U.S. Travel and Hospitality:Embracing a SMAC-Driven FutureA gradually improving economy and heightened consumer expectatio...
cognizant reports 2Industry leaders are ahead on the adoption curve,and second-tier players will soon follow suit.Neverthe...
cognizant reports 3In addition, the expected growth in foreign tour-ists to the U.S., led by travelers from China, isexpec...
cognizant reports 4Nevertheless, revenue growth is expected to slowover the next few years (see Figure 4). The pres-sure o...
cognizant reports 5to adopt social and mobile technologies, analyt-ics and cloud allow enterprises to leverage thevolumino...
cognizant reports 6Smartphones and tablets offer consumers a toolto research and plan their travel while on the go.The fig...
cognizant reports 7sites and display advertisements (see Figure 7).Airlines also provide flight information and vari-ous o...
cognizant reports 8Quick TakeBig Data, Analytics and Cloud ComputingJust as mobile and social have become crucialto how T&...
cognizant reports 9Doing so will help them maximize revenues andobtain firsthand access to both transactional andinteracti...
cognizant reports 10cornerstone for marketing and communication,and their social activities need to be backed bystrong con...
cognizant reports 11Travel Agents•	 Create enhanced offerings: Travel agents arewell-placed to leverage location-based off...
cognizant reports 12Footnotes1	 Total guest room revenue for a given period divided by the total number of paid occupied r...
cognizant reports 1318	“2013 Hotel Marketing Trends: From Standout Social Media to Marvelous Mobile Marketing,” VFMLeonard...
About CognizantCognizant (NASDAQ: CTSH) is a leading provider of information technology, consulting, and business processo...
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U.S. Travel and Hospitality: Embracing a SMAC-Driven Future

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Airlines, hotels and travel agents are driven to holistically embrace social, mobile, advanced analytics and cloud to boost business performance and retain share of wallet.

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Transcript of "U.S. Travel and Hospitality: Embracing a SMAC-Driven Future"

  1. 1. U.S. Travel and Hospitality:Embracing a SMAC-Driven FutureA gradually improving economy and heightened consumer expectationsfor more personal and real-time interactions and transactions is drivingairlines, hotels and travel agents to holistically embrace social, mobile,advanced analytics and cloud to boost business performance and retainshare of wallet.Executive SummaryFor an industry hampered by the weak globaleconomy, 2012 was a good one for the globaltravel and hospitality (T&H) industry, as a record-breaking one billion tourists traveled outsidetheir home countries. Domestically, the U.S. T&Hindustry is experiencing a genuine revival. Realspending on tourism has increased in the pasttwo years, and U.S. citizens are expected to travelmore frequently this year than last, indicating areturn to “travel as usual” in both the businessand leisure segments.The boost bodes well for leading players in thetravel and hospitality value chain, namely, hotels,travel agents and airlines. However, a wave oftechnological advances is flooding the industry,creating opportunities to boost operational effi-ciencies and customer satisfaction, as well ascombat the threat of displacement by more inno-vative, technology-savvy competitors. The wavecomprises four foundational elements: socialmedia, mobile, analytics and cloud computing, orthe SMAC Stack.TM(For more on the SMAC Stack,read Cognizant’s paper, “Dont Get SMACked:How Social, Mobile, Analytics and Cloud Tech-nologies are Reshaping the Enterprise, CognizantTechnology Solutions.”)T&H is among several service industries feelingthe disruptive impact these technologies can haveon business, spurring forward-thinking players tobegin consolidating their offerings and technol-ogy backbones around them.The rise of mobile and social media has impactedcustomer behavior significantly. Consumers nowuse mobile devices to not just research theiroptions but also book travel. While on vacation,they use social media to connect to their friendsand share pictures. By doing so, they add to thevoluminous business data generated each andevery day. This data can and should be leveragedto create efficiencies and develop insights intocustomer behavior through the use of advancedanalytics. Similarly, cloud computing holds thepromise of reducing capital expenditures forcompanies looking to boost their business capa-bilities by paying only for the IT services they usefrom more flexible operating budgets.cognizant reports | april 2013• Cognizant Reports
  2. 2. cognizant reports 2Industry leaders are ahead on the adoption curve,and second-tier players will soon follow suit.Nevertheless, many T&H companies are in a stateof flux regarding the best way forward, with manyadopting a wait-and-watch approach, prefer-ring to hold off until SMAC technologies matureand reach mainstream status. Yet, unless theyact now, T&H companies might find themselvesoutmaneuvered by nimble-footed, technology-driven competitors that reach customers viamobile apps and optimized Web sites, impactingtheir revenues or, worse, enabling travelers tocompletely bypass them. Owning the customer(i.e., transacting directly with the traveler) is acritical battle that each and every industry playermust fight and win.We believe the key imperatives for T&H industryplayers include:• Take an integrated approach to the emergingSMAC Stack, as these technologies performoptimally when deployed holistically ratherthan in silos.• Use cloud computing to provide customers alltravel-related services in one place.