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Dare to differentiate
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Transcript of "Dare to differentiate"

  1. 1.  
  2. 2. DARE  TO  DIFFERENTIATE   Summer  2010  Edition  “Not  So  White”  Paper  Series         Library  of  Congress  Cataloging-­‐in-­‐Publication  Data   Fitzgerald,  Chicke  J.   Dare  to  Differentiate,  Tapping  the  Drive  Traveler  –  The  Forgotten  Mass  Market   ISBN  0-­‐9721398-­‐3-­‐4   Copyright  @  2010,  Solutionz  Group  International,  Inc.   All  rights  reserved  under  the  Pan-­‐American  and  International  Copyright  Conventions.    No  part  of  this  book,  in   whole  or  in  part,  may  be  reproduced,  stored  in  a  retrieval  system,  or  transmitted  in  any  form  by  any  means   electronic,   mechanical,   photocopying,   recording   or   otherwise,   without   the   prior   written   permission   from   Solutionz  Group  International,  Inc.     Dare  to  Differentiate   Tapping  the  Drive  Traveler  |  The  Forgotten  Mass  Market   Cover  image  courtesy  of  MMG  Worldwide,  all  rights  reserved       Publisher:     Solutionz  Group  International  Inc.   13911  W.  Hillsborough  Avenue,  Suite  312   Tampa,  FL    33635  U.S.A.     Printed  in  the  United  States  of  America       ©  2010,  Solutionz  Group  International,  Inc.    All  Rights  Reserved.   Page  |  i    
  3. 3. DARE  TO  DIFFERENTIATE   Summer  2010  Edition  “Not  So  White”  Paper  Series                     Dare  to  Differentiate   Tapping  the  Drive  Traveler  |  The  Forgotten  Mass  Market            By  Chicke  Fitzgerald     Summer  2010  Edition     “Not  So  White  Paper™”  series         ©  2010,  Solutionz  Group  International,  Inc.    All  Rights  Reserved.   Page  |  ii    
  4. 4. DARE  TO  DIFFERENTIATE   Summer  2010  Edition  “Not  So  White”  Paper  Series         THE  FACTS   • 85%  of  all  overnight  trips  in  the     US  are  taken  by  car       • 78%  of  all  spending  on  travel  in     the  US  is  done  by  people   traveling  by  car     • 6  out  of  the  top  10  search  terms     in  the  travel  category  include     mapping  and  driving  directions     Do  you  intentionally  market  to  the   drive  traveler?                 1 Source:    U.S.  Travel  Association  and  Hitwise   PREFACE   For   over   50   years   airlines   have   been   the   biggest   guns   in   the   travel   industry;   it   is   therefore  no   surprise   that   the   air  traveler  sits  at  the  heart  of  the  multi-­‐billion  dollar  travel  industry.       As   an   industry,   we   cater   to   [aka   intentionally   market   to]   the   air   traveler   at   every   turn   –   providing   tools   for   them   to   plan   their   business   and   leisure   trips,   as   well   as   giving   options   for   their   vacations   and   weekend   getaways.    We  quite  naturally  sell  them  airline  tickets.    We  also  sell  them  hotel  rooms,  timeshare  ownership   and  vacation  home  rentals,  we  rent  them  cars,  motorcycles  and  RVs,  we  sell  tours  and  cruises  to  them  and  we   entice  them  to  come  to  our  destinations  and  attractions.    Even  our  technology  is  geared  around  their  needs   and  their  behaviors.    Yet,  air  travelers  are  a  surprisingly  small  part  of  the  total  travel  picture.   2. The  U.S.  Travel  Association  reports  that  there  are  ten  trips  by  car  for  every  air  trip    Whether  or  not  this  is  a   surprise   to   you,   wouldn’t   it   be   irrational   to   focus   on   just   the   one,   versus   the   ten?     But   it   is   both   a   fact   and   the   topic  of  this  paper  and  the  reason  that  I  urge  you  to  consider  this  opportunity  for  differentiation. The  obsession  that  we  have  with  the  air  traveler  is  superficially  logical.    The  foundational  technology  for  the   retail   side   of   our   industry   was   built   by   the   airlines.     And   the   air   traveler   spends   more   per   trip;   stays   away   longer  and  quite  frankly,  the  mechanics  behind  planning  a   point-­‐to-­‐point  trip  are  much  easier  than  one  taken   by   car.     However,   with   air   travelers   representing   just   15%   of   all   overnight   trips   in   this   country   and   just   22%   of   all  travel-­‐related  spending,  if  you  are  looking  for  a  competitive  edge  and  if  you  need  to  grow,  you  owe  it  to   yourself  to  evaluate  the  drive  market  opportunity.   I  do  not  suggest  that  you  should  turn  away  from  the  air  traveler,  which  may  still  be  lucrative  for  you.                                                                                                                                           1  U.S.  Travel  Association  Domestic  Travel  Market  Report  –  2007  Edition  and  June  Hitwise  Top  Search  Terms  as  of  June  26,   2010   2  A  trip  is  defined  as  being  more  than  50  miles  from  home  or  at  least  one  night  spent  away  from  home       ©  2010,  Solutionz  Group  International,  Inc.    All  Rights  Reserved.   Page  |  iii    
