NB: This is a guest article by Mark Bradbury, joint-CEO at RWA.
The prophets of doom have spoken: “Dozens of travel firms on the brink of collapse.”
Such predictions paint a stark contrast between travel firms who are seeing sales dramatically decline and those who are seeing significant sales increases.
The proposition is that the former have “outdated business models” and have failed to adapt to “the way we use technology, delivery methods and trading hours”, whilst the latter are adapting and show “increased profitability and sales”.
Here in the UK, travel firms are reporting a strong start to 2013, so how can tour operators (the market to which provide technology, for example) ensure they are in good, rather bad shape?
During a conversation at the Travel Technology Europe event this week, I was reminded of a message I have been giving regularly for many years, it’s just all that appears to have changed recently is the impact and swiftness with which getting this wrong takes effect!
So, here are my three key points:
1. It’s about your value-add, not the technology
You might be surprised that the CEO of a travel technology company is saying this, but it is a fact. There is a saying about putting lipstick on a pig and I would suggest that acquiring the best technology money can buy will not help you if the fundamentals of your business are wrong.
You need to regularly ask yourself: “Why should people buy holidays from us?” If your answer is simply “because we are the cheapest”, then I would be concerned.
Furthermore:
- Can you continue to compete on price alone?
- What prevents the likes of Expedia or other online travel agencies offering what you are offering at the same or a cheaper price?
- What is your differentiated “value add”?
This can take many forms. It may be the products you sell (which cannot easily be sourced), the expertise you have in the destinations or product types (that can’t be easily replicated), a highly respected brand developed over many years, or indeed the ability to sell to a membership group that others cannot easily reach.
You need to be clear on what differentiates you and where you add value and then that needs to be clearly communicated to your customers.
2. Have the right business processes tailored to your specific business needs
If your business is selling lots of lower margin holidays, then you need to ensure that your costs for selling each one are as low as you can get them.
You cannot afford to have expensive human beings having to “touch” each booking in order to take it, manage it and fulfil it.
You need to be able to take bookings online and confirm these with NO human intervention and to automate as much of your supplier reporting and customer fulfilment as possible.
However, if you are offering higher value (and margin) products where part of your value add is your product expertise and client advice, then you will want to have business processes that maximise your staff’s ability to deliver these (at the appropriate point in the sales cycle) to your potential customer.
Full end-to-end automation is not only less critical but also possibly detrimental!
Don’t fall into the trap of simply continuing to do things the way you have always done them though! As the article says, you need to be ready to adapt as the world around us (consumer habits, technology etc.) rapidly changes.
One of the wins in replacing a legacy system with any new system comes from the opportunity that the project provides to examine existing business processes and look how they need to be performed in the future.
The worst thing you can do is simply look to model your existing business in a new system!
3. NOW choose the right technology
Ok, here’s the technology point. Once you are clear on your value add and differentiation and have an understanding of how you need to work operationally, you then need to find the right technology to SUPPORT this.
Technology is rarely the driver here – unless you are a major OTA! It is an enabler.
Get it wrong and it will hinder, or even worse. Get it right and it will support your business model, help you to leverage your ‘value adds’ and help provide a vehicle for sustained business growth.
Having a clear understanding of your real requirements will significantly help you in the tricky process of selecting the right technology and technology partner. If you have a clear focus on WHAT you need and WHY you need it that helps you make trade-offs about things that are necessary vs nice to have.
And, speaking as a technology supplier, discussions with travel companies that know what they want and why and have clarity on this are much better than discussions over vague system requirements.
We have many years of experience working with tour operators and travel wholesalers around the world, but our job isn’t to tell you how to run your business – it is to enable you to do it.
So, there you have it – simples (as a furry animal would say).
But as the evidence shows from the large number of companies who are struggling, it is easier to say than to do – or perhaps it is that inherent human instinct to always keep on doing what we have always done in the hope that things will get better!
In closing I am reminded of the saying: “There are four kinds of people.”
- THOSE WHO MAKE THINGS HAPPEN
- THOSE WHO WATCH THINGS HAPPEN
- THOSE TO WHOM THINGS HAPPEN
- THOSE WHO DON’T EVEN KNOW THINGS ARE HAPPENING
Which kind are you?
NB: This is a guest article by Mark Bradbury, joint-CEO at RWA. Follow him on Twitter.
NB2: Sunset laptop image via Shutterstock.