• Use social media as a cornerstone formarketing and communication with custom-ers, as social media and travel are consid-ered to be a natural fit. The channel is idealfor spreading the message directly to thecustomer, using tools such as videos, personal-ized offers and contests. Social channels canalso provide feedback for all other channels.• Develop high-quality content, such as vid-eos of services or destinations being offered,accompanied by customer testimonials to dif-ferentiate offerings and build customer trust.• Analyze customer data to understand theirbehavior and preferences and build strongerrelationships.• Leverage personalization to meet travelerexpectations. Analytics, in combination withmobile and social, is an ideal platform for cre-ating an individualized experience. Analyticsis being used to match offers, provide plansbased on a customer’s previous choices anddeliver personalized offers on consumers’social media pages.• Integrate new technologies such as mobiledevices into legacy systems on a prioritybasis. Companies should invest in new technolo-gies that help legacy systems work with emerg-ing technologies. Alternatively, they can buildtechnology layers (middleware) that interoper-ate with cloud-delivered third-party solutions.A Slow, Steady ComebackThe current optimism in the T&H industry is well-founded. During the past few years, there hasbeen a steady rise in the industry’s key economicindicators (see Figure 1). This is further corrobo-rated by surveys indicating that both leisure andbusiness travel are set to make a strong come-back in the coming years. For instance, the GlobalBusiness Travel Association found that a pent-upneed for face-to-face conversations with clients,coupled with spending on international trips,is expected to boost travel spending in the U.S.by 4.6%, to $266.7 billion in 2013. Similarly, themembers of the U.S. Tour Operators Associationexpect higher sales in 2013 over 2012.Spending on U.S. Tourism Returning to NormalFigure 1Source: U.S. Bureau of Economic Analysis-16.0-12.0-8.0-4.00.04.08.02005 2006 2007 2008 2009 2010 2011 2012%Quarterly Growth in Real Tourism Spending
  3. 3. cognizant reports 3In addition, the expected growth in foreign tour-ists to the U.S., led by travelers from China, isexpected to result in one million incoming travel-ers this year. This demand, coupled with the slowgrowth in supply, is expected to work in favor ofU.S. airlines and hotels. In particular, hotels areexpected to outperform other travel industryplayers. Airlines, hampered by high fuel and oper-ational costs, express tempered optimism. Ongo-ing industry-wide consolidation is also expected toaccelerate. Moreover, industry players are seekingregulatory relief to help them better control costs.HotelsFueled by strong fundamentals, the U.S. hospi-tality industry is expecting a boom in the nextfour years. In 2012, the occupancy rate grew by2.4% (see Figure 2), whereas the daily rate1grew3.8%, to $108.53, and revenue per available room(RevPAR) increased 6.3%, to $66.77.2Supply hasgrown slowly in the U.S. hotel industry — 0.6% in20113— while demand has grown at a healthy 5%clip in the same period, which points to a favorablepricing environment for hotels.Revenue and profitability have improved over thepast two years (see Figure 3, next page). Simul-taneously, hotels have maintained tight cost con-trols to improve productivity without adding newresources. This has added to the bottom line asoccupancy rates bounced back. Net operatingincome (NOI) per available room, which fell to alow of $10,483 during the weakest phase of therecession in 2009, is expected to surpass the2007 peak of $16,868 and reach $18,216 in 2014,according to research firm PKF.4Large U.S. hotels have rapidly expanded intodeveloping markets, such as China. For exam-ple, 60% of the additions to Hilton Worldwide’shotel portfolio over the past few years have beenoverseas.5Expansion into developing countrieswill also improve providers’ chances of attract-ing tourists from these countries. The growingnumber of tourists will trigger domestic compe-tition, allowing new players to enter the market.These developments highlight the importance forhotels to revisit their marketing strategies andfind ways to boost customer loyalty.Travel AgenciesU.S. travel agents are currently enjoying the fruitsof a growing travel market. Online leisure/unman-aged business travel outperformed the industry,growing 11% in 2012.6During the recession, travelagents bore the brunt of the weak economy,including travel cancellations and deferments.As bookings rebound and employment levelsincrease, business is expected to bounce back.Research firm IbisWorld expects the domestictravel market to grow at 3.3% annually between2012 and 2017, while international arrivals areexpected to grow 5.4% during the same period.The sector’s 2013 revenues are expected to grow6.7% and reach $20.7 billion in 2013, as comparedwith $19.5 billion in 2012.Rise in Hotel Occupancy Rates in 2012Figure 2Source: Smith Travel Research, HotelNewsNow.com75%70%65%60%55%50%45%40%1 4 7 10 13 16 19 22 25 28 31 34 37 40 43 46 49 522009Week of YearMedian (2000-2007)20132012