  5. 5. DARE  TO  DIFFERENTIATE   Summer  2010  Edition  “Not  So  White”  Paper  Series       However,  I  do  want  to  point  out  the  fact  that  growth  may  be  as  simple  as  expanding  your  focus  to  the  “other   85%”  of  travel  in  this  country,  which  for  the  purpose  of  this  report  I  have  dubbed  the  “Forgotten  Mass   Market”.   3 A   few   years   ago,   I   wrote   a   guest   article   that   was   published   in   ProMedia’s   The   Beat™   subscription   newsletter.     It  was  entitled  “The  Irresistible  Pull  of  Irrational  Behavior  –  Travel  Industry  Style”,  with  the  title  borrowed  from   4 the   sub-­‐title   of   the   book   Sway,   by   Ori   and   Rom   Brafman.     The   subject   of   that   article   was   distribution   channel   choice  and  more  specifically,  the  use  of  travel  agents  and  the  GDSs  by  travel  suppliers,  a  subject  on  which  I  am   extremely  passionate  –  and  very  vocal.    I  have  included  excerpts  of  the  text  of  that  article  here  because  it  also   applies  as  strongly  to  the  industry’s  love/hate  relationship  with  the  airlines  and  our  natural  obsession  with  the   air  traveler,  as  it  does  to  travel  distribution  channel  choices.         I  just  started  reading  a  book  titled  Sway  last  night.  The  parallels  of  the  stories  told  by  authors   Ori   and   Rom   Brafman   about   various   situations   where   intelligent,   normally   logical   individuals   make  decisions  that  make  absolutely  no  sense  immediately  struck  me.   For  anyone  that  follows  my  musings  about  distribution  on  a  regular  basis,  you  know  that  I  have   written  columns  for  The  Beat  that  poke  a  bit  of  fun  at  our  industry  and  discuss  how  the  issues  of   distribution   fall   into   that   category   of   "irrational   behavior."   While   told   tongue-­‐in-­‐cheek,   they   ring   all   too   true   and   are   a   stark   example   of   how   our   decision-­‐making   in   this   industry   gets   derailed  by  looking  at  what  is  going  on  around  us.   The  key  points  of  the  book  focus  on  the  things  that  "derail  our  decision-­‐making":   • Loss  aversion  -­‐  tendency  to  go  to  great  lengths  to  avoid  perceived  losses   • Diagnosis  bias  -­‐  original  diagnosis  blocks  our  ability  to  see  subsequent  results  clearly   • Chameleon  effect  -­‐  tendency  to  take  on  characteristics  that  have  been  arbitrarily  assigned  to  us     This   paper   is   about   differentiation.     The   basic   premise   behind   my   thesis   is   that   when   you   market   and   sell   your   products   and   services,   if   you   remain   focused   on   the   status   quo   (marketing   to   the   air   traveler),   you   may   be   missing  a  huge  opportunity.   We   hope   that   this   paper   prompts   you   to   determine   which   of   these   derailing   drivers   are   keeping   you   from   exploring  how  to  differentiate  and  grow  your  business  by  extending  your  marketing  to  the  “other  85%”.   1. What  do  you  think  you  might  gain  if  you  added  a  focus  on  the  drive  market?     2. If  you  were  starting  at  ‘ground  zero’  how  would  you  think  about  this  opportunity?     3. Are  you  thinking  independently  and  being  objective  about  evaluating  the  potential  of  this  market?     When  you  finish  reading,  if  you  find  that  you  have  been  focusing  solely  or  primarily  on  the  air  traveler  and  see   merit  in  exploring  the  drive  market  in  greater  detail,  then  by  all  means,  stand  out  from  the  crowd  and  go  for   the  incremental  profits!       At  the  end  of  the  day,  you  will  need  to  make  your  own  decisions  that  make  sense  for  you  and  your  business.     And   perhaps   you,   too,   can   be   an   iconoclast   and   help   the   industry   "sway"   the   other   direction!     Dare   to   differentiate  your  marketing,  your  services  and  your  business  models.   Chicke Fitzgerald CEO  Solutionz  Group    |  www.solutionz.com  |  1-­‐813-­‐925-­‐0789  |  www.twitter.com/chickefitz                                                                                                                                       3  www.promedia.travel   4  ©2008  by  Ori  Brafman  and  Rom  Brafman,  Sway.  All  rights  reserved,  Doubleday.       ©  2010,  Solutionz  Group  International,  Inc.    All  Rights  Reserved.   Page  |  iv    
  6. 6. DARE  TO  DIFFERENTIATE   Summer  2010  Edition  “Not  So  White”  Paper  Series       EDITORIAL  NOTES   WHY  IS  THIS  REPORT  FOR  ME?    AM  I  REALLY  OBSESSED  WITH  THE  AIR  TRAVELER?   Individuals   who   should   read   this   report   include   C-­‐level   executives   (and   investors)   that   set   strategy   and   influence  technology  investment  in  the  following  sectors:   Travel  suppliers  (air,  car,   If  your  selling  process  begins  with  where  your  product  picks  up  and   hotel,  rail,  cruise)   leaves  off,  then  you  are  an  air-­‐traveler  centric  supplier.    And  if  you  are  a   hotelier  and  you  are  not  asking  the  starting  point,  you  are  missing  out  on   the  potential  of  securing  the  enroute  bookings,  as  well  as  those  on  the   way  home.   Travel  retailers  (online   If  your  dialogue  with  a  traveler  begins  with  where  do  you  want  to  go  and   and  offline  agencies)   when,  and  you  never  ask  them  their  starting  point  or  mode  of   transportation,  you  are  an  air-­‐traveler  centric  retailer.   Corporate  Travel  Agencies   If  you  are  not  providing  a  service  for  the  52%  of  corporate  travelers  that   drive  (other  than  expense  report  processing),  you  may  be  missing  a  huge   opportunity  to  aggregate  the  purchasing  power  for  and  make   commissions  on  the  hotel  nights  consumed  by  this  group.     Travel  packagers   If  you  package  together  travel  at  a  destination,  then  you  are  an  air-­‐ traveler  centric  packager.   