Previous publications Future Traveller Tribes Report for the Travel Industry Developed by Henley Centre HeadLightVision in partnership with Amadeus Future Traveller Tribes 2020 www.amadeus.com/traveller tribes Report for the Air Travel Industry Developed by Henley Centre HeadlightVision in partnership with Amadeus The Austere TravellerThe austere traveller: The effect of corporate cutbacks on hotelsthe effect of corporate cutbacks on hotelsA report from the Economist Intelligence UnitExecutive Summary A report from the Economist Intelligence Unit http://www.amadeus.com/hotels/austere_traveller.htmlSponsored byThe Amateur-Expert TravellerThree important trends in travel which are being accelerated by the recession.For more information:firstname.lastname@example.org/amateur-expert
The Amateur-Expert Traveller Three important trends in travel which are being accelerated by the recession
ContentForeword, by Ian Wheeler 1The Amateur-Expert Traveller 2> New destinations 4> The rise of the BRIC economies 5Building the brand in the online world 6The Responsive Journey 8> Technology and the total trip experience 9> Waiting for mobile 12> Looking further into the future 14> …but it’s so much nicer to [stay] home? 15The consumer booking experience 16All Niches Great and Small 18 Appendix 22
The Amateur-Expert Traveller Foreword, by Ian Wheeler started during the Great Depression; Microsoft and The Gap Limited were founded during more recent recessions. Indeed, in some ways, recessions make starting new businesses easier – there is a larger number of talented people looking for work, suppliers are more open to negotiation and customers may be more open to trying a new product or service that promises cost savings. Niall Ferguson, a financial historian at Harvard University, draws a similar parallel between biological and business evolution: “…often, the real drivers [of financial history] are the process of speciation - when new types of company are created - and the equally recurrent process of “creative destruction” - whereby weaker companies die out or, more commonly, get ‘eaten’.” 2 In this paper, we describe three broad trends influencing the travel industry today – increasingly expert customers, the ever more technological trip experience and the growth of “niche” travel – that we believe are being accelerated by the current downturn. To reach these findings, we interviewed thirty leading executives and thought-leaders in the travel industry and polled 2,719 travel professionals worldwide about a series of key trends in the travel industry. We then conducted extensive desk research to understand how these trends might be affected by the recession. The amateur-expert traveller: the Internet has put much more information at the fingertips of the average traveller – whether from professionally produced content or user reviews and other social media. With business and personal budgets squeezed, the incentive to put all that knowledge to good use has never been greater. The responsive journey: technology has improved the booking experience immeasurably but the trip itself remains ripe for technological innovation. Such innovation may be provided by talented executives using the recession as an opportunity for a change in direction. All niches great and small: travel companies will increasingly lookIn the summer of 2007, as the first cracks in Wall Street’s mighty at opportunities in travel niches or selling niche travel services orfinancial edifice began to appear, a natural disaster was already well additional offer opportunities for additional revenue as well asunder way on the other side of the United States. Millions of acres higher margins for in-depth expert advice.of the American West were ablaze in what would turn out to be thesecond most destructive summer of forest fires since records beganin 1960 1. On the other side of the Atlantic, the European Forest Fire Just as forest fires form an important part of the regenerationInformation System called July 2007 the worst on record. process, we believe that the current recession will clear the way for a fresh burst of innovation in the travel industry.Forest fires, like recessions, are both painful and tragic. In this report,we have tried to look beyond the immediate devastation of thecredit crisis and ensuing global recession, to the future. We havetried to look at the trends and innovations which might flourish inthe post-recessionary environment. Ian WheelerRecessions – and even depressions – do not always smother Group Vice President, Marketing Distribution, Amadeusinnovation as much as we are sometimes told. Hewlett-Packard, www.amadeus.comGeophysical Service (now Texas Instruments), Polaroid and Revlon all
The Amateur-Expert Traveller The Amateur-Expert Traveller The Amateur-Expert Traveller
The Amateur-Expert Traveller The Amateur-Expert TravellerTowards the late 1990’s doctors began to notice a curious trend: increasingly, patientsknew almost as much about their illnesses as their doctors did3 , who, after all, have thebenefit of years of university study.This is the result of two factors: as people live longer, more Just as the Internet has empowered patients with knowledge, socialsuffer from long-term illness meaning that people live with their networks, user-reviews and other Internet resources have, and willcondition for years whereas doctors have merely studied it. The continue to, devolve to travellers the power of knowledge. Overmedical industry has dubbed these the “Expert Patient”. Second, the next ten years, half of the experts in our panel expect to see athe Internet has given patients more access to information and “major change” in travellers’ level of knowledge about their travelhelped them to diagnose their condition. This has given rise to options (see chart).“participatory medicine”, in which the rational relationship betweenan all-knowing doctor and a dutifully passive patient is replacedby a team which includes a knowledgeable and actively engaged The corollary to this is that half of our experts expect a similarlypatient, specialized social networks, and clinical researchers in a significant change in the level of service which travellers will“collaborative relationship of mutual respect”4 . demand over the next ten years. This is partly a function of a customer service “arms race” in which travel companies compete to give better customer service, which in turn sets a higher expectationSomething similar is happening in the travel industry. The current among customers. “The challenge there is, the more you give therecession notwithstanding, travel has increased enormously over customers the more they demand,” as Paul Ellerby of easyCruisethe past 10 to 15 years. Similar to someone with a long-term illness puts it. A smaller – but still significant – proportion of our experts– though, one hopes, not suffering quite as much – the frequent expect travellers to become less likely to seek professional advice intraveller will often know more about their destination and how best the future.to get there than a travel agent. This applies as much to business asit does to leisure travel.Looking to the future, to what extent do you think consumer behaviour will change over the next 10 years in eachof the following ways? More knowledgeable about options 50% 43% 7% More demanding in terms of service 50% 36% 14% Less likely to seek professional offline advice 25% 50% 11% 14% Major change Reasonable change Slight change No change Don`t know (Expert interviews: Base: all responding: 28)