  4. 4. cognizant reports 4Nevertheless, revenue growth is expected to slowover the next few years (see Figure 4). The pres-sure on revenues will come from multiple sources,chiefly from lower commissions, which form thebulk of travel agents’ income. As travel grows,hotels will, in all likelihood, cut their commissionsto travel agents. Airlines, which struggle with highcosts, may do the same. Moreover, as hotels upthe ante on the online hotel booking front, com-petition will heat up, further affecting revenues.According to reseacher PhoCusWright, growthat supplier Web sites (hotels and airlines) isoutpacing online travel agencies, with totalonline supplier bookings jumping 14% in 2012compared with 6% growth for online travelagents (OTAs).7Two-thirds of online bookings in2014 are expected to be made via supplier Websites. Travel agency heavyweights such as Carl-son Cos., American Express, Expedia and Price-line.com, which together hold more than 75% ofthe market, will need to sharpen their market-ing efforts to retain customers.8Agencies willalso need to look at ways to create efficienciesand customize offerings to the needs of variousdemographics, such as the millennial generation,baby boomers, etc.AirlinesThere seems to be no end in sight to the airlineindustry’s (global and domestic) woes. Factorssuch as high fuel prices and the economic slow-down have affected the industry’s financialperformance. Consequently, the industry hasU.S. Hotel Revenue Returns to Pre-crisis LevelsFigure 3* GOP % = Gross Operating Profit / Total RevenueSource: Smith Travel Research, HotelNewsNow.comTotal U.S. estimated revenue and profitabilityTotal Revenue ($B) Pre-Tax Income ($B) GOP %*103.5 102.6 105.3113.7122.7133.4139.4 140.6127.2 127.7137.516.2 14.2 12.8 16.722.6 26.6 28.0 25.816.0 18.0 21.637.1% 35.7% 35.0% 36.6% 38.8% 41.3% 41.3%38.2%34.0% 35.3% 36.1%0204060801001201401602001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011$BillionsTravel Agents See Grounded Growth AheadFigure 4Source: www.ibisworld.com11.7%10.4%14.1%16.7%-1.1%-13.5%11.2%8.8% 8.8%6.1%4.6%1.8% 1.6% 1.6%-15-10-5051015202004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017%RevenueGrowth
  5. 5. cognizant reports 5to adopt social and mobile technologies, analyt-ics and cloud allow enterprises to leverage thevoluminous data generated allaround them via the power ofon-demand computing. Thenew master corporate IT archi-tecture involves taking an inte-grated approach to these tech-nologies by tying the individualcomponents to core knowledgeprocesses. This new architec-ture will not only improve T&H players’ abilitiesto reach consumers consistently across channels,but it will also drive enterprise-wide efficiencies.Advanced data analytics, for instance, can helpcompanies proactively identify areas to reducewaste, such as supply chain optimization. Cloudcomputing can provide on-demand access tothe latest software tools, storage and processesacross departments and geographies. At a timewhen T&H players must meet changing customerexpectations while reining in costs, taking a holis-tic approach to implementing SMAC technologiesis a smart way forward.MobileAdvances in consumer-facing mobile technolo-gies, in combination with the rise of social mediaas a channel, offer a glimpse of the future play-ing field for marketing and communication strat-egies. For T&H players, mobile is considered thebest medium for reaching travelers before, duringand after their travel.Smartphones have moved beyond the hardcorebusiness traveler segment into the wider con-sumer electronics market, thanks to Apple’siPhone, which was launched in 2007. Indeed, thesame year that the world travel industry recordedone billion international travelers (2012), smart-phone sales hit the one billion mark.12Thesedevices accounted for 40% of worldwideshipments in 2012, with the U.S. leading the wayin smartphone usage, at close to 165 million13iOS- or Android-enabled devices. However, thefastest growth in smartphone adoption is inoverseas markets such as China (see Figure 5,next page).Available for mass consumption only two yearsago, tablets have recorded an even faster rateof growth. According to comScore, one in foursmartphone owners uses a tablet.14witnessed frequent bankruptcies and large-scaleconsolidation, the most recent being the mergerbetween American Airlines and US Airways.9Thisleaves three large network players competingfor market share, even as low-cost airlines makeinroads into the market.The most obvious benefit of a well-managedmerger is the streamlining of operations thatcould potentially lead to lower costs. However,this will not be easy, as even the best intendedmergers and acquisitions often encounter tur-bulence. An example is the United Airlines andContinental merger, where customers had toendure technical glitches, including droppedreservations, lost loyalty points and five-hourphone wait times.10For an industry that reliesheavily on customer choice, such a situation cansignificantly erode loyalty.Such crises can be better handled by using socialmedia tools to listen for early signs of customerdissatisfaction, communicating with customers onremedies and next steps, and providing enhancedcustomer support when required. With customeranalytics, moreover, airlines can identify seg-ments that need special attention and generatetailored offers to assuage high-value customers.The U.S. airline industry remains the global leader,with almost 30% of the installed commercial fleetbased in the country; China, the second largest inthis measure, stands at 9%. Yet, China’s marketgrew 11% in 2011 compared with just 1.3% for the U.S.A strong outlook for travel will benefit the airlinesas they try to retain customers through innova-tive services and improve efficiencies. Cost-cuttingis expected to remain a major source of profit.U.S. airlines have led the way in cutting back onnon-profitable flights,11and many carriers have“rightsized” their fleets by purchasing more fuel-efficient aircraft. Embracing green initiatives alsohelps airlines meet customers’ rising expectations.Forces Driving SMAC AdoptionBy adopting SMAC technologies, the T&H indus-try can drive down costs and support revenuesthrough more innovative offerings that helpretain existing customers and attract new ones.SMAC technologies are transforming businessmodels by redefining corporate IT infrastruc-tures. While consumers are driving businessesSMAC technologiesare transformingbusiness modelsby redefiningcorporate ITinfrastructures.
