The travel industry must move from the one-size-fits-all methodology to a more refined approach
The experience economy recently overtook the product and service sectors in terms of outright value. This has led people in many industries to rethink whether their revenue models, products and services can truly support their continued growth and enable them to stand out in this competitive environment. Against this background, some companies have already successfully transformed into a new model, where they no longer simply sell products, but also provide experiences.
As the consumer market experiences growth in personalized demand and new technologies continue to emerge, the future will present even more opportunities to improve travel experiences.
This year’s Travelport LIVE APAC summit was focused on how the experience economy is impacting the nine-trillion-dollar global travel market. Attendees at the two-day event took part in discussions on issues surrounding the experience economy, such as how to use new technology to make buying and managing travel experiences more convenient, efficient and personalized.
At the start of the conference, Dr Andrew Staples from The Economist presented his macroeconomic forecasts. According to him, some key risk indicators include:
- The US becoming increasingly protectionist, which is likely to cause global trade to decline
- The volatility of global energy markets
- The long-term decline of global stock markets, which could damage global economic stability
- The increasing severity of cyberattacks and data leaks, which could weaken the value of the Internet
- Sluggish global economic growth, with some countries possibly exiting the Eurozone
Naturally, another key point of this analysis concerns the damage done to both the US and China by the ongoing trade war.
Asia is already a venture capital hotspot in the global travel market
While the global economy may face a great deal of uncertainty, industry professionals and business owners attending the conference almost universally expressed their optimism on how APAC's travel industry – given its massive size and rapid growth – will transform the global landscape, especially in terms of online travel. APAC has already overtaken the US and Europe in many business areas, and vast amounts of venture capital continue to flow into the region.
Technological innovation in APAC's travel industry is inspiring the world
A few months back, Lufthansa announced the creation of the third Lufthansa Innovation Hub. The new hub will open in Shanghai in 2020, following the launch of the first hub at the company’s German headquarters and the second in Singapore. The mission of Lufthansa's Innovation Hubs is to identify partners and proactively collaborate to drive forward R&D on-air products and services in response to the latest passenger demand. Lufthansa views China as one of the most dynamic markets in terms of air innovation.
Among the many ideas shared at Travelport LIVE APAC 2019, one was particularly intriguing. A completely simulated “airline” was recently founded in Japan, with the travel experience reportedly providing everything you would expect to find at 30,000 feet, including meals. The only difference between this company and a real airline is that it doesn’t actually fly — it is a theme restaurant that uses virtual reality (VR) technology to deliver a simulated flight experience.
Another highlight was the Singapore Tourism Board’s use of 360° VR technology to create a brand-new destination marketing project that reflects Asia’s increasingly rapid progress in digital innovation.
Experience economy =
Personalised products and services +
Cross-screen, omni-channel touch points +
Smooth, stress-free user experience +
Ubiquitous social media
Whether in mature markets such as Europe, North America, Japan and South Korea, or in emerging markets like China, India and Indonesia, an unprecedented revolution is underway in terms of what customers expect from experiences. This revolution is likely to be one of the main drivers of future growth and development in the travel industry.
However, the fact is that the radical transformation faced by traditional travel companies –such as hotels, airlines and travel agencies – has placed them under more pressure than ever before. The hotel and airline industry has invested less than many other industries in digital transformation and new technology adoption, while travel agencies’ level of investment in digital transformation is even smaller.
The relatively low level of attention paid to these areas is reflected in the understanding of “experience” and the design of services. It is undeniable that even today, the customer experience of many travel companies needs to be upended and rebuilt from scratch. Some companies still lack even a basic awareness of “user experience (UX) design”, and remain mired in the self-centred sales concepts of the past.
Let me give you a real-world example.
This year’s Travelport LIVE APAC was held in a luxury hotel in the heart of Shanghai. More than half the guests were from outside China – which presents unique opportunities to upsell certain services. However, the vending machines of mobile phone power banks only supported AliPay and WeChat Pay, leaving most foreign guests helpless.
At the conference, Travelport’s guests also shared their views on future travel trends and potential effects of new technologies. Travelport also discussed “Business 4.0”, the growing boom in leisure travel, and other noteworthy trends in this new era.
Key insights and trends include:
- Package tourists are gradually abandoning traditional two-week-long trips in favour of taking multiple, shorter holidays.
- Travel is becoming more responsible and environmentally-friendly. 55% of global travellers say they would prefer making sustainable travel choices.
- Long-haul routes are expanding, while new technologies are giving next-generation consumers unlimited opportunities.
- The number of solo travellers is constantly growing: Dublin Airport claims that 57% of the 31.5 million passengers it handled in 2018 were solo travellers.