The Amateur-Expert Traveller The Amateur-Expert TravellerNew destinationsDescriptionTravellers are expected to become more adventurous in the future Organisation, the current top three travel destinations globallytoo. This makes sense: if fore-warned is fore-armed, then more are France, Spain and the United States. Although our panel doknowledgeable travellers will feel more confident about travelling to not expect a major shift, they do anticipate that China is likely toplaces about which, previously, there was little information. become a major travel destination. Asked what they think the top three destinations will be in 2020, most popular choices were the USA (76%), France (66%) and China (52%). Spain was relegated toAccording to the UN World Tourism Organisation 5 growing demand fourth position (28%).for new and unusual destinations continues despite the broaderrecessionary trend of falling global visitor numbers. Globally,international tourism declined by 8% between the first four monthsof 2008 and the first four months of 2009; but tourism to Africaincreased by 3% over the same period, driven by North Africa (+6%)and the return of tourism to Kenya following unrest in 2008.Indeed, according to Gerard Bellino, a vice president at CarlsonWagonlit’s leisure division, quoted in Business Week, the recessionmay even be accelerating the growth in travel to non-traditionaldestinations: “People are taking advantage of a down market forthings they may have had to save more and longer for in the past.” 6Perhaps unsurprisingly, China also looks set to benefit fromchanging patterns of tourism. According to the World Tourism Looking to the future, to what extent do you think consumer behaviour will change over the next 10 years in each of the following ways? More travel abroad 29% 43% 14% 7% 7% More adventurous 25% 29% 29% 14% 4% More cost-conscious 25% 21% 29% 21% 4% More short-term booking ahead 11% 43% 29% 11% 7% Major change Reasonable change Slight change No change Don`t know (Expert interviews: Base: all responding: 28)
The Amateur-Expert Traveller The Amateur-Expert TravellerThe rise of the BRIC economiesNot only will the traveller of the future be more knowledgeable respectively in 2009. The economies of China and India, by contrast,and more willing to try new destinations, they will increasingly are expected to grow by “only” 6.7% and 5.1% in 2009.arrive from different countries too, as the growing middle classes of As Western households rein in spending and rediscover thedeveloping economies such as Brazil, Russia, India and China (BRIC), virtue of living within their means, Chinese consumers are takinglead to an increase in tourism from those countries. full advantage of their higher savings rates and an enormousDeveloping countries are playing a growing role as a source of government stimulus package. Consequently, excluding Sportstourists and business travellers. Tourism from China grew by an Utility Vehicles, almost as many cars have been sold in China as inaverage of 27% a year between 2002 and 2008 7 . Each year, the America in 2009 11 . In 2006 Americans bought twice as many. In theworld receives 45 million tourists from China – that is more than the airline sector, Air China, China Eastern and China Southern postedentire population of Spain, the world’s second most popular tourist 16%, 25% and 6% growth in revenue per passenger kilometre ondestination 8 . Between 2000 and 2007, Russian outbound tourist domestic Chinese routes for the first four months of 2009 12 .numbers increased by 9.4% a year and the money spent in foreign The growing importance of non-Western cultures in the make-upcountries by Russian tourists increased by 14% each year over the of the world’s travellers has very real consequences for the travelsame period. In 2007, Russia was the 9th largest outbound tourism industry. An Amadeus-sponsored Economist Intelligence Unit surveymarket 9 . published in early 2009 found Asian business travellers to be moreEye-popping statistics about growth and opportunity in emerging influenced by the respectability of a hotel’s brand than Europeans ormarkets – especially Brazil, China, India and Russia – have been a North Americans.staple of management consultants and journalists for much of the With more travellers taking more, longer and more adventurous21st century. So far, though, this has been a pre-recessionary story. trips, increasing numbers of travellers from the emerging economiesWill the growth in developing economies continue through – and and the all-pervasive impact of the Internet on the travel experience,beyond – the recession? it will become an increasingly global marketplace, breaking downThe story is mixed, but overall the recession may well accelerate geographical boundaries. In this context, customers will need tothe global economy’s shift Eastwards. While the current recession be segmented across new lines. An 18-year-old male from Chinais undoubtedly global, its effect is not equal. Generally-speaking, may have more in common with an 18-year-old male from the USWestern economies have been pushed into reverse whereas the than with a 40-year-old male from his own country. Over 80% ofBRIC countries have merely had hitherto spectacular growth rates our expert panel accept this proposition, most of them stronglyclipped. The International Monetary Fund 10 expects the economies agreeing.of the United States and Europe to contract by 1.6% and 2.0% Key findings The Amateur-Expert Traveller is much more knowledgable about his or her destination and what to expect when they get there. Their expectations of service have diverged: they either expect a totally touchless online experience or they expect a very high level of personalised service. The Amateur-Expert Traveller is more adventurous about trying new destinations. Africa and Asia are more accessible and popular than ever. The North Americans and Northern Europeans who have traditionally dominated the travel industry will increasingly make way for Brazilian, Russian, Indian and Chinese tourists and business travellers.