  6. 6. cognizant reports 6Smartphones and tablets offer consumers a toolto research and plan their travel while on the go.The fight for customer attention will, therefore,play out on the touchscreens of these devices.Although the PC is still the favored medium fortravel booking, travel searches and bookings onmobile devices have steadily increased over thepast couple of years (see Figure 6). The number ofAmericans booking travel via mobile is expectedto more than double from an estimated 16 millionin 2012 to 36.7 million in 2016.These devices have embedded themselves deeplyin travelers’ daily routines. Price alerts andreminders are slowly moving from PCs to mobiledevices. With emerging technologies such as con-text- and location-aware services, mobile devicesand tablets are set to take the travel experienceto a different level. Not surprisingly, T&H indus-try players are upping theante in their efforts to create astrong presence on this chan-nel. Hotels, for example, areincreasing their spending onmobile marketing as a percent-age of their digital marketingbudgets. According to a surveyby Hospitality eBusiness Strat-egies, the percentage of digitalmarketing budgets allocatedto mobile was 10% in 2012and is expected to rise to 15%in 2013. The focus of these initiatives is likely toinclude activities such as enhancing mobile WebWith emergingtechnologies suchas context- andlocation-awareservices, mobiledevices and tabletsare set to take thetravel experienceto a different level.Travel Research and Booking Move to MobileFigure 6Notes: Ages 18+; researchers defined as travelers who researched information prior to a trip via mobile Internetor app services at least once in the past year but did not necessarily book; bookers defined as those who bookedtravel via mobile Internet or app services at least once in the past year.Source: eMarketerU.S. mobile travel researchers and bookers by device (millions)Smartphone users Nonsmartphone users16.63.119.77.71.08.7Researchers Bookers21.33.324.610.71.111.8Researchers Bookers26.23.529.713.91.215.1Researchers Bookers2010 2011 2012Developing Markets Drive Smartphone GrowthFigure 5Source: Flurry AnalyticsNote: Year-on-year growth 2011 — 2012Fastest growing iOS and Android markets by active devices401%279%220% 217%196% 193% 193% 189% 185% 171%China Chile Brazil Argentina Iran Vietnam Mexico Russia Turkey India
  7. 7. cognizant reports 7sites and display advertisements (see Figure 7).Airlines also provide flight information and vari-ous other ancillary services, such as hotel bookingand travel insurance via mobile apps, which couldboost their revenues.Social NetworkingAs smartphones become ubiquitous, social net-working has emerged as the most importantcog in the communication wheel for most ser-vice industries. Travel and social are considereda natural fit, and with good reason. From updat-ing their Facebook status to checking into a hotel,many individuals actively indulge in social net-working, even when on vacation. Perhaps moreimportantly, social has influenced the way con-sumers plan, book and experience travel.15The notion that an agent knows the customerbest is being challenged by algorithms that combmembers’ Facebook interac-tions to make personalizedrecommendations.16TripAd-visor, a leading online travelreview site, managed to boostits membership by more than100% year-on-year in 2012 byacquiring members (domes-tic and international) throughFacebook.17In fact, users log-ging into the site to shop forhotels increased by 30%. Asa result, the site was able todrive revenues through tar-geted click-based advertisements generated byinsights extracted from travel reviews gleanedfrom members’ Facebook updates.For travel industry players, there is a clear incen-tive to provide services that generate positivesocial networking feedback. In a survey by VFMLeonardo, 92% of respondents said they trustthe opinions of people they know above all otheradvertising.18This makes mastering social mediaa key imperative. Social spend by travel compa-nies is on the rise, driven by videos and imagesused in advertising and content-based directmarketing initiatives. However, social can be adouble-edged sword, as negative publicity tendsto spread faster than praise on social networks.For this reason, T&H players need to approachsocial media strategically and place it at the heartof their marketing and public relations efforts. Thiscan be done by embedding a social component intheir communications strategy, directing users tothe company’s social media page and employingPR-savvy customer relations executives to helpcreate a responsive and personalized experi-ence. Given the propensity of social media usersto share their experience with friends, this chan-nel holds much promise for attracting potentialcustomers, with no marketing effort on the com-pany’s part. However, the key differentiator forT&H players will be the social content generated,either by the company or by their guests. Thiscontent, in the form of videos or photos, is emerg-ing as a key promotional tool for T&H players.The notion that anagent knows thecustomer best isbeing challengedby algorithms thatcomb members’Facebookinteractions tomake personalizedrecommendations.Hotels Investing in Improving the Mobile Experience0%10%20%30%40%25.937.526.022.437.527.4 27.6 25.08.219.012.54.124.18.9N/AN/A8.232.838.411.017.850%Mobile site MobilebookingengineSMStextmarketingMobilebanneradvertisingiPhone app MobilesearchI am notplanning anymobilemarketinginitiativesfor the year2010 2011 2012Figure 7Source: 6th Annual Benchmark Survey on Hotel Digital Marketing Budget Planning, HeBS Digital, 2012Which mobile marketing initiatives are you planning for? (Percent of respondents)
