Your 2020 trends roadmap through the changing traveler landscape
February 7, 2020
The travel industry has evolved so much in the last 20 years. At every phase of the customer purchase journey technology is making an impact for both buyer and seller.
The quote from noted American author John Maxwell sums up the state of travel quite well, "Change is inevitable. Growth is optional".
There will be winners and losers in the technological arm-wrestle for growth. This could be your potential roadmap to victory.
The age of Google Travel
When Google began ranking webpages over 20 years ago, its mission was “to organize the world's information and make it universally accessible and useful”. But in more recent years the mission has been more focused on generating revenue from all the data it has collected.
While travel brands — particularly online travel agencies — have dedicated huge portions of their marketing budgets to search engine marketing for years, the arrival of Google Travel has marked a shift in this relationship. The world’s largest search engine is now prioritizing its product with the top spot in its organic search results. As a result, travel companies are seeing less of a return from search engine optimization (SEO) and SEM (search engine marketing) efforts.
Airlines have reacted quickly, by leaning on their brand and thinking more like retailers.
Airlines are going direct to own the customer
The main aim of retailing is to maximize the value of each customer. The number of passengers is less important than revenue per passenger per flight. Direct sales through the website and/or mobile app remain the airline’s preferred channel to achieve this. The main reasons supporting direct selling are the ability to upsell and cross-sell their product through richer content, branded fares, and personalized offers. They believe they can do this more effectively than 3rd party websites or mobile apps that are attempting to display hundreds of airline fares.
To facilitate changing traveler preferences, travel providers need to think more like retailers and offer a wider variety of product choices. The genesis of retailing by airlines started with one or two products — first class and economy. But it took decades to introduce additional variations in cabin classes. Now there are multiple branded fare offers within the same cabin class.
A great example is Air Canada’s offering for long-haul economy seats. The options are Basic, Standard, Flex and Latitude packages for essentially the same seat. Premium economy and business also have three sub-brands.
However, there is an opportunity for OTAs to prove their value to the customer. By providing a clear interface that compares and itemizes each fare from the various airlines, OTAs will demonstrate they are an unbiased source of the best travel offers.
Airlines are not the only group to react to Google’s virtual land-grab. Metasearch has reacted too.
Skyscanner is becoming merchant of record for air bookings
In reaction to Google’s encroachment on their turf, Skyscanner announced in November 2019 that it is taking a further step to becoming a ‘travel marketplace’. It now offers users three ways to purchase their tickets, each resulting in a variation on who ultimately owns the customer.
The transition from metasearch to meta book has been coming for a while. Back in 2011, KAYAK surprised the industry by introducing facilitated bookings. The trend of metasearch channels facilitating bookings has grown steadily driven by local language and localized services.
Alibaba in China offers more of the freedoms of a true marketplace on its Fliggy platform: suppliers choose the products to sell, how to present them, and interact directly with the customer. While Alibaba provides the underlying infrastructure, the agency or supplier handles bookings directly and has creative freedom in how their brand and products are presented. Since the supplier or agency is doing all of the selling, the participation costs are lower than metasearch channels. However, at the moment Fliggy is only open to Chinese customers.
If we look to the far east again, we see another trend that can help larger travel companies rely less on Google and other search engines by creating a microcosm on the internet in a supper app.
Super apps will add more competition to the customer acquisition landscape
WeChat is the original super app and has evolved into a quasi-operating system, dominating messaging and file-sharing in China. It pioneered the idea of ‘apps within an app’ through the use of mini-programs (currently more than 1 million of them). It serves as a portal for its 1 billion monthly active users to the wider economy, with virtually every major brand having a presence.
Innovative airlines like KLM have fully integrated their mobile website into their WeChat account, letting users book flights, search their flight status or check-in, all through the Chinese super app. Once a flight is booked, users receive notifications on the app when online check-in opens, can have their boarding pass sent to their WeChat account, and can contact KLM’s customer service through the app’s chat interface.
Building a super app is only within reach for a very small number of companies, but that’s not to say apps or mobile can’t play a role in every company’s growth. With the threat of super app, OTAs must disrupt or risk being disrupted. Contextual messaging across the journey will help.
Real-time messaging (Messaging trend)
Today the consumer journey consists of a complex maze of activities and the use of a multitude of apps and platforms for banking; digital wallets; transport (ride-hail and public transport); flight, hotel and restaurant bookings; to organize schedules as well as using messaging and social apps to share experiences with friends and colleagues.
Multi-channel messaging enables OTAs to change the way they interact with customers, so instead of simply taking orders, they become advisers and add value by making travelers think about things they hadn’t considered but may very well enjoy. These types of capabilities may provide OTAs with a new way to disrupt the status quo again with a 21st-century business model, built to satisfy a much savvier traveler.
Messaging and communications will play an increasingly important role for all travel companies. As the product becomes increasingly homogenized, service will be the key differentiator.
Virtual interlining provides better choices and peace of mind
OTAs can bring the biggest value to customers by offering virtual interlining. These multiticket itineraries enable customers to book a flight ‘from anywhere to everywhere’. Previously, to create this kind of itinerary, customers had to search, book and manage multiple bookings from multiple suppliers. Beyond this, the traveler would also be responsible for the financial impact of a disruption that may result in them missing a connecting flight. By offering virtual interlining capabilities and insurance against disruption, OTAs can provide the same assurances and security that traditional airlines interlining partnerships have provided for travelers.
This has expanded the attraction of virtual interlining to traveler persona groups who may not have wanted to take the disruption risk before, like families. 61% of leisure travelers use sites that suggest travel options based on a budget for travel research. By offering virtual interlining capabilities, OTAs can provide the same assurances and security that traditional airlines interlining partnerships have provided for travelers.
The biggest disrupters in online travel like Kiwi.com and some of the larger OTAs in APAC and Eastern Europe are excelling in this space, by creating unique and cheaper itineraries that combine content from traditional GDS network carriers and low-cost carriers.
As the awareness, acceptance and understanding of virtual interlining solutions among consumers have grown, providers are reporting 10-15% of booked itineraries being multi-ticket solutions. Virtual interlining is expected to continue to grow in importance in the competitive arena of OTA and metasearch.
Read the room and make an effort to show you understand.
We closed out 2019 with news that Greta Thunberg had been named the Time Magazine person of the year against the backdrop of devastating wildfires in Australia. Despite the UN’s Intergovernmental Panel on Climate Change (IPCC) dire report on the state of the world’s climate, incredibly there are still people in powerful positions of government that are climate change deniers.
According to Travelport’s research, a significant proportion of travelers make accommodation and transport choices based on environmental and social impact. Naturally, this is led by the younger generations, with 53% of millennials choosing eco-friendly options, compared to 20% of those in the 55+ age bracket. Over half (55%) of business travelers are also more environmentally aware of choosing sustainable options compared to 42% of leisure travelers.
Denmark-based travel agency, KILROY, has prioritized sustainability in its offerings to travelers. Pernille Vaupel, Director of Air and Online Sales at KILROY, says that sustainability is one part of their overall assessment process when choosing travel suppliers. “Customers ask for sustainable options now and they expect us to have made choices on their behalf that benefit sustainability. By screening travel suppliers based on a variety of parameters and our long-term expertise we add value for the traveler.”
You can visit our OTA hub page here and download our Travel Trends 2020 eBooks and read our forecasts for the coming year.