Destination  marketing   If  you  don’t  help  travelers  get  from  where  they  are  to  you  and  your   organizations/convention   planning  process  is  all  about  your  destination,  then  you  are  an  air-­‐ and  visitors  bureau   traveler  centric  DMO/CVB.   Travel  technology   If  your  technology  dialogue  with  retailers  or  the  consumer  starts  with   companies  and  Global   when  and  where,  and  you  never  ask  them  their  mode  of  transportation,   Distribution  System   you  are  an  air-­‐centric  company  (even  if  your  technology  is  for  hotels,  car   companies   rental  companies,  and  cruise  lines).   Attractions  and   If  you  don’t  help  travelers  get  from  where  they  are  to  you  and  your   destination  resorts   planning  process  is  all  about  your  attraction  or  resort,  then  you  are  air-­‐ traveler  centric.   Industry  associations  and   If  your  meeting  and  conference  agendas  and  your  research  and  lobbying   government  agencies   efforts  do  not  include  the  drive  market  as  a  key  topic/focus,  then  you  are   air-­‐centric  and  not  helping  your  constituents  tap  into  the  85%  of  travelers   that  drive.   Location-­‐based  services   If  your  product  simply  does  point-­‐to-­‐point  mapping  and  navigation  and   companies,  including  GPS   doesn’t  take  into  account  that  people  using  your  product  need  to  plan   and  navigation  firms  and   their  entire  journey,  have  different  preferences  when  they  are  with   mapping  technology   different  people  and  travel  under  different  circumstances,  then  you  are   companies   not  tapping  into  the  drive  traveler  market.     Investors   If  your  questions  about  travel  trends  start  with  what  is  happening  with   vacation  travel  (8%  of  total),  corporate  travel  (25%  of  total),  or  air  travel   volume,  or  what  will  happen  in  the  next  round  of  GDS  negotiations,  then   you  are  air-­‐centric  and  missing  a  huge  upside  opportunity  for  the   companies  in  which  you  have  invested  (or  are  about  to  invest).       ©  2010,  Solutionz  Group  International,  Inc.    All  Rights  Reserved.   Page  |  v    
  7. 7. DARE  TO  DIFFERENTIATE   Summer  2010  Edition  “Not  So  White”  Paper  Series       NAVIGATING  THIS  REPORT     We   recognize   that   everyone   who   reads   this   paper   will   come   from   a   different   place   of   knowledge   and   understanding  of  the  travel  industry,  of  the  history  behind  the  industry’s  focus  on  the  air  traveler  and  of  the   drive   market.     Some   may   need   to   “stop”   and   think   about   your   current   approach,   or   at   minimum   “yield”   to   the   possibility   that   there   is   an   opportunity  that  is  yet  untapped.       Here  are  some  tips  of  how  to  get  the  most  out  of  this  report:   • If  you  are  not  at  all  familiar  with  the  travel  industry,  we  recommend   that  you  read  the  report  in  its  entirety.   • If  you  don’t  need  the  history  and  background  on  the  air  focus  and   want  to  just  “cut  to  the  chase”  about  the  drive  market  opportunity,   then  you  should  begin  with  The  Forgotten  Mass  Market.   ABOUT  THE  NOT  SO  WHITE  PAPER™  SERIES   Our   reports   are   topical   and   timely   and   we   focus   on   analyzing   emerging   trends.     Because   they   are   published   in   real  time,  we  constantly  update  the  content.    This  report  is  an  update  to  a  paper  on  the  Drive  Market  titled   “Are  You  Reaching  the  Forgotten  Mass  Market?”  originally  published  in  2008.       Our   authors   are   considered   experts   in   the   selected   subject   and   they   are   backed   up   with   respected   industry   5 research .     The   papers   include   anecdotal   insights   and   analogy   to   stress   the   points   of   the   paper.     They   are   written  in  a  slightly  irreverent,  frank  style.    Items  of  particular  importance  are  noted  with  a  light  bulb.         Throughout  this  report  the  use  of  “I”  denotes  my  personal  perspective  and  “we”  generally  refers  to  the  “global   we”  where  I  speak  as  a  member  of  the  travel  industry,  unless  used  in  a  personal  story.   If   you   are   fond   of   reports   with   a   heavy   statistical   or   analytical   bent   or   those   written   in   the   detached   third   person,  the  Not  So  White  Paper™  series  may  not  be  for  you.    However,  if  you  consider  yourself  intellectually   curious  and  are  willing  to  look  outside  of  our  industry  and,  more  importantly,  outside  of  your  own  experience,   then  you’ve  come  to  the  right  place.   ABOUT  THE  AUTHOR   Chicke   Fitzgerald   is   the   CEO   of   Solutionz   Group   International,   Inc.,   a   Tampa-­‐ based   global   consultancy   specializing   in   marrying   travel   buyers   and   sellers   via   multiple  channels.       Chicke   has   over   thirty   years   experience   in   the   electronic   distribution   and   marketing   fields,   with   a   focus   on   the   travel,   transportation,   and   mobile   industries.       She   is   a   strategist,   author,   keynote   speaker   and   was   an   early   investor   in   a   groundbreaking  technology  firm  serving  the  travel,  mapping,  navigation,  and  media  industries.  That  company   is  currently  sitting  in  hibernation,  waiting  for  the  inevitable  financial  thaw  and  for  the  “believers”  in  the  drive   market  opportunity,  who  are  surely  out  there.   Her   specialty   is   developing   strategy,   crafting   profitable   business   models,   and   creating   executable   plans   to   achieve   her   client’s   vision.     Her   passions   include   incubating   early   stage   businesses,   fostering   joint   ventures,   and  mergers  and  acquisitions.                                                                                                                                       5  See  Appendix  A  for  information  about  the  resources  used  for  this  paper       ©  2010,  Solutionz  Group  International,  Inc.    All  Rights  Reserved.   Page  |  vi    
