With more than four decades of experience under his belt, Norm Rose, former President of Travel Tech Consulting, shares his firsthand knowledge of how the arrival of the internet, the use of the first online booking tools, mobile, blockchain and more, have altered – and will continue to alter – the global travel industry.
The Two Sides of the Travel Industry
When it comes to travel, it is the consumer-grade side of things that most people think about – the travel app or interface travelers use. The other side of travel, and where technology needs to be the most disruptive, is the underlying infrastructure – that which the consumer never sees. Even so, both sides are important to all travel verticals, from airlines to hoteliers to distribution platforms and tour operators to corporate travel and government.
Striking a Balance Between Tech Evangelist and Tech Skeptic
With any emerging technology comes hype, whether that be outside or inside the travel industry. The problem with emerging technologies inside the travel industry is lag. Most of the time it is only after general tech has already researched different items that they then come to travel. This gap can be bridged by being both an evangelist for new technology as well as a skeptic. The objective is to determine what is really going to have an impact and what will not.
Take for example a common buzzword from 2018: personalization. We heard from start-ups and we heard from larger companies that everything must be personalized. The reality is, if you are a leisure traveler you are probably traveling only one or two times a year. And the individual persona within leisure travel changes. One trip could be for a family vacation and the second trip could be a weekend get-away with a spouse. Such infrequency makes personalization challenging. Personalization for the business traveler is more logical, but there are still many different business personas.
Overhype is commonplace in technology with AI, blockchain, VR, AR, and voice being other examples of the traditional Gartner drop off and technology adoption curve which eventually dips into the “trough of disillusionment,” where hype shifts to the idea that nothing is going to happen. But each of these technologies does have their own profile and each has the potential to change the very infrastructure of travel.
How the Internet Impacted the Travel Industry
Thus far, the biggest technological leap in travel has been the internet. Why? Because it has given the consumer direct access. Prior to the internet, if you wanted to talk to an airline you needed to pick up the phone and dial. Today, you are free to go to a .com site or an OTA site and interact in a self-service model. (This, however, could be disputed. The question being posed is, have we simply made some other entity by turning the leisure traveler, the business traveler, or the assistant to the business travel into travel agents? By pushing out self-service are we now taking time away from other things? It’s complex!)
Over time, OTAs have become more like travel agencies with support staff and progressive travel agencies have become more online oriented. But even with the adoption of the internet, 50% of travel is still booked by traditional travel agents. And much of the interaction between agent and traveler is still in a traditional format via telephone, email, and PDF exchanges. Such examples of perceived complacency have earned online travel agencies the title of “legacy companies.”
How the Lack of Data and Lack of Integration Impact the Speed of Adoption in Travel
As of 2018 we were just entering the digitization of travel, with players simply doing what they had previously done manually but now with computers. Another example of how travel was (and arguably still is in 2023) in the early phase of digitization is how GDS (Global Distribution System) platforms still power most of it. The way we shop is still dictated by how the API that was programmed against the GDS allows one to get commands. We are still restricted by the underlying technologies that have yet to change much.
But with consumers shopping via Amazon and streaming movies into their homes via Netflix, don’t they expect more than simply booking a trip? This answer is “yes,” but it all comes down to data. The amount of data that Amazon has access to with purchase after purchase, or that Netflix has access to with stream after stream, significantly outweighs the data available on the leisure traveler. Lack of data combined with the lack of integration makes obtaining the netscape experience in travel challenging.
While slow, the digitization of travel is happening. The big three GDSs have moved off mainframe computers that had operating systems that went back to the sixties and the New Distribution Capability (NDC), the XML standard promoted by IATA (Internation Air Transport Association), is replacing the even more archaic EDIFACT (Electronic Data Interchange for Administration, Commerce and Transport) standard.
Mobile Devices as the Next Agent of Change in Travel
Currently the biggest change agent in travel is mobile. People depend on their mobile devices very strongly when they travel – to shop, to acquire and to understand information, and so much more. The mobile problem is a ten-plus year-old problem for the travel industry and mobile must be viewed as a platform and not as a touchpoint. Mobile is at the center of everything which means that the traveler is at the center of everything – which is different than it used to be.
Airlines and Other Thought Leaders in the Travel Industry
When asked about yield management, Alfred Kahn, the father of deregulation and member of the Carter Administration, jokingly said, “from the airline perspective, yield management is you yield to my management.”