The Amateur-Expert TravellerBuilding the brand in the online world tation of the market, the They cite the increased fragmen online brands take a larger accessible to the customer, As more business goes online and wide number of options readily ket, the relationship of travel s, the volume of user- and larger share of the travel mar the loss of personal relationship becomes more fragile. price competitiveness. companies with their customers generated comment and greater at Forrester Research, Most of our expert panel acknowl edge that it is harder to According to Henry Harteveldt, was offline. Marilu Ngo, of to discover options that build brand loyalty online than it “It is so much easier for people much easier for them to Griffin Sierra Travel in the Philippi nes sums it up thus, “In the they may not be aware of. … It is ent, customer loyalty is others’ opinions and be proliferation of user-generated cont share their opinions and to read ronment because now, it is the Internet to find new inadvertently lost in the online envi swayed by them, and then to use mostly price-driven.” options.” uld you say that most important factors According to our panel, the two Compared to the offline world, wo ther online or offline, ine world is in building an effective brand, whe building brand loyalty in today’s onl promise and delivery and are consistency between brand easier or harder? . Word of mouth and the quality of the user experience effective promotion are both considered to be marginally building an emotional more important online, whereas ght to be more connection with the brand is thou 10% important offline. 3% Much easier h of the 7% How important would you say eac e brand in A bit easier following is in building an effectiv online and 40% The same today’s travel industry for both all responding: 30) A bit harder offline? (Expert interviews: Base: 40% Much harder Consistency between brand promise and product delivery onding: 30) (Expert interviews: Base: all resp Quality of user experience Peer-to-peer word of mouth Effective brand and product promotion Emotional connection with the brand Average score based on nt, scale 5 = vital, 4 = very importa 1 2 3 4 5 very 3 = fairly important, 2 = not important, 1 = not imp ortant at all Online Offline
The Amateur-Expert Traveller a company has over its s actually reduce the control the question of whether user-review terms of the service and productWe explored in our interviews e other parts of the brand in ingi at Yatra.com in India, “Th ” For Mr Shringi, userown brand. According to Dhruv Shr trol. The user generated con tent just reflects these factors. e company’s con ed content is just an outcomare still very much within the trol the others, the user generat cause, “…so if the company can conreviews are a symptom, not a an impact.”and won’t really have too much of nds quality and expectations of bra are a positive force, driving up eve that user-generated reviews erally refl ect this view. Most Most of our expert panel beli part in the online survey gen reputation (13%). Those taking %). Fewer than (73%), rather than a threat to brand itive’ vs. 27% overall ) and online travel agencies (39 panies (42% see it as ‘very pos positive are the car rental com s are more likely to do so (25 %). ough the offline travel agencie one in five regard it as a threat, alth 3% 16% ed content with respect 27% Very positive 27% How do you see user-generat Moderately positive 55% to your brand? onding: 2,646) Moderate threat 16% (Online survey: Base: all resp Severe threat 3% 55% rs are going to get into the “I think that the travel provide k they’re going to let their review business as well. I thin on share the demographic data customers read a review and customers. ” the reviews with their other Brian Harniman, Kayak, USA e even more pressure to “I think that hoteliers will hav to ensure that a customer still upgrade their experiences and er has that much more of an comes to them, when a custom erience in advance.” ability to understand the exp rs, UK Alan Josephs, formerly ebooke
The Amateur-Expert Traveller The Responsive Journey The Responsive Journey
The Amateur-Expert Traveller The Responsive JourneyTechnology’s impact has largely been concentrated around searching for, and booking, thejourney, not the journey itself. That, according to our panel, is about to change.The 1987 film, Planes, Trains and Automobiles, tells the story of Neal Page, an uptight advertising executive, trying to get home to see hisfamily in Chicago for Thanksgiving after a business trip in New York. Among the many absurd misfortunes which turn a 1 hour 45 minuteflight into a three day epic, he suffers a downgrade from business to economy, a diverted – then cancelled – flight, an awful motel room, anabortive train journey and an irritating travel companion. Despite the considerable impact of technology on the travel experience, the storyis no less plausible today.To what extent do you agree or disagree with the elements included in the statement? Technology hasn’t changed what the 17% 45% 14% 24% consumer experiences on a journey That`s about to change 41% 34% 3% 14% 7% Totally agree Partially agree Neither Partially disagree Totally disagree (Expert interviews: Base: all responding: 29)Technology and the total trip experienceTechnology offers significant immediate opportunities to improve the customer experience before,during and after a trip. The travel professionals on our expert panel acknowledge that this will generateadditional revenue and 79% agree that it will solve the problem of online customer loyalty.To what extent would you agree or disagree with the following statements from your own perspective? Services beyond the booking stage will generate further revenue 69% 28% 3% Services beyond the booking stage will solve the problem of online customer loyalty 34% 45% 3% 7% 10% Completely agree Agree to some extent Neither Disagree to some extent Completely disagree (Expert interviews: Base: all responding: 29)
