Innovation is restructuring the travel industry, and new solutions that solve today’s customer pain points will be developed by companies that collect data, manage it effectively, and break down data silos to develop the most comprehensive — and personalized — picture possible of the travel customer. As matters stand today, these innovations are far more likely to be driven by tech companies and venture-backed start-ups than by travel providers. These are just some of the key findings of a new report by The Boston Consulting Group (BCG) in collaboration with BCG Digital Ventures and B Capital Group. The report, titled Travel Innovated: Who Will Own the Customer?, is being released today.
According to Travel Innovated, three areas are ripe for innovation and disruption over the next several years: travel inspiration (the first vital phase of the travel journey), booking transparency, and unmanaged business travel. The speed and extent of change in each area will be determined in part by how and how much traditional travel companies, technology companies, and start-ups interact in areas such as sharing data and co-investing in shared infrastructure.
BCG bases its conclusions on an analysis of venture-capital investment trends in the industry, interviews with more than 30 visionary thinkers (including travel company CEOs and CIOs, start-up CEOs, and others) in North America, Europe, and Asia, and the firm’s own experience with a wide range of global airlines, hotel companies, and other travel suppliers.
“The key question for travel companies is, how can they leverage their strengths to take part in this innovation so they can maintain and strengthen their position in the consumer’s travel experience?” said Raj Ganguly, a partner of B Capital Group and a coauthor of the report. “Will they be active in creating the exchange platforms that will be necessary to facilitate trading and sharing of consumer and operational data in a controlled environment? Or will they let big technology companies and start-ups fulfill that function? Unless travel suppliers are developing the solutions themselves, or partnering with others that are doing so, they risk losing their place in the value chain.”
Two-thirds of the experts BCG interviewed think that within ten years, consumers will be able to source their travel inspiration using tools that provide far more integrated and personalized experiences. Some experts expect that the new tools will be developed by start-ups, but these companies need to capture a significant share of travel search and booking in order to make money, and this model has yet to be proven. The strong advantages of the big tech companies give them a big edge in this area.
More than half of the experts believe that other new tools will be in place in the next ten years, giving consumers far more transparency in the booking process with respect to both price and nonprice attributes. Some predict that venture capital-backed start-ups will lead this innovation, while others think that technology companies will leverage their strengths to lead in the development of new tools. The ultimate goal in that case is to be able to perform some functions of a travel agent and use predictive analytics to optimize the timing of bookings and offer greater flexibility to change or cancel tickets sold as nonrefundable.
Start-ups, which do not have legacy businesses or platforms to protect, are more likely to seek inventive ways to break down and combine data silos. That said, once they mature, start-ups are likely to be acquired by larger technology companies. This represents a significant potential threat to traditional travel suppliers — unless travel companies decide that they, too, want to play in this game and then back that decision with serious financial investment.
“Despite the investment attention that the travel sector attracts — and the number of start-ups it spawns — there is still plenty of opportunity for innovation,” said Sean Collins, a partner of BCG Digital Ventures and a coauthor of the report. “One is the personalization of travel — providing the ability for customers to customize travel itineraries more easily. We expect that new inspiration and booking sites will marry data with predictive analytics to tailor recommendations and provide concierge-style packages. Another area is better integration across the travel journey. Back-end technology tools will improve integration across modes and providers, creating a more integrated experience for the consumer along every step of the travel journey.”
One-third of the experts interviewed felt that new tools will reshape business travel just as profoundly as they will leisure travel in the next ten years. While start-ups are developing new tools that enable business travelers to tailor their travel experiences within price limitations, the advantage generated for established technology companies by being deeply embedded with enterprises and business travelers today will be hard for others to overcome.
“The key for travel companies is to make sure that they are integral parts of the industry’s evolution in these areas, however it plays out,” said Nicolas Boutin, a BCG partner and report coauthor. “This almost certainly means changing the way they look at the marketplace and approach the consumer. It will require playing offense as well as defense, developing new capabilities, and learning to leverage their strengths to innovate or to work with others. Most of all, it means putting consumers first.”
A copy of the report can be downloaded at www.bcgperspectives.com.
See original article at https://uk.finance.yahoo.com/news/data-based-innovation-disrupt-restructure-050100205.html