  8. 8. DARE  TO  DIFFERENTIATE   Summer  2010  Edition  “Not  So  White”  Paper  Series       The   firm   has   expertise   in   all   sectors   of   the   travel   distribution   value   chain,   including   offline/online   agencies,   corporate   travel,   travel   suppliers,   GDS   companies,   destinations,   travel  technology,  service  providers,  content  companies,  and  social  media.    Prior  to  forming   her  own  consulting  firm,  Ms.  Fitzgerald  held  senior  positions  with  Equant,  SITA,  Worldspan,  and  Sabre.   In   addition   to   the   Not   So   White   Paper™   series,   she   has   published   three   books   on   travel   distribution,   known   as   the  Travel  Distribution  Library.    She  also  was  the  executive  editor  on  a  series  of  white  papers  completed  for   the  Hotel  Electronic  Distribution  Network  Association  (HEDNA).       Her  iconoclast  style  is  also  featured  in  regular  articles  on  The  Beat™  subscription  newsletter  and  in  their  blog   <http://www.thebeat.travel/blog/>.   The  investment  community  recognizes  Chicke  as  an  expert  on  the  travel  industry.    She  has  achieved  top  5%   status  in  the  Gerson  Lehman  Group  Council  of  Expert  Advisors,  <http://www.glgroup.com>,  in  a  field  of  more   than  250,000  advisors  across  all  industries.       Chicke  and  her  husband,  Michael,  presently  reside  with  their  son  and  daughter  in  Tampa,  Florida.       For  more  information,  see  www.solutionz.com,  or  contact  Chicke  by  email  at  chicke@solutionz.com  or  phone   (+1-­‐813-­‐925-­‐0789).           ©  2010,  Solutionz  Group  International,  Inc.    All  Rights  Reserved.   Page  |  vii    
  9. 9. DARE  TO  DIFFERENTIATE   Summer  2010  Edition  “Not  So  White”  Paper  Series       TABLE  OF  CONTENTS     EXECUTIVE  SUMMARY................................................................................................... 1   Breaking  Down  the  Limiting  Myths ....................................................................................................1   Turbulent  Times  Demand  Creative  Solutions .....................................................................................2   How  is  Planning  Done  Today? ............................................................................................................3   The  Purpose  of  this  Report.................................................................................................................4   WHY  DIFFERENTIATE? .......................................................................................... 5   eCommerce  Pioneers .........................................................................................................................6   Differentiation  or  Accelerated  Commoditization? .............................................................................6   Disintermediation  as  a  strategy..........................................................................................................7   What  now? .........................................................................................................................................8   THE  FORGOTTEN  MASS  MARKET ............................................................................ 9   The  Terminology.................................................................................................................................9   Non-­‐Air  Traveler..............................................................................................................................9   Drive  Market ...................................................................................................................................9   Mass  Market ...................................................................................................................................9   Life  Travel......................................................................................................................................10   The  Logic...........................................................................................................................................10   Better  said  “Why  should  I  care?” ..................................................................................................10   Measuring  the  Impact...................................................................................................................10   The  Decision  to  Drive ....................................................................................................................11   Sizing  the  Market..............................................................................................................................12   Total  Trips  by  Mode  of  Transportation .........................................................................................13   Overnight  Trips  by  Mode  of  Transportation  –  2006  to  2009.........................................................14   Top  Misconceptions  of  the  Road  Traveler.....................................................................................14   Fallacy  #1  –  Low  Income  Demographic ...................................................................................................................... 