10 The Amateur-Expert Traveller The Responsive JourneyTechnology and the total trip experience DescriptionAccording to our panel, the opportunities Looking ahead, to what extent would you say each of the followingare most evident in researching the trip, elements offers an opportunity for technology to improve the customerfinding price and availability information experience before, during and after a trip in the immediate future?and booking the trip.If the industry is to make the most of Researching the trip 66% 17% 10% 7%these opportunities, then it will have toembrace new technology solutions that will Finding price / availability information 52% 34% 14%help to make the travel experience morecomfortable, secure and personalised for the Booking a trip 48% 38% 7% 7%traveller – the ‘humanisation of technology’. Researching / choosing hotel 45% 52% 3%With the pace of technological change Choosing destination 45% 38% 10% 7%accelerating, our expert panel feel that Comparing price information 41% 38% 17% 3%the impact will be greatest for those toolswhich particularly address the issues around Acitivities upon return 21% 41% 31% 7%poor user experience, making the onlineexperience more personalised and easier touse. Major opportunity Reasonable opportunity Slight opportunity None / D.K.Foremost among these are likely to be more (Expert interviews: Base: all responding: 29)sophisticated customer information systemswhich select destination information basedon customer preferences, and intuitiveinterfaces, which will provide new ways tointeract with computing devices, such asnext-generation touch-screens and voice Which of the following will have the biggest impact on humanising theinteraction. Nearly one-third also anticipate travel experience? (Expert interviews: Base: all responding: 29)the role that virtual reality may play inhumanising the travel experience. Personalised destination information 55%But the Internet is a continually evolvingphenomenon, and, even in mature markets, Intuitive interfaces 41%the likes of Web 2.0, social networking andmobile technology continue to be drivers of Virtual reality 28%growth. Our expert panel predict that, by2020, technology will have brought about Geo-localisation technologies 21%significant improvements in capabilities fortravel providers, sellers and consumers in all Tailored loyalty programmes 17%areas of the travel industry – in particular,the ability of travel sellers to make more Social computing 17%travel options available to the public and theability for consumers to share information Digital concierge 14%about travel providers with other consumers– both themes picked up in other places Digital identities 7%throughout this research. Sensory airport / airline systems 7%
The Amateur-Expert Traveller 11 The Responsive JourneyThinking ahead to 2020, what would you say the further impact of technology will be on the following … Ability of travel sellers to make more travel options available to the public 31% 59% 10% Ability for consumers to share information 28% 66% 3% 3% about travel providers with other consumers Ability for travel providers and sellers to make pricing and availability information available to the public 10% 76% 10% 3% Ability for consumers to find information about the quality of travel providers’ products 7% 79% 14% Ability of travel providers to manage the logistics of travel better 7% 79% 7% 7% Ability for independent travel providers and sellers to increase market share 14% 41% 38% 7% Improve beyond all recognition Improve a lot Improve a little Hardly / not at all (Expert interviews: Base: all responding: 29)Nearly all of our expert panel agree that Web 2.0 improves As with many of the changes associated with the Internet, it is notinformation transparency ‘a lot’ (69%) or ‘a little’ (28%), although so much the technology itself but the way that technology enablesone disagrees, believing that it actually makes information less behaviour which is important. Kerry Cannon Jr., at iM@, capturestransparent. Around 80% of them have already added or are the essence of this when he says: “There’s always been user-considering adding social computing or user review functionality to generated content; it was called word of mouth. Technology hastheir own websites. Airlines are perhaps a little behind others, but just empowered that word of mouth… technology has absolutelythey too are generally considering taking this step. changed the game in terms of how many other mouths you canWithout exception, our experts agree that Web 2.0 will improve hear from.” Or, in the words of media consultant and author, Claythe customer’s travel experience between now and 2020, whether Shirky, “[social media] tools don’t get socially interesting until they‘beyond recognition’ (17%), ‘a lot’ (59%) or ‘a little’ (24%). In get technologically boring.” 13particular, they see Web 2.0 as an answer to user experience issues Looking forward to how user-generated content itself will evolve,which may be hindering the growth of online travel services. Nikos Goulis, of E Travel SA, in Greece, sees the proliferation of UGCPrimarily, it will give the user more and better information that will continuing unabated, “User generated content will have more data,be better organised, easier and faster to access and more interactive, both in text and picture, video and music. I believe we will haveleading to greater satisfaction with the whole online experience. content for destinations that are not very popular right now and“There will be a dramatic change in the way the content is searched there isn’t much … and, for the popular destinations, we will haveand organised. It is still extremely hard for customers to find a plurality of the content which might be missing today.” (Nikoscontent, define content easily and to actually use it. Going forward, Goulis, E Travel SA, Greece)all these factors will change tremendously and … it will be veryeasily accessible. … The technology will add a lot of value in terms of Joe Bous, at US travel agency, Wholesale Travel Center, thinks thehow data gets collated and presented to the end consumer.” (Dhruv challenge is not so much to get more content, but to find meaningShringi, Yatra.com, India) in the content you have, “there might be 4000 reviews – what are you going to do with 4000 reviews? And it all, of course, comesSome also point to the increased opportunities to personalise down to 3.5 stars. It’s sort of worthless.” Part of the answer isand select the information that is most relevant to the user’s own knowing who wrote a given review, as Brian Harniman, Kayak,circumstances and to share experiences. According to Timir Bhose points out, “I can look for people that seem to be like me and reallyand Pia Viljaniemi of Finnair, reading user reviews, “…supports better trust their judgement more than the rest of the great unwashedpre-planning so that the customer will be able to plan better ahead reviews. If someone is travelling for a different reason from me, aand get more knowledge about other customers’ opinions.” hotel may be good for them but by the same token horrible for me.”
