NB: This is a viewpoint from Andrew Ryan, co-founder of 3BaysOver.
I have a confession to make. I used to be a Wall Street banker. Fortunately, I saw the light before it was too late, and I let it guide me to the world of travel. However, I did learn a few things before I made the leap.
Bankers have certainly not enjoyed a stellar reputation of late, with much of the criticism fully deserved, but certain elements of that industry can serve as an important lesson to us in travel.
In particular, my time in finance showed me first-hand how a whole industry can truly benefit when it embraces technology and innovation. This is of particular relevance to travel today, where the new and the innovative is all-too-often resisted and feared. Such resistance is not only futile, but enormously detrimental both to those who work in travel, and to the customers or partners they serve.
A distant past… which travel is still living in today
30 years ago, technology played only a very small part in the lives of finance professionals. Its most prominent role was to progressively convert exchanges from physical trading floors to online marketplaces. The day-to-day life of the typical banker or trader was all about faxes, telephone calls and paper printouts of bond and equity prices. Travel as an industry wasn’t much different, with the airlines and some agencies connected to an emerging online marketplace via the GDS’s, but otherwise life for its members was very much an offline affair.
What’s notable in finance is that since then, technology has been viewed not as a challenge but as an opportunity: if it can make pricing more transparent, save people money, reduce the time it takes to trade, help industry members to connect more easily and make information more accurate and more accessible for everyone, then why not embrace it with open arms? And that’s exactly what finance did.
To be sure, it hasn’t been a painless process: some jobs have been lost along the way, companies that couldn’t adapt or whose business models became redundant disappeared, and nowadays everyone and their cousin can claim to be a trader. But the ratio of output to input (ie. the efficiency) of any process in finance is almost infinitely greater today than it was 20-30 years ago.
Travel, by and large, has always viewed technology as an evil imperial power, set on conquering hitherto virgin markets and plundering their resources to enrich only itself. Few are those in travel who see technology as the unifying and empowering tool it really is – much more liberator, than conquistador.
Yet the truth is, and despite the common refrain, to date technology has barely impacted travel, let alone disrupted the whole industry. It has made small parts of it a little more efficient – mainly searching for and booking flights and hotel rooms, which are the easiest parts to commoditize and hence to be purchased online by the consumer – but as anyone within travel knows well, airlines and hotels are just the tip of a huge and very complex iceberg.
2 further differentiators
1) In finance, most of the innovation has focused on the back-end, ie. making the processes within the industry faster, cheaper, better. The conventional wisdom is that a more efficient industry will always benefit the consumer with better products at lower prices. You won’t find many social networks dedicated to letting bank customers post pictures of their favourite branch or share updates about their interest rate.
In travel, it’s generally been the opposite: investor funds and entrepreneurial energy have focused mainly on the traveler and creating funky tools for her, while those who dedicate their lives – not just their holidays – to travel, struggle to remain relevant with their outdated systems in their disconnected markets.
2) Unlike finance, the travel industry is not so much one industry as multiple interconnected ones. Few if any of these have centralized and truly effective trade representation or regulatory groups, and where these do exist they are often strongly incentivized to maintain the status quo.
This means that meaningful change will almost certainly not come from the top down, in contrast to finance where powerful regulatory agencies have been the ones pushing for continuous innovation.
In travel, innovation will likely come through grassroots experimentation and entrepreneurial innovation, which will see the early adopters thrive before the masses have no choice but to follow. This means that any and all of us can start to contribute today to shaping a technology-loving travel future.
Where is all this going?
Perhaps the most significant question to ask today, at least in terms of the age-old value chain that anchors much of the industry, is this: in a world of hyper-connectivity and consumer impatience, does the traditional “supplier-DMC-tour operator-retail agent-customer” chain still make most sense most of the time? Of course it doesn’t.
Is that a bad thing?
It’s maybe a little sad, the same way it was when the jet airplane condemned elegant transatlantic liners to a future of sunny island-hopping. But on balance, such evolution invariably favours a greater number of people.