15   Fallacy  #2  –  This  is  the  Economy  Traveler .................................................................................................................. 15   Fallacy  #3  –  We  already  serve  the  road  traveler ........................................................................................................ 16   The  Electronic  Distribution  Picture................................................................................................17   Air  Disintermediates  Hotels..............................................................................................................17   Investment  Community  Focus..........................................................................................................18   Further  Reductions  in  Air  Travel.......................................................................................................19   THE  HEART  OF  THE  MATTER  –  A  PRIMER  ON  THE  DRIVE  MARKET ............................ 20   Road  Trip  2010  Style.........................................................................................................................21   Why  Do  I  Need  a  Primer  on  Marketing  to  the  Drive  Market? ..........................................................22   Distribution  Value  Chain  Penetration ...........................................................................................22   Getting  Perspective.......................................................................................................................23   Why  Does  Mode  of  Transportation  Matter?.................................................................................24   Changing  your  mindset .................................................................................................................24   Road  Traveler  Needs ........................................................................................................................26   The  Online  Planning  Process ............................................................................................................26   The  Journey  Planning  Tools ..............................................................................................................27   The  Model .....................................................................................................................................28       ©  2010,  Solutionz  Group  International,  Inc.    All  Rights  Reserved.   Page  |  viii    
  10. 10. DARE  TO  DIFFERENTIATE   Summer  2010  Edition  “Not  So  White”  Paper  Series       Demographics  -­‐  It’s  not  just  the  Economy  traveler .......................................................................28   The  Bottom  Line ...............................................................................................................................29   LOOKING  OUTSIDE  OUR  INDUSTRY ...................................................................... 30   The  Transformation  of  the  Restaurant  Industry  –  A  Story  of  Product  Centricity .............................30   The  Television  Industry  –  A  Story  of  Customer  Centric  Design ........................................................32   The  Shipping  Industry  -­‐  Becoming  Multi-­‐Modal...............................................................................33   From  Hamburgers  to  Televisions  to  Shipping...................................................................................33   HIGHER  ORDER  MARKETING™ ............................................................................. 34   Product .............................................................................................................................................34   Action ...............................................................................................................................................34   Intent ................................................................................................................................................34   The  Higher  Order  Marketing  Equation .............................................................................................35   MOVING  FORWARD ........................................................................................... 36   There  is  Hope ...................................................................................................................................36   The  Profitability  Challenge ...............................................................................................................36   Cost  Cutting  is  Not  a  Strategy...........................................................................................................37   Mode  of  Transportation  Matters .....................................................................................................37   Are  You  Customer  or  Product  Centric? ............................................................................................38   TAKING  ACTION................................................................................................. 