- User types are being constantly segmented and deeper insights are needed to design diversified products and services (see image below).
Destination marketing was another key topic at the conference. A guest from Klook shared their insights and new measures for the thriving APAC region. Klook not only started selling standardised small transport and ticket products, but also began to take lead with innovative experience projects.
Taking Jiufen for example, a top Taiwanese scenic spot popular among Internet influencers, Klook studied the challenges faced by young solo travellers and designed a minibus product for groups of 12-20 people that can be booked on the spot. This product is positioned between the category of public transport (which is infrequent) and car rental (which tends to be expensive). The company has also been using its data and marketing capabilities to empower local drivers to explore new market segments and garner fresh opportunities to generate
Klook recently published its 2019 Global Solo Traveller Trends survey. Nearly 21,000 respondents from 16 markets were surveyed, with 76% of respondents saying that they have solo travel experience or are considering taking a solo trip. The proportion was particularly high for Chinese travellers, which stood at 84%, second only to South Korean travellers.
Compared with their global counterparts, solo travel is particularly popular among Chinese travellers. 49% of Chinese travellers previously travelled solo, and 35% said they are very willing to travel alone.
Two other examples were shared about using technologies to improve efficiency:
1. Hotel groups use Travelport’s blockchain technology to simplify the longstanding problems of accuracy and synchronisation in commission reconciliation and settlement.
2. The dynamic pricing model supported by Travelport’s Next Generation Platform, which is currently under development, will give travel agencies more flexibility to boost their marketing potential, with the ultimate goal of generating more sales.
3. Another hot topic at Travelport LIVE APAC was the intense debate on New Distribution Capability (NDC), specifically the “carrot and stick” policies used by IATA and the airlines to drive industry uptake of NDC.
Singapore Airlines is one of Travelport’s key partners in the NDC field. The company’s KrisConnect Programme went live in late 2018, and Travelport has established a wide-ranging partnership with the airline to integrate its NDC content. The two parties plan to bring NDC into general use by April 2020. Over the next few months, NDC functions will be launched under the auspices of Travelport as part of the products and platforms using NDC standards, while some trials involving travel agency customers are already underway. Based on the partnership between Travelport and Singapore Airlines, Travelport travel agents that are connected to KrisConnect will be able to obtain products and services tailored to their needs and preferences.
Singapore Airlines indicated that its forthcoming fare options and content will create additional benefits for travel agents. These functions will all be presented on a fast, convenient and intuitive interface.
Travelport believes that leading airlines will connect to GDS in the next six months or so, while more “sticks and carrots” will be used to encourage wider adoption of NDC with more global airlines set to announce their progress on NDC implementation over the next few months. At the same time, questions raised by guests reflected the concerns and confusion of agencies regarding these measures. Such questions include:
- Do you think that airlines really know what they are trying to achieve with their NDC strategies? Isn’t it the case that revenue and cost calculation remains a must?
- Airlines are taking different approaches towards NDC implementation, some correct and some incorrect. Could you share some examples of failures?
- Given that air tickets distributed through NDC are issued directly by airlines, rather than as BSP tickets, will airlines accept the same BSP payment conditions?
- Some airlines are using NDC to adjust their distribution models. How is Travelport dealing with this situation?
- Could you tell us a bit more about “one order”?
- The NDC concept has been around for nearly a decade. Why was its implementation hindered by GDS? Why do new business models fail to show clear progress in functionality?
- Has Travelport abandoned your commercial responsibilities for airlines by claiming you are only a platform, and left the job of negotiating content contracts with airlines to travel agencies?
- Airlines without NDC are still profitable and able to provide their customers with good services. Can you comment on that?
It seems that the industry will still be debating NDC-related issues for some time to come.
Travel is competing with other industries for customers' time, money and attention
In a subsequent interview, Nick Dagg, Travelport’s Chief Commercial Officer Responsible for Agency Commerce, Mark Meehan, GVP and Managing Director APACMEA and Global Operators, and Ming Foong, Travelport’s Vice President of Strategic Business Development, shared their views on a number of relevant issues.
Their key points are summarised below:
- From a Travelport perspective, we are moving into an intriguing era. Travelport was privatized a few months ago. This will create new opportunities for development over the next few years, partly because our new investors have different requirements, and new opportunities in the market are enabling Travelport to apply new thinking to distribution and next-generation technologies, as we create a next-generation platform for our partners and operators.
- In strategic terms, Travelport has made the right decision to shift our focus to APAC, and our next step in growth will involve consolidating our position in the constantly growing APAC market. Travelport recently secured an excellent position in the Indian market and is also starting to increase our market share in Indonesia.