At the end of the day, we should remember that as travel professionals, we are here – directly or indirectly – for one reason only: to serve the traveler. Not to defend our job title, not to promote our own agenda, and not to waste valuable time and energy on defensive strategies that could otherwise be invested in creativity, productivity and profitability.
2 quick points to keep in mind:
1) Innovation does not mean replacing humans with computers. Far more often than not, it means using technology to help humans do their jobs better. And this is where travel professionals can really benefit today.
2) Innovation will likely lead to the creation of completely new jobs in travel. In 2010, Mary Schapiro, then chairwoman of the US Securities and Exchange Commission (the US financial markets regulator), said that “advances in technology have opened the door for entirely new types of market professionals”. Who knows what new types of jobs might emerge in travel?
The future of travel: My predictionsÂ
To put my money where my mouth is, here are my Top 5 Predictions for trends facilitated by technology and innovation that we’ll be seeing in travel over the next decade or so:
1) New roles created: The biggest new role we’ll see created will be the ‘client-facing DMC’ (let’s call them Destination Travel Consultants). This change will reflect a progressive blurring of the lines between agents, tour operators and DMCs, which to some extent has started with the first two, but has yet to really impact on the inbound side.
While it’s clear there will always be a demand for experienced travel advisors on both the outbound and inbound sides, it’s also clear that agents/operators with expert knowledge and a local presence will have an edge in the future.
2) Consolidation: The above trend will be facilitated by significant consolidation in the market, across geographies and sectors, which will see vetted and accredited professionals joining forces (sometimes under the same brand, sometimes as integrated networks of independent brands) to benefit from economies of scale, to allow customers to return to the same group of professionals for each trip (if not to the exact same professional), and to mitigate some of the risks (eg. legal and logistical) of going ‘too local’.
3) A centralized global B2B marketplace will emerge. This will likely be the biggest change in the industry in the next decade. Similar to a stock exchange in finance, this dynamic marketplace will allow for the highly efficient real-time pricing and trading of all travel products, not just flights and hotels.
Tourism boards – whose role will grow in importance in the coming years – will be critical in setting up and regulating this new marketplace. Maths PhDs and computer scientists currently making big bucks on Wall Street will hop over to travel to help design and build it. Consumer-facing sites will also plug into this marketplace, but it will primarily be for the trade.
4) Evolution of user reviews: Qualitative user reviews (a la TripAdvisor today) will be completely outdated within 2-3 years. Consumer reviews will soon happen almost exclusively via ultra-smart mobile apps that a) verify that a consumer is legitimate, b) collect and interpret real-time feedback about an experience or service, c) translate that into an accurate score weighted for specific user characteristics, d) feed that into a centralized global rating system of all products and service providers. This ranking and rating system will be an integral element of the new marketplace.
5) In-person events: Smaller and more focused trade events will grow in popularity, while the big yearly trade events will see business decline further. The current trade show model (rent a booth, sit there, wait) will be progressively replaced by a more interactive and engaging experience, facilitating the actual doing of deals rather than catching up over a cocktail. At the same time, printed brochures will all but disappear within 5 years.
Like most of you no doubt, I’m proud to work in travel. I admire the fact that unlike bankers, my peers in travel are driven more by passion than profit. However, this has perhaps blinded us to the fact that an industry that wants to stay healthy must continuously improve and innovate. Finance has always done that well, and it may serve us to take just that page out of the banker’s playbook.
NB: This is a viewpoint from Andrew Ryan, co-founder of 3BaysOver.
NB2: Wall St Image courtesy Shutterstock.
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Very insightful and enjoyable opinion piece, thank you. I would invite you to write another which goes into more detail on point 3 above, about the B2B marketplace. It sounds to me like this could well be big part of the future of travel. Ill be watching the evolution of the roles closely. I also think the DMC role will change quite a bit, but not sure if it will be “the” key point in the chain.