39   Your  To  Do  List..................................................................................................................................40   The  Role  of  the  Travel  Agent ............................................................................................................41   Geographical  Focus ..........................................................................................................................42   Sector  by  Sector  Action  Plan ............................................................................................................42   Gathering  Data  and  Creating  A  Marketing  Plan ...........................................................................42   Travel  Suppliers .......................................................................................................................................................... 42   Travel  Technology  Companies.................................................................................................................................... 43   Destination  Marketing  Organizations ........................................................................................................................ 43   Industry  Associations  and  Government  Agencies  and  Research  Companies............................................................. 43   BACK  TO  THE  “IRRESISTIBLE  PULL  OF  IRRATIONAL  BEHAVIOR” ................................ 44   Loss  aversion ....................................................................................................................................44   Diagnosis  bias ...................................................................................................................................44   Chameleon  effect .............................................................................................................................44   CONCLUSION..................................................................................................... 45   NOTES .............................................................................................................. 46   CONTACT  INFORMATION .................................................................................... 47   APPENDIX  A  -­‐  RESOURCES .................................................................................. 48           ©  2010,  Solutionz  Group  International,  Inc.    All  Rights  Reserved.   Page  |  ix    
  11. 11. DARE  TO  DIFFERENTIATE   Summer  2010  Edition  “Not  So  White”  Paper  Series       EXECUTIVE  SUMMARY   As   you   look   at   the   cover   of   this   report,   you   will   see   a   lone   airplane   and   on   the   roads   below,  scores  of  cars,  along  with  SUVs,  motorcycles,  trucks  and  RVs.       Every  day  on  every  road  in  the  U.S.  the  story  is  the  same.    Excluding  commuters,  each   vehicle  is  on  a  journey  of  varying  lengths  and  different  levels  of  complexity   –  taking  trips   around   town,   day   trips   and   weekend   getaways   in   the   region,   all   the   way   up   to   and   including   the   Great   American   Road   Trip.     Some   have   pre-­‐planned   their   outings.     Still   others  are  more  spontaneous,  planning  as  they  go.       According  to  research  conducted  on  this  market  in  2007  by  the  U.S.  Travel  Association,  there  are  over  2  billion   trips  taken  annually,  with  over  85%  by  car,  representing  78%  of  all  spending.    Over  50%  of  those  vehicles  ⎯   1 yes,   that   is   one   billion   ⎯   are   going   more   than   50   miles   from   home   and   will   require   a   hotel   room .     And   6 according  to  our  own  research,  over  85%  of  those  ⎯  850  million    ⎯  will  stay  in  3,  4  and  5  star  motels/hotels .       Most  all  of  these  road  travelers  will  need  driving  directions  for  at  least  a  portion  of  their  trip,  suggestions  of   where   to   eat,   things   to   do,   places   to   shop   and   some   will   want   to   know   about   events.     However,   today   as   a   rule,  the  travel  industry  leaves  all  this  work  to  the  consumer.    And  by  and  large,  as  an  industry,  we  maintain   our  singular,  transaction-­‐focused  model,  making  money  from  the  sale  of  our  products  (or  the  booking  fees  or   commissions  from  those  sales).    Most  industry  players  have  not  given  serious  consideration  to  the  possibility   that  they  can  augment  this  tried  and  true  model  with  a  new  revenue  stream  by  knitting  these  tools  together.   7 Hitwise  reports  that  6  out  of  10  of  the  top  search  terms  in  the  travel  category  include  mapping  and  driving   directions.     It   is   no   surprise   that   the   bulk   of   the   revenues   from   this   lucrative   market   go   to   MapQuest   and   Google,  CitySearch  [and  the  like],  while  the  travel  industry  happily  serve  the  other  15%  of  overnight  travelers   that  fly  to  their  destination.       BREAKING  DOWN  THE  LIMITING  MYTHS   The   purpose   of   this   Not   So   White   Paper™   is   to   break   down   the   myths   that   hold   us   in   our   present   conundrum,   focusing  on  the  addressable  air  traveler  market,  which  is  declining  before  our  very  eyes.    Those  myths  are:   MYTH   FACT   Air  travel  is  the   Air  travelers  only  represent  15%  of  all  travel  in  the  US  and  just  22%  of  all  spending  in   8 mass  market   the  travel  category .    The  real  mass  market  is  the  drive  market.   We  know  our   We  may  know  their  preferred  airlines  or  hotel  brands,  but  we  do  not  understand   customers  and  their   their  behavior  under  different  situations  and  how  it  changes  based  on  whom  they   behaviors  and  intent     are  traveling  with  or  why  they  are  traveling.   