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Hi Mark
I was making the same point in my presentation at Travel Tech Europe show
I summed it up (for product owners) as “the right technology can’t give you a competitive advantage against your best competitors, but the wrong technology will give you a competitive disadvantage”
This came within the context of a discussion of “build a reservation system vs buy a reservation system”. My other advice was that a product owning company – having decided to save money on buying a res system (rather than building) should then spend some of that money saved on someone (human) on their team to look at data insights and trends. Data IS their own. Data IS where they can deliver competitive advantage, if they understand their data, that is – and take better commercial decisions as a result of understanding their own business better.
Alex
[Please note my caveat - "for product owners" - this is like Mark's caveat of "Technology is rarely the driver here – unless you are a major OTA". This article would have quite different advice for for OTAs, aggregators, curators and distributors]
Completely agree – and with Alex as well.
One caveat, however. I start with point 0. – The organization’s Business Objectives. When I work with travel businesses starting up, launching new products or repositioning old ones, it has to start with the core business objectives which should apply to both a) external customer value proposition and b) internal financial objectives.
From the external/customer perspective, it’s not good enough just being different or adding value – there must be sufficient differentiation and value creation to support someone providing an adequate form of monetizable compensation to the organization (in terms of traffic and/or conversion to generate adequate traffic, revenues and/or margins.
That’s when part b) come in. Plenty of disruptive/differentiated travel products have launched, only to be sunset when those pesky revenues, margins, profits or patience have not been sufficient to cover shortfalls in operating expense or investor ROI performance.
Truly innovative companies may be first to pioneer a market sector, be sufficiently differentiated, and create value. However, if travelers and/or travel suppliers are slow to adopt, even though they may support/embrace the product concept, the firm may encounter financial realities that hinder its ability to survive.
In many cases, travel companies encounter the classic strategic chicken-egg dilemma. They need traffic to attract suppliers, while they need suppliers to attract traffic. It can be a precarious balancing act where the two sides do not grow at parallel rates
This creates a fifth group of people, THOSE WHO WHO DO EVERYTHING RIGHT, BUT LACK THE RESOURCES OR INVESTOR PATIENCE TO GAIN CRITICAL MASS OR STABILIZE CASH FLOW.
AS a result, I wind up working with clients to ensure their performance metrics all tie back and support the corporate objectives. The days of relying on vision or trust to patiently wait for a product to penetrate a market have largely been replaced by the ability to measure tangible progress toward business objectives on both a macro and micro scale.
If the business can not establish a track record of making progress toward corporate objectives, it may not ever get to the point where it can demonstrate its differentiation, value-add or get an opportunity to choose the right technology.
Thanks for your comments Alex and Robert. I would actually sum it up Alex as the right technology can help you LEVERAGE your value add and differentiation. In general, it won’t create it for you,but it will certainly help you make the most of it (or get it wrong and it will minimise it!)
Robert, of course you are absolutely right that technology has to support the business objectives – one of which for most businesses should be to keep making a profit! This re-emphasises my point that if the business fundamentals are not right, the best technology in the world will not solve the problem. But, as you say, knowing your business objectives and the fundamentals of the business will go a long way to helping you make an informed decision on what is the right technology for your business.
Very good article as all too often the “me too” attitude is taken towards technology solutions that if it worked for someone else and helped them it must help me as well. It might but then again might not.
If a company does not understand its value propositions introducing new technology can often muck things up and spiral deeper and deeper into confusion about what is the right thing to do for them and their customers.
A while back I was on a 30 ft motor cruiser going to the Ilse of Wight with an ex-captain of a P&O ferry Dover to Calais, he was the captain type, ropes had to be laid down properly and very strict about how to run things. On the trip he said this as I was steering. “If you don’t know where you are, stop, work out where you have come from , where you are and then where you need to go.”
If was true for that trip and so true for many things in business, you need to know where you are now before you go on to the next stop, some might call it common sense.
Great comment Kevin. As a keen yacht/sail boat owner and skipper I love the boat analogy. So true on the water, in business and in life!
I am pleased at the information given by each of you, because it is valid that decisions that come with operating a travel business need value add. It’s not always about being the cheapest.
My host agency is great and have developed the backend of the business for its hosted agents which make it easier to stay in the market of generating leads whether the lead is exclusive or not.
It is important to follow through with service which some agencies lack and hours of availability.
Even though a client can book with their agency 24/7 via internet, fulfilling the clients request asap is key.
Agencies lose clients when the client feel inadequate response.