  8. 8. cognizant reports 8Quick TakeBig Data, Analytics and Cloud ComputingJust as mobile and social have become crucialto how T&H companies interact with custom-ers, data analytics and cloudcomputing have emergedas the backbone of a digitalmarketing strategy. Travelcompanies have traditionallystored volumes of data abouteverything from pricing mod-els to customer relationships.But today, the focus has shiftedto deriving insights from thisdata.Thanks to increasing  digiti-zation, companies find  them-selves at the center of a datadeluge, in which the volume,velocity and variety of data are growing fasterthan ever before. Flights, for example, generateterabytes of data on every journey, and travelagents and hotels have access to crucial personalinformation on their clients.Integrating this data into a coherent whole, andthen using advanced analytics to slice and dice itaccording to various parameters, can drive fact-based decision-making across all departments.This could lead to improved efficiencies, bettermarketing campaigns and more personalizedcustomer relationships. Big data is already driv-ing innovations, such as Web sites that providetravelers with better hotel deals and help themgauge providers’ reputation and service qualityby crunching data from millions of Web pages.An example is Hopper, which converts raw datafrom Web pages into structured information tocreate a better travel search and planning expe-rience. Olset, another big data startup, derivesuser information from sites such as Expedia andFacebook to identify user preferences and offermatching results in the travel planning stage.19Going forward, big data and analytics will helptravel providers better understand customers andcreate more personalized service offerings.Cloud computing is gaining popularity acrossindustries, and T&H is no exception. The benefitsof cloud computing include cost reduction, scal-ability and access to the latest software. Cloudalso allows companies to free up resources tofocus on core business activities. Functions suchas data storage, productivity tools and messagingare moving to the cloud in various service sectorindustries. For travel, cloud computing can createa low-cost but highly efficient platform to offerall customer-facing services that hitherto wereoffered separately.Owning the CustomerAs mobile becomes the preferred channel for con-sumer engagement, airlines, hotels and agentswill fight harder to “own the customer” by per-suading customers to transact directly with them.A Changed CustomerThe financial crisis brought about dramatic changes in customer behavior as consumers became moresavings-oriented and pragmatic in their purchasing behavior. They became choosier and willing to spendtime researching the products that they desire. This behavior is more visible among the millennialgeneration, who are more willing than previous generations to share their experiences on the Internet.A survey by Boston Consulting Group found that 60% of the millennial population, compared with46% of the non-millennial population, were willing to rate products and services on the Internet, whilean equal percentage of millennials engage in uploading videos, images and blog entries to the Web(compared with 29% non-millennials).20Technology has empowered individuals across generations. It has also made them more open mindedabout switching brands. Driven by their price sensitivity or feedback from friends, today’s consumersare more open to changing their minds. For T&H companies, which have traditionally relied on loyalty,it is important to consider the behavior patterns of these connected customers across channels if theyare to make the most of the rise of mobile and social media.Just as mobile andsocial have becomecrucial to how T&Hcompanies interactwith customers,data analytics andcloud computinghave emerged asthe backbone of adigital marketingstrategy.
  9. 9. cognizant reports 9Doing so will help them maximize revenues andobtain firsthand access to both transactional andinteractional data. However, gaining and retain-ing customer loyalty is a far more challengingtask in the age of mobilility, given the plethoraof options that can be revealed through a simpleonline search. Moreover, customer behavior haschanged dramatically following the financial crisis(see sidebar, previous page).A SMAC-enabled strategy should focus on cre-ating a consistent and invigorating experienceacross channels. Mobile Internet users are set in2013 to overtake fixed-network users.21With thegrowing adoption of tablet and smartphones, tai-loring Web sites to fit the screens of these deviceswill be a step in the right direction.But the key elementof the mobile Website experience will becontent, in the formof blogs, photo-shar-ing, newsletters andvideo. Video, in fact, isexpected to be a keyvehicle for engagingwith travelers on themobile Web, whetherthrough reviews, demos or interviews. Travelersuse video at almost every stage of travel plan-ning (see Figure 8). However, while 85% of theU.S. population watches video online, traveladvertisers reach just 3.5% of this audience.22Online travel-related video viewing is expected toremain popular, especially among business travel-ers, according to an April-May 2012 Google travelstudy. Through high-quality, informative videos,providers can engage with travelers in the earlyplanning stages and highlight the uniqueness oftheir offerings. Clearly, travel companies mustfocus on offering Web sites with quality contentand optimize the site for mobile viewing, payingclose attention to basic aspects such as readabil-ity and navigation.But there is a lot more that mobile devices can dofor T&H players. Hotels, for example, can smooththe customer journey by enabling them to checkinto a hotel without waiting at the receptiondesk. Mobile services such as these can help T&Hplayers generate revenue. The IntercontinentalHotel Group, for example, generated $2 millionin revenues from mobile booking in 2009, andthis increased to $40 million in the first monthof 2013, alone.23The customer experience can befurther enhanced by incorporating hotel loyaltyprograms into mobile apps.The impact of social media on T&H providerscan be gauged from the number of travelerswho change their choice of hotels, agents or air-lines based on social media feedback.24Surveyshave also found travel companies generatingdirect revenues from social media.25It is impera-tive for T&H players to treat social media as theVideo, in fact, isexpected to be a keyvehicle for engagingwith travelers onthe mobile Web,whether throughreviews, demos orinterviews.Travelers Use Video at all Stages of TravelFigure 8Source: “The Traveler’s Road to Decision,” Google and Ipsos MediaCT, July 2012.Whenchoosing adestination64%When lookingfor activitiesat a destination62%Whendeciding onaccommodationsat a particulardestination57%When decidingon whichWeb site to book34%When thinkingabout takinga trip66%Respondents were asked which of the following they have performed online in the past six months.