Thanks Leo. I’d be happy to write a follow-up one on the B2B marketplace idea some time
. If I do, please feel free to share any ideas you might have about it and which I’d be happy to include, as for now it’s all rather speculative!
Very insightful and love the future bit!!!
Thanks Andrew.
Thank you ram. I’d be really keen to hear other people’s predictions as well!
I read this article with great interest, thank you. Maybe we should, in fact, be more like bankers…
After quite a few years in the travel industry I agree with most of what you say, in particular the fact that new technology is becoming increasingly important. The many new opportunities help increase efficiency and save time in what are often very long and stressful working days. When I tell people I work in tourism the typical reaction is “lucky you, you get to travel loads and for free”. The sad truth is that the vast majority of my time is spent in front of a computer, and travels are mostly to participate in trade fairs, which usually leave no time for visiting the city hosting the event. Of course we also travel around to inspect what we sell every once in a while, and yes, luckily I do get to see some amazing places.
I am sure you are right that this industry will change significantly over the next few years (like most other industries as the matter of fact), I do, however, not agree with some of the terms in which you predict these changes. A client-facing-DMC? I never heard this definition before and would not put my money on the fact that it will be a big new role in the industry, for a number of reasons starting with a lack of guarantee (in both legal and quality terms) towards the final customer. We, as a specialized tour operator, often book some services for clients who decide to book the rest on their own (on the internet/via a DMC/directly with the hotels/on “low-cost-websites” etc.). Then, and this has happened twice in the last two weeks, we get calls from the other end of the world from clients who have problems with the services they booked on their own (or their retail agent did, thinking he was a TO). The division of roles may look a bit complicated and not very smooth, but in many ways they still make a lot of sense in my view.
I do agree with most of your other points, in particular the necessity of a more dynamic and innovative online market-place (B2B), a more controlled system of user reviews and smaller, more specialized in-person events (while these should not completely out-rule the huge shows as I believe they would serve a different purpose). The feeling of the people we work with will always be a huge factor when you chose who to trust your clients, and their holidays, with.
I will read, with much interest, more articles of this kind.
Great article. Up until 6 years ago I was working in the recruitment business. Even though that’s a pretty decentralized and inefficient industry I often tell my colleagues in travel that our ‘old’ tools in that business were more advanced and we felt more connected to other members back then than I do today in travel. They wholeheartedly agree but it’s funny because they don’t seem to see how it could change. I’ll share this article with them and perhaps they too will see the light!
Oh and regarding the predictions, I think they’re spot-on, though I also agree with Isabella that outbound and specialised tour operators will probably not be replaced by “client-facing DMC’s”. They are very different roles and I think you will always need a trusted professional in your own market to help you navigate the sometimes difficult waters of those destination markets. Who knows though, maybe in 10 years time you’ll be right Andrew.
Great article, thanks! I completely agree with it.
Just a little add-on: something the travel industry should do better than the finance industry is the client focus.
For too long, finance has worked on improving the backend process instead of improving the user experience. In travel, both will be equally important – the processes are too complicated and the user experience is still lacking, especially in the planning and booking phase.
An excellent point Manuel. I agree completely: it’s not an either/or in travel, it really needs to be both, especially now that travel can inspire itself in so many other markets which seem to be getting UX right (or ‘right-er’).
Planning and booking for the consumer is still generally very poor in travel (as some other Special Nodes articles have done a great job of exploring), and I believe this deserves serious innovation, investment and creativity in the years ahead.
Great article Andy! Interesting and easy to read. As you have worked in both industries, your point of view is really valuable. I hope people in the travel industry will stop fearing technology and mainly internet and start considering it as an ally. Keep us posted about new writings!
Thanks Lorena. I am hoping for the same as you! One day I think technology will be an ally. Today it’s maybe not quite the enemy it once was, but it’s still probably nothing more than an untrusted stranger…
Good Article, I would like to emphasize on point 1) and 3)
1) New roles created – We are seeing the growth of local specialist agents in our industry, by specialists I mean – the ability to get Extra special rates, more favorable terms, and offer clients a more individual service based on expectations.
