According to the Industrial Research Institute’s 2016 Global R&D Funding Forecast, Asia is the only region that continues to track growth in its R&D budget and will account close to 42 percent of the global research and development (R&D) budget.
With an estimation of close to 50 percent of global passenger traffic to be within the APAC region, or between APAC and the rest of the world by 2030, the region’s lead in travel consumption and services is a reason why Asia needs to lead the world in travel technology innovation. We talked to Hervé Couturier, Executive Vice President of Research & Development, Amadeus IT Group to find out more.
CIO Asia: How has the travel industry evolved over the years?
Couturier: Over the years, technology and the increasing reliance on the Internet have contributed to the evolution of the travel industry. Today travellers expect instantaneous updates along their journey, from flight delays to trip ideas, as well as safety or earthquake warnings.
Travellers also prefer technologies that provide convenience, and expect them to be able to manage multiple aspects of their travel from their smart devices. The dominance of social media has also encouraged the desire to be treated as individuals, highlighting the importance for travel companies to focus on personalising recommendations and recognising preferences.
More importantly, travellers can now be identified by their purchasing behaviours and motivations as opposed to age, gender or cabin class. Based on Amadeus’ Future Traveller Tribes 2020 report, we have identified six Traveller Tribes that will shape global travel in 2030: Simplicity Searchers; Reward Hunters; Social Capital Seekers; Cultural Purists; Ethical Travellers; and Obligation Meeters. To satisfy these different travellers, the travel industry will need to focus on better catering to their values, behaviours and needs — from a simplicity searcher who values ease above everything to an ethical traveller who will allow their conscience to be their guide when organising and undertaking their travel.
How have these changes influenced R&D and innovation for travel technologies?
In addition to the changes in the travel industry, we’re also seeing the rise of big data, cloud technology, open APIs, an increased focus on security, demands for higher availability and increased mobility — all of these have an impact on R&D and innovation. The fast moving nature of the industry and increasing sophistication of travellers indicate the need to adopt a leaner, faster and more agile approach in the development of solutions. In order to address this, Amadeus approaches innovation from an Open Source perspective.
An Open Source environment empowers developers with the opportunity to work in a more collaborative and innovative manner. It functions like a huge ecosystem of innovators to share knowledge with each other, create new resources and opportunities to benefit from.
For the travel industry, time and flexibility are also two important elements when it comes to innovation and R&D. Open Source supports enhanced time-to-market for new solutions. It allows travel technology companies like Amadeus to better allocate resources and make changes to specific code that directly suit our customers’ needs. It also provides technology companies with the flexibility to build exactly as they want or need, by customising code to their exact requirements, giving them much greater flexibility. Innovation is also safer as the model allows for “peer-to-peer review” of codes, ensuring that the code is secure before putting it to market.
Why is Asia the only region that continues to see influx of R&D investments?
Aside from the U.S., Asia Pacific continues to see an influx of R&D investments. Asia Pacific as a whole is an exciting hotspot for investment and innovation. This is driven by APAC’s continued growth as the leading powerhouse across economy, growth and technology. From having one of the highest mobile adoptions globally, to being the region with the highest potential in terms of spending power, companies are keen to invest in R&D in APAC to be closer to where the action is. They benefit by having a better perspective of their opportunities and challenges here, which allows them to innovate and create solutions that are aligned to local needs.
At the same time, the nature of R&D in the region has also changed. While APAC’s R&D investments in the past were seen as a way to cut costs, investments are now pouring in largely because R&D centres have moved up the value chain of businesses, according to the Economist Intelligence Unit.
Amadeus is committed to R&D globally – having invested 16.6 percent of our total revenue since 2004 and employing more than 5,000 people in R&D across 23 centres worldwide, including Sydney and Bangalore. By having R&D centres in Asia Pacific it allows us to be closer to our customers and stay on the pulse of new trends and needs.
As travel companies face increasing pressure to innovate in an increasingly competitive landscape, how do they stand out and do better?
Travellers today are more distinctive, connected, and well-informed. As travellers’ expectations and behaviours change with the times, the travel industry also needs to adapt to industry trends and respond to them faster.