12 The Amateur-Expert Traveller The Responsive JourneyTechnology and the total trip experience DescriptionFor Mr Bous, there is an opportunity for smart technology to panel see potential – as yet unfulfilled – for user-generated contentpluck meaning from the mass of content already available, “the to add value to the business travel experience.next generation of technology will look at something that can do With corporations under more pressure than ever to keep costs to asemantic analysis and come up with some sort of metric or analytic minimum, a mechanism which allows employees to share cost-that can make sense of all that drivel that people write.” saving tips and for travel managers to aggregate feedback fromA final word on business travel. Until now, leisure travel has travellers which can be used in supplier negotiations, becomes allbenefitted most from user-generated content, but two thirds of our the more attractive.To what extent do you agree with the following statements? (Expert interviews: Base: all responding: 29) User-generated content has yet to improve the business travel experience 31% 34% 7% 21% 7% User-generated content would be beneficial to the businesstraveller in much the same way that it is to the leisure customer 41% 21% 3% 31% 3% Totally agree Partially agree Neither Partially disagree Totally disagreeWaiting for mobileriptionNearly a third of respondents to our online survey felt that mobile devices will have a greater impact on the way the next generationresearches and books travel than social networking, user reviews, video sharing or visualisation tools. According to the InternationalTelecommunications Union, the number of mobile phone subscriptions exceeded 50% of the world’s population in 2008. Once again, theBRIC countries are responsible for a large share of this: over 1/3 of the world’s mobile phone subscriptions are accounted for by these fourcountries .14Which of the following do you think will have the 2% 10% 8% N/Agreatest impact on the way the next generationresearches and books travel? Visualisation tools (ie Second life) 22% Users reviews 26% Mobile devices(online survey: Base: 2719) Social networking Video-sharing (eg YouTube) 32%
The Amateur-Expert Traveller 13 The Responsive JourneyWaiting for mobileriptionIn a March 2009 report, PhoCusWright calls mobile, “The Next Platform for Travel” 15 and Samsung, the electronics group, expects themarket for smart phones – which combine voice calling with email and Internet access – to grow from 170 million in 2009 to 500 million in2012 16.Long anticipated, mobile internet really does seem about to take off. As PhoCusWright has pointed out, “the more compelling opportunity[than simply shifting reservations from fixed Internet to mobile] will be to create mobile-specific applications that go beyond shifting shareto a new channel, and thus generate ancillary revenue that was not previously available.” 17This is certainly not lost on application developers. Today, Apple’s website lists over 3,700 travel-specific applications for its iPhone, foreverything from checking flight delays to finding the cheapestpetrol station to a mobile travel map of China specifically for fansof kung fu.Henry Harteveldt of Forrester Research points out that the nexusbetween mobile Internet and user-generated content will beincreasingly important. “Travel is one of the businesses that lendsitself to user generated content and the sharing of ideas, opinionsand suggestions. … A big factor behind this increase will be thegrowth and evolution of mobile internet devices that are gearedmore for data than voice. These will allow person-to-person orgroup messaging that might be written word or voice, SMS text orother data, and along with this will be the emergence of new typesof internet sites.”Indeed, some of the most interesting iPhone applications combinemobile with user-generated content. Roadtrippr is like a wiki ofinteresting destinations for people to visit while on a road trip.Users contribute information about interesting attractions in theirhome town and, in turn, use it as a resource when they are on theroad. When used from an iPhone, the application is aware of theuser’s location and tailors (user-generated) content accordingly.
14 The Amateur-Expert Traveller The Responsive JourneyLooking further into the futureThe futurologist Ray Kurzweil (The Age of Spiritual Machines: by private individuals or delivery fleets 20 . Such applications areTimeline) predicts that, in ten years’ time, computers will be largely even changing the way we think about cars: Zipcar is a car-sharinginvisible and embedded in walls, furniture, clothing and even bodies. service billed as an alternative to car ownership or rental. MembersMr Kurzweil accurately predicted the emergence of the Internet and of the service are given an electronic card which they can use tothe fall of the Soviet Union, so he is worth listening to. access any one of 6,000 cars in North America and London 21 . The cars themselves report their positions back to head office so agentsWhat is more, his vision of embedded computing is already can tell customers where their nearest car is. Customers rent thebecoming a reality. Cars are a case in point: the 1978 Cadillac Seville cars by the hour or for days at a time, picking them up from wherewas the first car to include a – single – microprocessor, to power its the previous customer left them. Such a model potentially releasestrip computer18 . Thirty years later, even the world’s cheapest new car rental companies from the necessity of renting out large carcar – the Tata Nano – carries twelve microprocessors. Car rental parks; the problem is, in effect, crowd-sourced. Similarly, a car rentalcompanies already offer optional GPS devices which not only show company could aggregate historical location data of all the carsyou the way to your hotel but can also suggest nearby tourist in its rental network, combine this with the real-time locations ofattractions. the cars in its network and put such data to commercial use. TheyAs with personal computers in the nineties, treating cars as nodes could recommend services not just on the basis of their geographicin a network is revealing valuable new applications 19 . Inrix is proximity but also on the basis of how popular such services havea start-up which aggregates information on traffic flows from been with other drivers in the network: “drivers who stayed at thisGPS systems installed in vehicles, fixed traffic sensors and other motel ate at Chez Gerard’s Bar and Grill”.sources. This is then delivered to in-car GPS systems used either
The Amateur-Expert Traveller 15 The Responsive Journey…but it’s so much nicer to [stay] home?The ultimate travel technology would enable all the benefits oftravel without leaving the comfort of your home or office. MrKurzweil predicts that within a few short years, three-dimensionalvirtual reality displays embedded in glasses and contact lenseswill be used routinely as primary communication interfaces,and that high resolution virtual reality and all-encompassingtactile environments will enable people to do virtually anythingwith anybody, regardless of physical proximity. And the rise invisualisation tools and virtual reality may change the whole conceptof travel. Travellers can experience the travel sensation whilemaking their choices, whilst “virtual” travel (video conferencing,hologram meeting, etc.) may completely change travel patterns.The technology of the moment, in this respect, is TelePresence.Launched by Cisco three years ago, TelePresence is basically a high-quality video conference system. It is still used mostly by largercompanies because the technology is still expensive. Of course,this is no reason to write it off; as adoption increases the cost will It remains unlikely that TelePresence will completely replace thefall. The question is, will it replace business travel? Starwood and business trip; much less the holiday abroad. Since the inventionMarriott think not: both have announced TelePresence services of the telegraph, advancing communications technologies haveat their hotels . The target market is smaller companies or local tended to go hand-in-hand with a global growth in travel, drivenbranches which can’t afford their own dedicated TelePresence by among other things advancing transport technology, theset-ups but would still like the virtual face-to-face experience. internationalisation followed by the globalisation of business and,At 500USD an hour the service still isn’t cheap, but it is a lot cheaper simply, the desire to get away from it all. After all, it’s still nice to gothan flying from New York to London, for example. travelling. Key findings We are about to see a significant amount of technological innovation to streamline the experience of travellers during their trip. Mobile internet will combine with social networking to offer new opportunities for travel companies to offer an improved trip experience for business and leisure travellers. TelePresence technologies will complement, but not replace, business travel.