Per Rose, this joke “sums up how the travel industry has worked for decades. The airlines drive a lot of thought leadership. Airlines drive a lot of the means-to-the-end. You can’t have a tours-as-an-activity sector if you don’t have an airline sector. […] The type of hotels that accommodate air travel passengers wouldn’t exist without the air travel. So [airlines] really tend to be the innovators.”
With the rise of the internet also came the rise of the three largest Online Travel Companies: Expedia, Priceline (now Booking), and Ctrip. As with most industries, consolidation occurs with the “big guys” buying up the “small guys” which means the acquisitions of multiple secondary companies and metasearch companies. Whether such moves yield innovation is yet to be seen.
Technology’s Impact on Revenue Loss Prevention
Unlike other industries, there is no inventory in travel. What wasn’t sold today is not there to sell tomorrow. Channel Management Software is a tool used to prevent such revenue loss by dictating how much inventory goes to different sources. Analytics associated with the software can also determine where sales are coming from to further strategize.
Emerging technologies will go beyond CMS, of course. Everything from Natural Language Processing to Machine Learning to Deep Learning is being put into place behind the scenes, mainly to increase accuracy in ad targeting, quotes, and more.
And in addition to the XML standard, the NDC is also trying to allow airlines to become like retailers. Ultimately, airlines could get a request and provide a quote that contains unique ancillaries and prices for customers, making one-on-one marketing more feasible. More than likely, this one-on-one marketing will look more like segmented audiences or micro segments. Rose says, “A lot of the merchant technologies are here and are changing. The next big thing is not going to come with a bang, it’s going to be a slow crawl.”
The Rise of Blockchain Technology in the Travel Industry
One such slow crawl will be the use of blockchain. Rose’s prediction is that there will be a distributed layer, not necessarily is distributed ledger. But transactions will be happening on top and then be recorded on the blockchain. The value of doing so is the creation of a single source of truth around the record. This will open up the opportunity to reduce costs through faster and lower settlement costs, emission tracking, and a whole bunch of other things that can be done with blockchain once it is in place. Ross estimates it will take two or three years to see the evidence and five to ten years to see full-blown change and revolution.
When it comes to blockchain and travel, Rose feels there is a lot of skepticism, “The best way to state it is that if the pitch around blockchain is eliminating the middleman so that you no longer have the cost associated with that middleman (which is not easily done, it is a nice pitch talked about and an ultimate goal) – but peeling away certain middlemen that don’t add value where a blockchain of flotation would be faster, is great. If it’s a private blockchain […] it’s not really eliminating the middleman, it’s just putting the middleman on a different platform and they still control who gets invited to participate in the blockchain how different records get authenticated, and so forth.”
In an industry that tends to be slow in embracing change, lag leads some travel companies to miss the boat. (Rose postulates the American Express could have been Expedia if they had seen the opportunity.) On the flip side, such lag also leads to the emergence of new companies who drive change.
In a time when the future favors the bold, Rose recommends experimenting with emerging technologies like blockchain and AI and assessing their practical business benefits – benefits that go beyond the buzz. Companies need to escape the hype cycle and investigate. A good question to ask is, “What can this technology do now?” For example, a chatbot isn’t going to be useful to make an entire reservation (yet!), but it can ward off some calls to the call center by answering simple questions.
After all, the traveler is ahead of the game with powerful computers in their pockets. Taking a pragmatic approach to incorporating technologies like AI and blockchain to enhance customer experiences and streamline operations is a good thing.
The Evolution of Travel Tech at a Glance
- The problem with emerging technologies inside the travel industry is lag. This gap can be bridged by being both an evangelist for new technology as well as a skeptic. The objective is to determine what is really going to have an impact and what will not.
- Thus far, the biggest technological leap in travel has been the internet because it has given the consumer direct access. Currently the biggest change agent in travel is mobile.
- Lack of data combined with the lack of integration makes obtaining the netscape experience in travel challenging. But while slow, the digitization of travel is happening.
- Airlines and Online Travel Companies are the current thought leaders in the travel industry with the New Distribution Capability (NDC), Channel Management Software (CMS), Artificial Intelligence (AI), and blockchain advances.
- Travel companies need to experiment with emerging technologies, take a pragmatic approach, and assess the practical business benefits. You can escape the hype cycle by asking, “What can this technology do now?”