- Travelport will provide APAC customers with truly global concepts and services. Many agency and airline representatives attending the conference plan to make greater use of mobile technologies to bring them together with new channels and customers, and even to expand into other countries. The APAC region is a diverse, multi-channel, multi-lateral market that has created new opportunities for Travelport. Travelport will use our API to build next-generation distribution platforms, bring together and integrate highly relevant products, help agencies in APAC to continually increase efficiency by means of automation. This will facilitate our seamless geographical expansion, help us address more challenging and demanding customer experiences, and further spread the collaboration-based perspective inherent in globalization.
- Travelport has a number of platform advantages in Asia. The first is our vital core service GDS. The ongoing development and innovation in this large, complex service is already delivering new functionality that is focused on making content more important, and then providing faster, better service and higher-quality products based on these new functions. The company has achieved a high level of scalability by modernizing and streamlining the performance of every level of the system.
- Travelport ‘s large-scale, global progress will not cause us to lose focus, and we continue to concentrate on distribution and service processes, as well as focusing even more closely on the APAC market.
In reference to Skyscanner’s recent performance, Nick commented that the company has become “more flexible”, and “has continued to innovate with the help of the Trip.com Group”. He said: “In this era, if you don’t innovate, you’re dead.”
When the conversation turned to Thomas Cook’s recent demise, many travel agency representatives at the conference expressed concern that they could face a similar fate.
Nick believes that in the UK at least, it is not just travel agencies, but rather the retail sector, that is facing challenges. “The UK’s (offline) retailers are undergoing massive changes. This is happening to the extent that you can see smaller shops, such as shoe shops and food shops, starting to close in towns across the country. The main reason for this is real estate prices, which make the cost of owning or renting unbelievably high. Costs in the UK labour market are also relatively high.”
“Traditional retailers are therefore struggling to turn a profit in the face of these challenges. On the other hand, online retail is sweeping the world, backed by technology, low prices and lower cost services,” Nick explained.
So how can traditional travel agencies survive in the future? Mark Meehan commented: “There are certainly plenty of opportunities for travel agencies to survive, on the basis of personalisation and high-quality services. However, under these new conditions, they find themselves confronted with travellers who are increasingly independent and don’t want to join traditional tour groups, and whose demand for packaged products and personalisation is nevertheless escalating. For example, customers need good information and service support to enjoy themselves in the local area.”
Chinese travellers of all age groups lead the world in terms of digital transformation
Ming Foong emphasized that the theme of the conference was “Experience Is Everything”. Of all the factors involved in experience, he believes that “choice” is one of the most critical, as it is not always better to have more information and more choices — relevance is more important. The background to all these is that demands for algorithms are increasingly exacting.
Turning to the subject of Travelport’s recently published Global Digital Traveller Research 2018 report, Ming took care to explain that Chinese travellers of all age groups lead the world in terms of digital transformation, and have full-cycle, multiple-touch-point, cross-generation characteristics. Whether you look at millennials or senior citizens, Chinese travellers of every age group are huge fans of digital tools and innovative technologies.
He believes that the report contains a number of interesting points:
- Chinese consumers have the world’s highest level of acceptance of new technology. The vast majority (84.2%) of Chinese respondents said they were inclined to use mobile devices to search for travel information, a figure that is 22.6% higher than the global average, and around 30% higher than in Japan and the US. In addition, 82% of Chinese travellers use mobile devices to buy travel products, compared to the global average of just 54.2%.
- More than half (62.2%) of Chinese travellers over 55 are happy to use smartphones.
- The Chinese travel industry not only faces fierce competition within the industry itself, but also must compete with other industries for customers’ time, money and attention. Key competitors include luxury goods, electronics and entertainment industries. This means that companies have an even more pressing need to boost their competitiveness and produce innovative ideas.
Ming concludes that the current state of play in the industry is very much one of “nothing ventured, nothing gained”— companies that are unable to truly understand the opportunities and challenges of the moment, or fail to rapidly increase investment in digital transformations and upgrades, will fall behind or even disappear.
As China’s economic development and spending power have increased, it is evident that the country’s travellers are increasingly demanding for travel experiences. The travel industry must move from the one-size-fits-all methodology to a more refined approach, optimise every touch point, and get to details right at every stage. Companies can appeal to Chinese travellers’ receptiveness to technology by enhancing their products and services in a technology focused manner that satisfies travellers’ demand for greater personalization.
About the author:
Joseph Wang joined TravelDaily China as Chief Commercial Officer in September 2014. Prior to that, he was Senior Director of Hotel Business Unit at Qunar.com from 2009, focusing on hotel direct sales.
He used to work for China Mobile 12580 as Director of Hotel Business, focusing on hotel supplier partnership management and customer service. From 1999 to 2007, Joseph worked at eLong.com in charge of hotel market management.