16 The Amateur-Expert TravellerThe consumer booking experience s must work hard to improve out this research is that provider One of the clearest messages we have heard through is the most important element in erts felt that the user experience the user exp erience. Indeed, our panel of exp creating brand loyalty online. nd loyalty in the online world? have the most impact on bra Which of the following will 73% responding: 30) Improved user experience (Expert interviews: Base: all 43% Personalised web content 40% Offer better value for money rests 40% Segment products to target niche inte ile 30% Support multiple platforms, e.g. mob 30% Incorporate user-generated content alisation, using customer Customisation and person how travel companies can intelligence to address per sonal needs, offer relevant In this sub-section, we look at s nt suggestions. erience in the online world. Thi information and make intellige achieve excellent customer exp must increasingly include: Andy Bateman of Interbrand, This is neatly summed up by , speed and ease of access that reflects the needs of A smooth online experience USA: “Provide a great service of freedom from technical content that gets in the way through multiple channels, and customers rather than push do.” hitches; what customers are trying to of MakeMyTrip, India: “The In the words of Jasmeet Singh anisation is the time when a moment of truth for every org l. iness, irrespective of the channe customer interacts with the bus vide a top it is imperative to pro In the case of online businesses, ortant at class user experience . This experience is not only imp payme nt) but it must begin with the latter part of the funnel (at the word Go.” delivery, making it easy to find Comprehensive information t price, transparency, and the the right product at the righ e. rmation required in one plac ability to access all of the info % okers, says, “It should be 100 Alan Josephs, formerly of ebo the ability to easily … Speed and focused on user experience. find the right product.”
The Amateur-Expert Traveller 17 tak e specific actions companies canBelow we outline some more online.to improve customer loyalty t and ld consumer confidence, trus Especially in Asia-Pacific, bui ments and personal credit card paycomfort with security around about giving credit carddetails: “Ma ke the customer comfortable will not happen all of a sudden, itdetails over the Internet. It will MakeMyTrip, India)be gradual.” (Jasmeet Singh, incentives, such as financial Creating urgency and offering ed value, to do the deal: “If the incentives, discounts and add there is a d user experience first time, customer has had a very goo er coming referral and for the custom lot of possibility for positive g.” (Helen back. I think user experie nce is the most important thin tralia) Demetriou, Wotif Group, Aus ed ediately – the old tried and test “Offer an incentive to book imm en, Kan oo Travel, Saudi Arabia) method.” (Abdulla Abikhamse just transparency but, where Reassurance on pricing – not even tees and promises: “Customers, possible, lowest price guaran from different price, still tend to ask if they are getting the lowest Have a ‘Lowest sources, ‘are there any lower prices available?’. your pro ducts well.” Fare Guarantee’ and explain air, Finland) (Tim ir Bhose Pia Viljaniemi, Finn erent ering niche products and aggregating products from diff Quality of products – off Providing a ‘one-stop shop’, customer rket providers, including competitive product, allowing the differentiation, not just commodity mass ma tailored package without hav ing to visit honest products. Many new to build their own offerings: “Offer niche and rators which have g con tent. … Travel suppliers travel agencies and tour ope multiple sites: “More far-reachin online , ts into their site to generate ’t know what they sell and nee d to aggregate different produc a lot of mass products don year after the client pliers need to have metasearch while they may get one boo king, the customer interest. These sup or ent is ‘class instead show real time seat inventories return to them. Our statem properties in their site that can lippines) does not , Griffin Sierra Travel, Phi room availabilities.” (Marilu Ngo of mass’.” , Germany) (Pascal Zahn, Olimar Reisen illary only for travel but also for anc “Make it a one-stop shop, not tomer can , supermarket where the cus h the process step-by-step processes. … It needs to be a Helping customers throug reached, providing gs he wants.” has been go in with a list of thin making it clear what stage haps allowing for (Ratan Ratnaker, Kingfisher Airl ines, India) reassuran ce where required and per offline support if needed.