The  current   Travel  technologies  (including  those  selling  hotel,  cruise  or  those  supporting  travel   technologies  meet   planning  to  destinations)  are  highly  air-­‐centric.    They  begin  the  dialogue  with  the   the  needs  of  the   traveler  asking  them  WHERE  they  want  to  go  and  WHEN,  with  an  orientation  on  top   mass  market   destinations.    They  don't  include  the  customer’s  starting  point  (other  than  an   airport),  the  details  of  the  journey,  mapping  and  driving  directions,  which  are  key   needs  of  the  drive  market.                                                                                                                                       6  LeisureLogix  Drive  Market  Study  2006  –  LeisureLogix  was  co-­‐founded  by  Chicke  Fitzgerald   7 th  Hitwise  Top  10  Travel  Search  Terms  As  of  June  26 ,  2010   8  US  Travel  Association  2007       ©  2010,  Solutionz  Group  International,  Inc.    All  Rights  Reserved.   Page  |  1    
  12. 12. DARE  TO  DIFFERENTIATE   Summer  2010  Edition  “Not  So  White”  Paper  Series       TURBULENT  TIMES  DEMAND  CREATIVE  SOLUTIONS   “If  people  say  that  Sept.  11  was  a  perfect  storm,  I  believe  now  that  that  was  just  partly  cloudy  with   a  chance  of  showers.”   Roger  Dow,  president  and  CEO  of  the  U.S.  Travel  Association.     9 In  2008  and  2009,  the  U.S.  saw  double-­‐digit  cutbacks  in  airline  capacity  and  frequency  as  a  direct  result  of  the   10 fuel   crisis .     The   Air   Transport   Association   reports   that   from   2000-­‐2009,   over   700   planes   were   retired   and   parked  in  the  desert  or  sold  to  third  world  nations,  never  to  return  to  service  here  in  the  U.S.       Domestic  air  ticket  sales  though  the  travel  agency  community  (online  and  offline)  for  2008  and  2009  declined   11%   and   5%   respectively.     International   air   ticket   sales   through   the   travel   agency   channel   for   the   same   period   11 declined   14%   and   9%   respectively .     In   2010,   if   approved,   the   United   and   Continental   merger   promises   to   yield  another  10%  decline  in  their  combined  capacity  and  frequency.       These   declines   have   impacted   every   sector   of   the   travel   industry   and   have   been   compounded   by   the   extreme   economic   challenges   we   have   faced   over   the   last   24   months.     And   while   airlines   will   invest   in   new   aircraft   when  the  economy  recovers,  channel  shift  will  persist  as  they  continue  dogged  pursuit  of  direct  distribution   through  their  websites.    This  strategy  of  disintermediation,  albeit  misguided  in  my  opinion,  is  here  to  stay.   As   a   group,   the   travel   agency   community   faces   continually   shrinking   (and   even   vanishing)   supplier   commissions   and   the   pressures   of   suppliers   selling   direct   to   consumers   and   corporations.     The   industry   has   gone   from   a   high   of   47,000   agencies   in   1996   to   just   under   16,000   in   2010.     Last   year,   with   system-­‐wide   air   12 sales  of  $186.1  billion,  just  $65.8  billion  (35%)  was  sold  through  the  agency  channel .   As  the  air  business  through  the  agency  community  declines,  so  goes  the  primary  revenue  stream  to  the  GDS   companies,   which   are   based   on   booking   fees   from   the   airlines.     And   every   other   type   of   supplier   and   every   destination  that  depends  on  air  travelers  for  business  are  likely  seeing  similar  rates  of  decline  in  business.       Following   the   lead   of   the   airlines,   other   travel   suppliers   continue   their   pursuit   of   direct   distribution   to   the   consumer,  cutting  out  as  many  middlemen  as  possible.    Statistics  show  that  this  strategy  may  save  on  the  cost   side   of   the   equation,   but   the   net   yield   on   transactions   is   substantially   less   due   to   the   focus   on   price   that   is   rampant  online.    The  profit  gap  cannot  be  made  up  in  volume.       It  is  certainly  a  turbulent  time  for  the  travel  industry.       Welcome  to  the  new  norm.       It   will   be   up   to   you   to   determine   how   you   will   respond   to   continued   pressure   on   the   current   model,   particularly  if  you  rely  heavily  on  air  travelers  for  your  revenues.    The  question  isn’t  whether  we  need  a  new   business   model   moving   forward   ⎯   it   is   “When   will   we   agree   on   a   model   that   will   result   in   growth   for   the   majority  of  constituents  in  the  travel  value  chain?”.       The   challenge   we   pose   through   this   paper   is   whether   there   is   opportunity   that   has   been   missed   due   to   the   singular  focus  that  most  of  the  travel  industry  has  on  the  air  traveler.       Imagine  if  you  will,  being  able  to  sell  the  same  products  and  services,  but  appealing  to  a  much  larger  audience   than  you  do  today,  simply  by  making  some  changes  in  the  tools  that  are  used  to  market  to  and  service  your   customers.                                                                                                                                       9  Air  Transport  Association  (ATA)  2010  Industry  Review     10  ATA 2010 Industry Review reports that in 2008 alone, U.S. airlines paid $16 billion more in fuel than in 2007.   11  Airline  Reporting  Corporation  (ARC),  Sales  by  Agency  Type   12  ATA  System  wide  Sales  versus  ARC  Agency  Sales  for  2009       ©  2010,  Solutionz  Group  International,  Inc.    All  Rights  Reserved.   Page  |  2    
