big tech companies and start-ups, travel companies need to move quickly. Data is the critical currency of the future, and the ability to share and leverage consumer data, with appropriate safeguards, will be the key to customer engagement. We expect two models to emerge. One leads to the type of experience that Olivia enjoyed: tech companies and start-ups consolidate data at the device level (what consumers see on their smartphone screens using apps such as Facebook or our imaginary Travel Dreams), while noncooperating travel suppliers are left on the outside looking in. In the other model, several (or more) travel suppliers cooperate through a platform they create to share data at sufficient scale to solve consumers’ current frustrations and present a truly seamless experience in which the suppliers are at the center, especially in the early stages of the travel journey.

    The latter vision will require investing in talent and expertise that may not be present in most travel companies today in fields such as data analytics and mobile technology. It may also require building distinct teams with nontraditional cultures within the company in order to attract technology talent that often seeks a “noncorporate” workplace. Such people are not easy to come by and such organizations are not necessarily easy to develop. A concerted effort will almost certainly require doing things differently.

    In a modified version of the vision laid out at the start of this report, Olivia is assisted at each step of the travel process by smart travel companies that have found innovative ways to improve her experience. Not only do these suppliers market their products and services to her directly as she plans her trip, but they also are able to collect the data she generates at each step of the planning and travel process. They can then use this data in numerous ways to develop new products and marketing strategies tailored specially for Olivia—and they can do the same for each of the millions of people who would like to have a personalized experience like hers. In this version of the vision, Olivia looks to such companies as trusted and valued suppliers when dreaming about, planning, booking, or taking a trip—whether for pleasure or business.

    The key for travel companies is to make sure that they are integral parts of the vision, however it plays out. This almost certainly means changing the way they look at the marketplace and approach the consumer. It requires playing offense as well as defense, developing new capabilities, and learning to work with others. Most of all, it means putting consumers such as Olivia first. As one start-up CEO told us, “If you act in the best interest of consumers, you will win. If you act in the best interest of your margins, you will lose.”