18 The Amateur-Expert Traveller All Niches Great and Small All Niches Great and Small
The Amateur-Expert Traveller 19 All Niches Great and Small Reports of the death of the travel agency have, by and large, been extent. Even if the products will become a humanised experience exaggerated. According to PhoCusWright, “The dramatic shift in when they surf the web, the customers will still feel they need online share towards supplier Web sites that took place in the earlier something extra by talking to someone … you cannot take that part of the decade has slowed or stopped.” 22 Indeed, PhoCusWright away.” expects share to shift from supplier websites back to online travel Regardless of where the online / offline equilibrium eventually rests, agencies as the economic downturn puts a premium on finding our panel expect to increase the proportion of their IT spend which deals and comparing different suppliers. is allocated to supporting their online strategy. Moreover, there is still a significant proportion of travel booked The Internet has enabled other industries to increase the length of offline. PhoCusWright estimates that in 2007, 49% (by value) of the distribution curve – i.e. sell more of the small-volume products travel booked in the US – the most advanced in terms of Internet – a phenomenon made popular by Wired editor Chris Anderson in penetration in travel – was booked offline. Will the shift to online his book, The Long Tail: Why the Future of Business Is Selling Less of level off or will we carry on all the way to 100% online booking? More. For example, Amazon.com makes 30% of its revenue selling Three-quarters of respondents to our global online survey think books which are not cost-effective for the world’s largest offline 100% penetration will never be reached. bookseller, Walmart, to stock. In our online survey, less than a third of respondents follow the Do you think the proportion of travel booked online will traditional retail model, deriving 80% of their revenue from only the ever reach 100%? top 20% of their product portfolio. However, for nearly 4 out of 10 of respondents, 80% of revenue is spread across 60% or more of their product portfolio, which is much closer to the long-tail model.No, the proportion is as high as it will get 10% No, there will always be a small 65% proportion of travel booked offline What percentage of your company’s IT spend would Yes, but a long, long time in the future 10% you estimate is allocated to technology to support your online strategy? Yes, soon 15% (Online survey: Base: all responding: 2,731) Indeed, one in ten suggest that it has already peaked or will even start to fall. This view is most likely to be held by those in 91% - 100% traditional travel agencies – and nearly one in five of those in North 81% - 90% America believe that the peak has been reached. Kerry Cannon Jr., at iM@ thinks, “There is and there will always be a cross-section 71% - 80% of the public that just won’t ever use [the Internet to book travel]. 61% - 70% Regardless of how much you humanise it, there will always be a 51% - 60% cross-section of people that will hire people to do that stuff for 41% - 50% them. … There are certain things that the Internet has definitely changed, but human nature, no.” Up to 40% However, the majority – 65% – of respondents think the proportion of travel booked offline will only be small. Marilu Ngo of Griffin Sierra Travel in the Philippines suggests that Currently In 2020 cultural differences may lead to asymmetric penetration of Internet travel around the world: “In South East Asia, clients prefer person- to-person communication or a personalised service … it is this preference that inhibits growth of online travel services to a larger
20 The Amateur-Expert Traveller All Niches Great and SmallAll Niches Great and SmallOnline travel agencies are more likely to be at the “long-tail” end of Travel 1975 Travel 2009the spectrum, with 30% saying that the top 80% of products account The Old Marketplace The New Marketplacefor 80% of their revenue. Scheduled Airlines, Cars, Scheduled Airlines Hotels, Cruises Low-cost Carriers Popularity Popularity Head Head Tours and ActivitiesWhich of the following best describes your business? Cars, Hotels Adventure Tours Vacation Homes Spas 15% Long Tail Long Tail 28% Top 20% products = 80% revenue Products Products Top 40% products = 80% revenue23% Top 60% products = 80% revenue Source: PhoCusWright, Inc. Top 80% products = 80% revenue What might those niches be? Although family-friendly travel is still 34% reckoned to offer the greatest opportunity – and is not exactly niche (Online survey: Base: all responding: 2,515) – our panel did see opportunity in, among other things, adventure travel (83%), religious travel (55%) and weddings (45%). Selling niche content has two obvious challenges: low volumeOur expert panel generally agreed with the view that “the future of and finding enough customers. By definition, a company will notthe travel business is in the millions of niche markets at the shallow sell a high volume of a niche product. To become large, a businessend of the distribution curve” (illustrated in the PhoCusWright must work out how to standardise across a number of nichesdiagram right). Two thirds agree with the statement, and only one to gain sufficient economies of scale to make low volumes on ain four disagree (airlines in particular). number of niches add up to a large and profitable business. Low-Although most of our panel still see big-selling products as their cost carriers operating a network of routes to secondary cities aregreatest opportunity, around half see significant opportunity in a good example of this in the travel industry: the absolute volumeselling more niche content and selling to niche customers. of passengers on each route may be small but so long as they are profitable, the carrier’s total volume may be large.Which of the following do you think offers the greatest financial opportunity for your own business? Selling more of existing big-selling products 41% 17% 28% 14% Selling more niche content 31% 21% 34% 14% Selling to niche customers 24% 24% 17% 34% Selling more to existing biggest customers 7% 48% 24% 21% Greatest opportunity Second Third Least opportunity (Expert interviews. Base: all responding, 29)
The Amateur-Expert Traveller 21 All Niches Great and SmallSpecialisation is another strategy. How would you rate the business opportunity in each of the followingCompanies like Trailfinders, which areas?specialises in adventure travel, or GriffinMarine, which specialises in marine travel Family friendly travel 56% 39% 6%and participated in this study, can offer Lifestyle travel 50% 39% 6% 6%specialised knowledge of a specific sectorwhich elevates the decision process beyond Groups and meetings 50% 28% 17% 6%price. Adventure travel 39% 44% 11% 6%It also builds loyalty. Outside the travelindustry, the carmaker Subaru has Aircraft charter 33% 28% 22% 6% 11%successfully operated in a niche; thecompany specialises in vehicles for outdoors Eco / green travel 22% 50% 22% 6%enthusiasts and ‘experience-seekers’. Anarticle in the Financial Times quotes Tim Religious travel 22% 33% 33% 11%Mahoney, US chief marketing officer at Ground transportation 17% 44% 28% 6% 6%Subaru, “We’re a niche brand but that hasnothing to do with size, it’s more about Weddings 17% 28% 39% 6% 11%finding a relatively safe place where we canexist comfortably.” 23 Dining reservations 39% 33% 17% 11%The same article quotes John Wolkonowicz, Travel goods 28% 44% 17% 11%an analyst at financial analysis and marketintelligence consultancy, IHS Global Insight,explaining, “I don’t think you could find a Major opportunity Some opportunity Limited opportunity No opportunity Don`t knowmore fiercely loyal body of customers [thanSubaru’s], except perhaps for BMW.” (Expert interviews. Base: all travel agencies: 18)In an increasingly online world, whereloyalty is hard to earn and easy to lose,and barriers to entry are low, scale orspecialisation or a combination of the twoare rare routes to profitable growth. Key findings The shift to online will continue but will most likely plateau before 100%: some travel will always be booked offline. The millions of niche markets at the shallow end of the distribution curve represent a significant opportunity for travel companies to increase revenue and loyalty.