Travel companies will need to go beyond being simply an intermediary and gain a deep knowledge of emotional drivers to become trusted experts. To differentiate from competitors, they also need to find the right blend of technology and personal, consultative selling to build enduring relationships with travellers. More than ever, it’s about taking a traveller-centric approach, which means personalisation and instantaneity. Their ability to link their product, merchandising, marketing and digital strategies to a behavioural understanding of travellers will be a key differentiator. Travel players that are able to appreciate the behavioural motivations of travellers and effectively merchandise against those motivations, at each discreet stage of the traveller journey, will be in a much stronger position.
How is Asia poised to lead the next era of travel technology innovation?
We are seeing a couple of factors that contribute to APAC leading the next era of travel technology innovation. Firstly, APAC is now the new centre of travel. Apart from its established reputation as a popular destination, it is fast becoming a leading source of outbound travel with the largest outbound markets in 2020 being China, followed by South Korea and Japan, according to Mastercard’s ‘The Future of Outbound Travel in Asia Pacific 2014’ report. We are also seeing increasingly sophisticated Asian travellers.
From a spending power perspective, the millennials in this region account for 35 percent of the total travel expenditure in the region, spending some US$280 billion a year on international travel. Imagine the potential as this is even before they have reached the peak of their earning years.
Secondly, APAC is also leading from a technology standpoint. eMarketer predicts that by 2019, at least 75 percent of mobile subscribers in 13 of 15 APAC markets will own a smartphone. This is significant as it indicates that travellers are more connected than before.
APAC is already the top destination for corporate R&D spend, accounting for 35 percent of total in-region R&D last year, including both domestic and imported R&D. This places the region ahead of North America and Europe, according to Strategy&PwC. APAC’s readiness to adopt new technologies also makes it an ideal testbed for innovation and R&D. Companies will invest in travel technology innovation here to be closer to the action and where the appetite lies too.
How do you see technology changing the landscape in the next five years?
We are in a frenzied era of disruptive innovation. Disruption has very quickly become the norm, with gadgets, apps and innovations seeming to appear overnight, immediately becoming something we cannot live without.
In the next five years, technology will continue to empower travellers with a more comprehensive and in-depth view of travel and the choices available. They will continue to have bigger voices and influence, as well as better access to content and recommendations through mobile technologies and social media.
Traveller needs are at the centre of everything we do but technology will play the complementary role to support travellers’ search for greater insights, advice and guidance in their travel choices.
As the travel industry continues its journey to becoming a truly traveller-experience driven sector, data and travel intelligence will continue to be the game changer. Big Data can unlock the opportunity to truly understand the traveller and make travel more personal, decrease travel stress throughout the travel cycle and improve operational effectiveness for the travel provider.
How is Amadeus helping to foster innovation in travel technologies specifically Asia?
When it comes to innovation, we take on several approaches. We are a huge believer in R&D. As mentioned earlier, we have not only invested 16.6 percent of our total revenue in R&D since 2004, but we also have a strong presence here in APAC with R&D centres in Sydney and Bangalore.
Our culture of innovation also sees us ‘doing things differently’ beyond our commitment in R&D. To be truly innovative, it’s about collaborating with our customers and partners. We take a partnership approach in working with our customers in APAC, investing in understanding their business, their customers, and their operating landscape. When it comes to travel technology here in Asia, we create solutions in collaboration with them that are customised to their needs. This approach has helped us reach our leading position with airlines and travel agents in the region.
For example, Amadeus’ partnership with Perth Airport saw a complete renewal of check-in system technology at the airport with the implementation of Amadeus Airport Common Use Service (ACUS), a cloud-based technology benefitting the airport as well as airlines and travellers.
Another example is our work with Qantas and our Travel Intelligence Solution, Amadeus Schedule Recovery, which minimises disruptions to operations caused by external events such as bad weather or air traffic control congestion. Amadeus Schedule Recovery serves as a recommendation engine, using data analytics to help quickly and efficiently identify the most critical issues, and act upon them.
Other key recent projects in Asia include the Korean Air and TOPAS cutover to the Amadeus system, allowing the airlines to provide travel partners and customers better booking experience, and the implementation of Amadeus’ digital design services to create a modern, responsive portal for Cathay Pacific.