  13. 13. DARE  TO  DIFFERENTIATE   Summer  2010  Edition  “Not  So  White”  Paper  Series       Before  you  can  move  forward,  sometimes  you  have  to  think  back  and  see  how  history  has  played  out.    And   sometimes  you  have  to  look  outside  of  your  own  world  and  see  what  has  happened  in  other  industries.       This  paper  will  take  a  look  at  both  the  restaurant  and  television  industries,  contrasting  the  adjustments  that   they   made   as   their   consumer   changed   before   their   eyes.   In   both   cases,   the   tools   and   delivery   mechanism   changed,  but  the  products  (e.g.  hamburgers  and  TV  programming)  remained  the  same.    We  will  also  look  at   the   shipping   industry   and   their   need   to   consider   the   investment   required   to   meet   multi-­‐modal   shipping   opportunities.     I   believe   there   is   a   strong   correlation   to   marketing   your   existing   products   and   services   specifically  to  the  drive  market  and  adopting  that  same  multi-­‐modal  approach  to  your  customers.       HOW  IS  PLANNING  DONE  TODAY?   Planning  a  trip  by  car,  SUV,  RV,  motorcycle  or  truck  is  more  complex  than  planning  a  trip  by  air.    The  consumer   who  is  driving  instead  of  flying  generally  has  a  number  of  different  needs  in  planning  their  trip:   • Picking  their  destination  (often  impacted  by  who  they  are  traveling  with  and  what  they  want  to   accomplish)  and  options  for  the  return  trip  or  trip  extensions  to  other  nearby  destinations   • Choosing  a  tool  to  plan  their  route,  including  determine  where  the  stopping  point  is  each  day  (based   on  route  preferences,  driving  style  and  speed  limits)   • Finding  someone  to  book  their  lodging  (offline  agency,  online  agency  or  supplier  direct)   • Locating  what  is  in  proximity  to  where  they  are  going  (places  to  stay,  things  to  do,  things  to  see,   places  to  eat,  places  to  shop,  events  to  attend)   • Exploring  what  is  along  their  route  (things  to  do,  etc.)  and  knowing  how  long  it  will  take  to  stop  and   get  back  on  their  way   • Seeing  who  else  is  going  to  the  same  place  that  they  are  going   • Getting  input  from  others  on  the  choice  of  destination  or  things  to  do  and  see  along  the  way  and  at   the  destination   While  there  are  some  very  interesting  trip  planning  and  social  media  tools  in  the  marketplace,  in  general  we   still   have   a   chasm   that   exists   between   the   travel,   the   mapping/navigation   and   the   location-­‐based   content   industries.    We  lack  an  integrated  solution.   The  travel  industry  generally  focuses  on  the  destination  or  the  product  itself  (e.g.  the  hotel,  the  attraction,  the   cruise)  and  has  a  bias  toward  top  destinations.    The  mapping  and  navigation  industries  focus  on  getting  from   point  to  point  and  providing  location  based  content  information  (e.g.  points  of  interest),  but  do  not  do  a  good   job  on  the  planning  of  multiple  day  journeys.    Both  camps  have  their  hands  in  the  content  game,  but  neither   one   has   the   ability   to   tailor   content   to   match   the   travelers’   unique   needs   based   on   the   purpose   of   trip   or   who   is  traveling  together.    These  variables  are  not  easily  handled  by  single  dimensional  travel  profiles.   I  liken  this  to  the  way  that  we  used  to  do  our  shopping  before  the  launch  of  superstores,  such  as  Super  Wal-­‐ Mart,  BJ’s  or  Super  Target.    We  went  to  one  store  for  our  food  staples,  another  for  our  beer/wine,  for  paper   goods,  for  home  and  garden,  for  clothes,  for  toys  and  yet  another  for  pharmacy  items.    You  get  the  picture.     There   were   some   stores   that   stocked   several   categories,   reducing   the   number   of   steps   to   fulfill   our   list,   but   nevertheless,  the  onus  was  on  us  to  make  our  list,  determine  the  best  places  to  go  and  then  plot  out  the  most   efficient  way  to  get  everything  that  we  need.       Consider  for  a  moment,  what  it  would  take  to  plan  a  road  trip  from  Tampa  to  New  York  City.    You  are  going  to   an  industry  conference,  but  decide  to  take  your  family  along.    On  the  way  up,  you  want  to  take  the  most  direct   route,  with  a  minimum  number  of  stops.    On  the  way  back,  it  doesn’t  matter  how  long  it  takes  and  you  want   to  visit  the  Jersey  shore,  several  battlefields,  visit  friends  in  Murfreesboro,  TN  and  visit  Dollywood.    It  would  be   fun   to   go   through   Atlanta   on   the   way   back   and   see   the   Coca   Cola   museum   and   catch   an   Atlanta   Braves   game.     You   have   your   favorite   hotel   chain,   or   perhaps   you   want   to   stay   at   historic   bed   and   breakfast   inns.     And   of   course,   you   want   to   know   where   all   the   Starbucks   are   along   the   way.    Where   would   you   start?     How   many   players/tools  would  be  involved  in  the  process?    Give  it  some  thought,  and  let’s  move  on.         ©  2010,  Solutionz  Group  International,  Inc.    All  Rights  Reserved.   Page  |  3    

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