  10. 10. cognizant reports 10cornerstone for marketing and communication,and their social activities need to be backed bystrong content, such as videos, photos, contests,etc., while dedicated teams respond to customerfeedback and inquiries, behind the scenes.T&H players have traditionally used analytics inareas such as campaign management, but therole is expanding, due to the amount of datagenerated today. For instance, travel agenciescan deploy analytics on customer data acrosschannels to create personalized offerings, andrecommendations can be made based on demo-graphic data, such as younger baby boomers(aged 46 to 57) with strong spending power and adesire to reward themselves.26Analytics can help airlines create a holistic viewof customers, known as the customer compositevector, based on their travel frequency, spend pertrip, non-travel spend, trip profitability, etc. (Formore on this topic, see “Leveraging AdvancedAnalytics to Drive Customer Behavior in the Air-line Industry.”) This holistic approach is betterthan traditional customer scoring cards used byT&H providers, as these are less effective for pull-ing together disparate customer data. Developinga holistic picture can help airlines, for example,build targeted offerings and campaigns based onspecific aspects of customer behavior. If internalresources are limited, providers can also look tocloud-based analytics solutions.To effectively embrace the SMAC Stack, T&H com-panies must create systems of engagement thatinteroperate with their legacy systems. They caninvest in new technologies that help legacy sys-tems work with emerging technologies, or theycan deploy translation software, or middleware,to enable interoperability with external platformsto offer Web-based or mobile-based services. Infact, cloud computing has wider applications forthe travel industry, as this platform can be usedto internally provide software access to offices/franchises across the globe. An example of this isthe choiceAdvantage platform offered by ChoiceHotels in the U.S. This platform enables a cloud-based central reservation system for its franchi-sees, which no longer need to invest in new tech-nology, resulting in cost savings.27Providers are also developing integratedcustomer-focused platforms that allow accessto services across the travel and hospitalityspectrum. These cloud-based platforms allowtravel providers to sell their products to consum-ers cost-effectively. Such a service will be a boonto industry players that may not want to invest innew technology.Industry-wide SMAC ImperativesThe combined forces of social, mobile, analyt-ics and cloud is causing T&H players to rethinktheir business models. As customers becomemore empowered, companies need to tune theirofferings to meet new expectations. However, webelieve that a gradually recovering economy willprovide the impetus needed for T&H players towidely adopt these technologies. The followingare key imperatives, opportunities and challengesfor industry players.Hotels• Revive customer loyalty: Hotels areexperiencing an unprecedented erosion incustomer loyalty.28Mobile Internet and socialnetworking have changed the way customersplan their travel. To minimize further erosion,hotels need to revive their loyalty programsby integrating them with customer and socialmedia analytics.• Predict behavior: Combining analytics onhistorical data with future scenarios canallow hotels to anticipate changes incustomer behavior and modify their offeringsto maintain wallet share, if not increase it.• Make CRM programs count: As smartphones,mobile Internet and social media becomean integral part of travelers’ lives, they pro-vide hotels with critical touchpoints that canstreamline and unify their CRM processes,something that was not easy to do in the eraof newspapers and television.• Boost productivity with real-time tools:Tools to monitor processes such as procure-ment on a real-time basis can reduce the costof day-to-day operations. Such a tool could bedeployed on a cloud-based platform to enableorganization-wide access, supported by ana-lytics that can improve spending decisions.• Create a culture of fact-based decision-making: In addition to adopting technologiesthat help cut costs, it is important to create acollaborative environment and initiate a cul-tural change toward fact-based decision-mak-ing. Such change needs to be driven by topmanagement, with technology teams workinghand-in-hand with users.