22 The Amateur-Expert TravellerTechnical Appendix Amadeus commissioned independent research consultancy, David Burton Associates (DBA), to undertake a programme of research within the global travel industry in autumn 2008. 30 in-depth interviews were conducted with key senior opinion-leaders in travel and travel-related companies worldwide – our ‘expert panel’ – offering a broad-based and informed insight into trends in the travel business. Interviews were conducted between September 2008 and January 2009. These were principally conducted by telephone by senior DBA executives and associates, with one or two interviews being completed by correspondence. Our expert panel comprised: Saudi Arabia, Abdulla Abikhamseen, Executive General Manager, Kanoo Travel, Online travel agency USA, Andy Bateman, Chief Executive Officer, Interbrand, New York, Branding agency Finland, Timir Bhose, Director Pia Viljaniemi, Development Manager – e-commerce, Finnair, Airline USA, Joe Bous, Director, Wholesale Travel Center, Online travel agency USA, Kerry J. Cannon Jr., Chief Executive Officer, iM@ (interactive MOBILE @dvertising), Travel information Taiwan, Jeff Chu, Managing Director, Grand Travel Inc, Travel agency Australia, Helen Demetriou, Executive General Manager, Flights Business Unit, Wotif Group, Online travel agency UK, Paul Ellerby, Sales Marketing Director – UK USA, easyCruise, Cruise USA, Robert Gallagher, Chief Operating Officer, AIG Travel, Travel insurance Greece, Nikos Goulis, Managing Director, E Travel SA, Online travel agency USA, Brian Harniman, Executive Vice President, Marketing Distribution, Kayak, Travel search engine USA, Henry Harteveldt, Vice President, Principal Analyst, Airline Travel Industry Research, Forrester Research INC., Travel research Colombia, Maria Claudia Isaza, Vice-President – e-business, Aviatur Group, Travel agency UK, Alan Josephs, Managing Director, formerly ebookers, Online travel agency Malaysia, Shivanathan Kesavan, Travel Manager, Gem Travel, Travel agency Canada, Guylaine Lavoie, Director – Marketing Innovations, Air Canada, Airline UK, Ignacio Martos, Chief Executive Officer, Opodo, Online travel agency Philippines, Marilu Ngo, Vice-President General Manager, Griffin Sierra Travel Inc., Travel agency / marine crew corporate travel Qatar, Peter Pohlschmidt, Manager – E-commerce, Qatar Airways, Airline
The Amateur-Expert Traveller 23 USA, Alexander Pyhan, Director – Global e-Commerce Channels, Marriott International Inc., Hotels Lithuania, Audrius Ramanauskas, Chairman, Interneto Partneris UAB, Online travel agency India, Ratan Ratnaker, Vice President – Revenue Optimisation, Kingfisher Airlines, Airline India, Dhruv Shringi, Chief Executive Officer, Yatra.com, Online travel agency USA, Lorraine Sileo, Vice-President – Research, PhoCusWright Inc., Travel research India, Jasmeet Singh, Manager – International Air, MakeMyTrip, Online travel agency Japan, Mr Takano, H.I.S. Co, Travel agency / Online travel agency Chile, Gonzalo Undurruga, Vice-President – e-commerce, LAN, Airline Poland, Janusz Wierbowski, Owner, Sonata Travel, Travel agency / Online travel agency Germany, Pascal Zahn, Executive Officer, Olimar Reisen GmbH, Tour operatorOne additional panel expert asked to remain anonymous.This was supported by an online survey, conducted in November 2008. Invitations were e-mailed to Amadeuscontacts throughout the worldwide travel industry, and a short questionnaire was completed by nearly 3,000travel professionals, covering all regions of the world and a spread of business sectors.The profile of the sample was as follows:BY SECTOR: BY REGION: Airline 19% Western Europe 34%Car rental company 2% Eastern Europe 5%Hotel 15% Southern Europe 4%Travel agency 52% USA Canada 25%Online travel agency 3% Central America Caribbean 3%Cruise 1% Latin America 11%Other 9% Middle East North Africa 4% Subsaharan Africa 2% North Asia 1% South Asia 1% South East Asia 6% Central Asia 1% Pacific 4%
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AcknowledgementsPUBLISHED BYAmadeus IT Group, SADESIGN PRODUCTIONAmadeus IT Group, SAPHOTOGRAPHYDaniel GreavesAlejandra ContrerasAmadeus Image BankRESEARCHDavid Burton Associates