3) A centralized global B2B marketplace – We are also seeing the rise of a B2B marketplace especially in the serviced apartment industry where client requirements need extra Human intervention. Our back office tools enable us to transact quicker however these tools cannot overcome Human intervention. Our affiliate program is especially popular with international travel agents who are booking clients into London for stays over 7 nights, we act as a specialist consolidator delivering fast turnarounds, better than best rates and a bespoke service.
Really like that specific example Gavin, thanks. It’s a sub-set of travel that’s growing rapidly and seeing a lot of attention, so perhaps that’s the kind of area where we’ll be seeing a disproportionate amount of innovation.
On both your points I see three especially relevant factors: speed, pricing and service. Throw in – as you do – ‘local’ and ‘specialist’ and I think you’ve got all the key elements of (a) what describes the best travel professionals, and (b) what a truly efficient marketplace can help improve.
@Isabella: many thanks for your detailed and thoughtful reaction.
@Karen: thanks for your and it looks like you second Isabella’s point about “client-facing DMCs” perhaps not becoming a ‘new’ protagonist in the industry.
Firstly, let me clarify that if they do really come into existence (they may well not!), I do not see them *replacing* outbound tour operators, but rather offering a complementary service – which technology can perhaps help ‘bundle together’ to the benefit of both parties . In today’s model, the TO ‘owns’ the relationship with the client/agent, and the DMC remains very much behind-the-scenes (and, paradoxically, always far from the traveller despite the traveller being physically right there whilst on their trip). That is a somewhat inefficient approach that I believe will evolve.
I expect the clients of yours, Isabella, who ended up with problems because they booked locally chose to book locally precisely because they were attracted by what they perceived as the local provider’s expert local knowledge and local presence (and – rightly or wrongly – probably by lower prices as well). Would it not benefit you if technology somehow allowed you to propose an ‘integrated’ service to travellers (and/or agents) which included both the peace-of-mind of working with a specialized tour operator and also the local presence and deep local network of a trusted local operator (DMC or similar)? That is where I see consolidation in certain markets (prediction 2) – either formally through companies merging or informally through strategic alliances – being something that will happen as the tools available to travel professionals improve.
Do you see that as a possible scenario?
Thanks for the insight Andrew. I agree with much of what you mentioned, however I feel in certain markets this is already happening. For example of the big four trade shows throughout the year, only one seems to have the resolve to grow with any real significance.
Niche markets are key to the future of travel, and with the normality of online bookings, expertise is earned and not simply a given anymore.
I also feel the development curve varies across markets. For example in Western Europe travellers are very savvy in booking online, however in other markets, the consumer is still reliant on traditional methods.
Every stakeholder plays their part in the end consumers enjoyment of a holiday, I feel in the future the value proposition each will have to offer will be imperative to their survival.
100% agree Nabeel: it’s all about the value proposition, which ultimately comes down to expertise – which has to be earned over time and through dedication and passion.
Excellent article, hats off to you Andrew. Where do you see the OTA’s and GDS’s evolving in the context of those predictions of your’s?
Thank you Jerry. I had toyed with the idea of including something on both the OTA’s and the GDS’s but in the end chose to steer clear – each deserves their own article I would say! In short:
OTA’s: I find it difficult to predict what’s going to happen with them. They’ve been around for more than 15 years now, and other than seeing aggregators come along (and then aggregators of aggregators), and of course a somewhat improved user experience, we’ve hardly seen any real evolution in their approach or their utility during that time. I think they’re great for whatever can be easily commoditized (as mentioned in the article), but I see them more as a tool among many than as a significant ‘player’ in the industry. I really believe that the biggest opportunities in travel today relate to making it easier to identify, access and make use of expert knowledge and quality service, and in that context the OTA’s are neither here nor there.