  11. 11. cognizant reports 11Travel Agents• Create enhanced offerings: Travel agents arewell-placed to leverage location-based offer-ings. Based on a customer’s location, the travelapp can send relevant location-based servicecoupons for restaurants, shopping, etc.• Go beyond the Web site: As customers addnew sources of information to their traveldecision-making, travel companies risk beingmarginalized. To avoid this, they need to forgea connection with travelers through differentchannels such as social media, using contentthat customers want to see.• Provide agents with cloud-enabledcapabilities: A cloud-based communicationssystem allows travel agents to work on thego, responding to urgent requirements fromcustomers on a real-time basis using theirsmartphones or tablet devices.Airlines• Plan a cloud-based future: Airlines aresaddled with high operating costs and otherexternal factors, and their troubles will notvanish overnight. However, they can harnessthe power of cloud computing to cut costsfurther, while simultaneously pursuing amobile and social strategy aimed at retainingcustomer mindshare and wallet-share.• Enhance the passenger experience: Airlinescan use the cloud to create services that allowtechnology-savvy passengers to utilize theirin-flight time to the fullest. For example, Luf-thansa’s CloudStream service allows passen-gers to choose and store content that they canaccess on their tablet devices after take-off.29• Use apps as a branding tool: Mobile appsallow airplanes to create a presence on thedevice that a customer is most likely to usewhile planning travel. This may or may notresult in direct business from the consumer,but it will add to the possibility of gaining wal-let-share.• Use social to build trust: A strong social pres-ence can drive brand loyalty in the same wayas frequent flyer programs. By being active onsocial networks, airlines can build customertrust. An example of this is Southwest Airline’sdedicated social media team that not onlyresponds to comments and questions, but alsorebooks flights, tracks bags and issues travelvouchers.30Ready for TakeoffA gradual return to pre-crisis levels of travel, com-bined with an increasingly mobile and informedconsumer, make it imperative for T&H industryplayers to offer a personalized and consistentuser experience across all phases of travel. Adopt-ing an emerging master IT architecture compris-ing social, mobile, analytics and the cloud willenable T&H players to meet this challenge and berewarded with improved operational efficiencies.These technologies will not only transform com-munication with applicable customer segments,but they will also push companies toward a morecollaborative work environment.Hotels, travel agents and airlines facedifferent challenges. Yet, whether it is aboutcutting operational costs, improving sourcingor increasing wallet-share and mindshare, theemerging SMAC-driven business model will be atthe heart of these efforts. Success will hinge onhow well organizations manage the transition tonew technologies. While there is no one-size-fits-all approach, the effort must be driven from thetop. Industry players should also look to partnerwith third-party providers with the necessaryexperience and wherewithal tonot only build solutions basedon these technologies but alsodeploy them holistically tounlock value and exert a mul-tiplying effect on business per-formance.We believe that an integratedstrategy for mobile, socialmedia, analytics and cloudcomputing is the way forwardfor T&H players. Companiesshould look at these technologies as one inte-grated stack instead of embarking on isolatedinitiatives. Organizations that focus initially oneliminating data, process and operational siloswill be positioned to reap early multiplier effectsof the SMAC Stack.Organizationsthat focus initiallyon eliminatingdata, process andoperational siloswill be positionedto reap earlymultiplier effectsof the SMAC Stack.
  12. 12. cognizant reports 12Footnotes1 Total guest room revenue for a given period divided by the total number of paid occupied roomsduring the same period.2 David Barley, “The Americas Hotel Market Posts Positive Performance Growth in 2012,” World Prop-erty Channel, STR Global, Jan. 24, 2013, http://www.worldpropertychannel.com/north-america-vaca-tion-news/2012-hotel-report-los-angeles-hotels-str-global-san-juan-hotels-santiago-hotels-6476.php.3 “2012 U.S. Hotel Valuation Index,” HVS, October 2012, http://www.hotelnewsresource.com/pdf11/HVS100312.pdf.4 Patrick Mayock, “Hotel Profits Up; Growth Expected Through 2015,” HotelNewsNow.com, June 22, 2012,http://www.hotelnewsnow.com/articles.aspx/8446/Hotel-profits-up-growth-expected-through-2015.5 Simon Hobbs, “Four-Year Boom Expected for the U.S. Hotel Industry,” CNBC, Jan. 22, 2013, http://www.cnbc.com/id/100398330.6 “Report Shows Murky Outlook for ’13 Travel,” MeetingsFocus, November 2012, http://www.meetingsfo-cus.com/ArticleDetails/tabid/162/ArticleID/19786/Default.aspx.7 Ibid.8 Johanna Jainchill, “Four Agencies Account for More Than 75% of Market,” Travel Weekly, June 4,2012,  http://www.travelweekly.com/Travel-News/Corporate-Travel/Study--Four-agencies-acco-unt-for-more-than-75--of-market/.9 “AMR, U.S. Airways Predict Clear Skies,” Wall Street Journal, Feb. 14, 2013, http://online.wsj.com/article/SB10001424127887323478004578303630011153910.html.10 Ben Mutzabaugh, “Customers Vent on United-Continental Switchover,” USA Today, March 28, 2012,http://travel.usatoday.com/flights/post/2012/03/united-continental-airlines-switchover-com-plaints/648618/1.11 “Airline Industry Stock Outlook — Dec. 2012,” Zacks Equity Research, Dec. 13, 2012, http://www.zacks.com/commentary/24969/.12 Dan Rowinski, “Know What’s Cool? A Billion Smartphones. And Theyre Changing Everything,”Readwrite Mobile, Oct. 17, 2012, http://readwrite.com/2012/10/17/know-whats-cool-a-billion-smart-phones-and-theyre-changing-everything.13 Ibid.14 “Majority of Tablet Users Watch Video on their Device, 1 in Every 4 Viewers Pay to Watch,” comScore,June 8, 2012, http://www.comscore.com/Insights/Press_Releases/2012/6/Majority_of_Tablet_Users_Watch_Video_on_their_Device.15 NewMedia TrendWatch, European Travel Commission, 2012, http://www.newmediatrendwatch.com/world-overview/34-world-usage-patterns-and-demographics.16 Justin Bachman, “Can Social Media Lift Travel?” BloombergBusinessweek, Feb. 16, 2012, http://www.businessweek.com/articles/2012-02-16/can-social-media-lift-travel.17 Trefis Team, “TripAdvisor’s Focus On Hotels, Social Media & Mobile Are Paying Off,” Forbes, Feb. 19, 2013,http://www.forbes.com/sites/greatspeculations/2013/02/19/tripadvisors-focus-on-hotels-social-media-mobile-are-paying-off/.
  13. 13. cognizant reports 1318 “2013 Hotel Marketing Trends: From Standout Social Media to Marvelous Mobile Marketing,” VFMLeonardo, November 2012, http://vfmleonardo.com/sites/default/files/2013-Hotel-Marketing-Trends-vfmleonardo2012.pdf.19 Kristen Bent, “10 Big Data Startups at Strata,” KDNuggets.com, Feb. 28, 2013, http://www.kdnuggets.com/2013/03/10-big-data-startups-at-strata.html.20 Christine Barton, Jeff Fromm, Chris Egan, “The Millennial Consumer: Debunking Stereotypes,”The Boston Consulting Group, April 16, 2012, https://www.bcgperspectives.com/content/articles/ con-sumer_insight_marketing_millennial_consumer/.21 “Mobile Internet Users will Overtake Fixed Users in 2013,” Hi-media Group, September 2011,http://blog.hi-media.com/mobile-internet-users-will-overtake-fixed-users-in-2013/.22 Simon McDowell, “Online Video and the Travel Industry,” River Film Communication, Nov. 30, 2012,http://www.riverfc.com/online-video-and-the-travel-industry-statistics/.23 Jessica Davies, “IHG’s Mobile Revenue Will Soon Outstrip Web, Says VP of Marketing Michael Menis,”The Drum, Feb. 26, 2013, http://www.thedrum.com/news/2013/02/26/ihg-s-mobile-revenue-will-soon-outstrip-web-says-vp-marketing-michael-menis.24 “2012 Social Media and Tourism Industry Statistics,” Stkkymedia.com, 2012.25 “Online Travel Statistics 2012,” Infographicsmania, October 2012, http://infographicsmania.com/online-travel-statistics-2012/.26 Maria Lenhart, “6 Consumer Trends to Act on in 2013”, TravelMarketReport.com, January 17, 2013,http://www.travelmarketreport.com/articles/6-Consumer-Trends-to-Act-on-in-2013.27 Dennis Schaal, “Choice Hotels Targets UK, France and Germany with Cloud-Based Property Manage-ment System,” Tnooz, June 8, 2011, http://www.tnooz.com/2011/06/08/news/choice-hotels-targets-uk-france-and-germany-with-cloud-based-property-management-system/.28 “New Deloitte Survey Uncovers the Erosion of Travel Loyalty,” Deloitte, Jan. 22, 2013, http://www.deloitte.com/view/en_US/us/Industries/travel-hospitality-leisure/b8f3794f6d36c310VgnVC-M1000003256f70aRCRD.htm.29 Sourya, “How Lufthansa Got Into the Clouds with CloudStream,” CloudTweaks, Oct. 25, 2011,http://www.cloudtweaks.com/2011/10/how-lufthansa-got-into-the-clouds-with-cloudstream/.30 Jason Whitely, “Airlines Using Social Media to Change the Way You Fly,” WFAA, Feb. 1, 2013, http://www.wfaa.com/news/business/Airlines-using-social-media-to-change-the-way-you-fly-189456191.html.
  14. 14. About CognizantCognizant (NASDAQ: CTSH) is a leading provider of information technology, consulting, and business processoutsourcing services, dedicated to helping the world’s leading companies build stronger businesses. Headquarteredin Teaneck, New Jersey (U.S.), Cognizant combines a passion for client satisfaction, technology innovation, deep in-dustry and business process expertise, and a global, collaborative workforce that embodies the future of work. Withover 50 delivery centers worldwide and approximately 156,700 employees as of December 31, 2012, Cognizant is amember of the NASDAQ-100, the S&P 500, the Forbes Global 2000, and the Fortune 500 and is ranked among thetop performing and fastest growing companies in the world.Visit us online at www.cognizant.com for more information.World Headquarters500 Frank W. Burr Blvd.Teaneck, NJ 07666 USAPhone: +1 201 801 0233Fax: +1 201 801 0243Toll Free: +1 888 937 3277Email: inquiry@cognizant.comEuropean Headquarters1 Kingdom StreetPaddington CentralLondon W2 6BDPhone: +44 (0) 207 297 7600Fax: +44 (0) 207 121 0102Email: infouk@cognizant.comIndia Operations Headquarters#5/535, Old Mahabalipuram RoadOkkiyam Pettai, ThoraipakkamChennai, 600 096 IndiaPhone: +91 (0) 44 4209 6000Fax: +91 (0) 44 4209 6060Email: inquiryindia@cognizant.com­­© Copyright 2013, Cognizant. All rights reserved. No part of this document may be reproduced, stored in a retrieval system, transmitted in any form or by anymeans, electronic, mechanical, photocopying, recording, or otherwise, without the express written permission from Cognizant. The information contained herein issubject to change without notice. All other trademarks mentioned herein are the property of their respective owners.CreditsAuthor and AnalystAkhil Tandulwadikar, Senior Research Associate, Cognizant Research CenterSubject Matter ExpertSamrat Sen, Director, Cognizant Business Consulting’s Travel & Hospitality PracticeDesignHarleen Bhatia, Creative DirectorSuresh Sambandhan, Designer

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