GDS’s: as Stuart says below, despite not being everyone’s favourite tool they do work and replacing them with a better solution will be very, very costly and complicated. Unless the GDS’s themselves innovate fast and well I reckon they’ll eventually be replaced, but I’d also put my money on the fact that whomever will replace them will not do so by immediately setting out with that principal objective; rather, the opportunity will arise if they first build some other kind of platform that unites a significant proportion of the industry’s big players.
@Lorena: what do you mean by us fearing technology and the internet? We use both a lot in our daily work, I can’t even start to immagine what it would be like to do my job without it. Certain websites (like TripAdvisor) can be a real pain in the neck, but that’s a long story, and it might not even be relevant to what you are saying.
@Andy: I still don’t understand what you are suggesting, in practical terms. Should tour operators partner up with their DMCs? Who will handle the clients? Who will organize the trip? Who will be legally responsible and who will issue the invoice/insurance etc.? As a product manager on South East Asia for a tour operator, I consider my DMCs, whom I have worked with for years and trust totally, like partners (and good friends too). We totally cooperate on all aspects, we select hotels together, develop itineraries, discuss endlessly, etc. I ask them for advice just like they do me, because we have different expertise but a common purpose. I therefore don’t understand what further “integrated” service we need? However, I’m all for technology that can make the communications and the keeping up to date, with all suppliers as well as tourism boards, smoother.
You make a very strong argument Isabella, and I don’t think I can counter it, nor would I want to! I’m not saying that change is needed for change’s sake, nor am I suggesting that the way you work with your clients and DMC’s is necessarily outdated or threatened. I admit that I cannot predict how the relationship and the dynamic will change, but I do feel that the current model is the product of a ‘pre-technology’ era where information had to flow in sequence from the DMC to the tour operator to the retail agent to the customer. As you suggest, there is room for improvement in terms of making communications smoother, but I would put my money on that being only the first step in an as-yet-to-be-created new model where everything that relates to the travel planning, booking and executing process – not just communication – happens in a smoother and more integrated manner.
Okay I’ll bite
1. Travel Agents should act more like bankers. Bugger that.
Will that be HSBC? With the $1.9billion fine
http://www.moneycontrol.com/news/wire-news/hsbcs-global-spread-left-it-open-to-crime-ceo_819595.html
Or Barclays with the fixing of markets?
http://www.bbc.co.uk/news/business-18671255
or RBS fined ÂŁ390m?
http://www.bbc.co.uk/news/business-21348719
And these are the ones we know of (and apologies for highlighting the ones mainly in the UK)
No I’m not sure Travel Agents should look to bankers. ..
Or maybe they should…
Maybe they should look at Co-op or Nationwide
Quiet. Dull. Boring. Dependable. And not a bunch of crooks.
2. Travel Agents want more tech. Yessir. Want it now.
Shaun Hinds, when he was MD at T2, was spot on here:
“…the most productive agents were crying out for better tools from operators”
http://www.travelweekly.co.uk/articles/2004/08/12/20144/travel-24-reaffirms-agent-stance.html
That was in 2004…
3. Yup GDSs are slow to change and there might need to be changes in contracts, but they work. Ditch em if you want (talking to the airlines here) but in a sense, you’re going to have to create your own GDSs with all the costs that’ll involve….Hmmmm.
4. I like travel tech folk. They’re lovely. The people I meet and hear and read on Tnooz, or speaking at conferences are smart, committed and grafters (on the whole). It’s an evolution that they will take over eventually (as foretold in Terminator 2….:)
5. But I love this comment from Valyn Perini last month. Actually I love the thread and comments. Big (not that big) grownups arguing about tech
http://www.tnooz.com/2013/01/09/news/the-travel-industry-can-be-absurd-so-dont-add-to-the-suck-factor-do-something-crazy-instead/#comment-2025320
6. ps I agree with you on this
“However, this has perhaps blinded us to the fact that an industry that wants to stay healthy must continuously improve and innovate”
Well. Fingers crossed.
Cheers
Stu
Haha, thanks Stu! I think the ironic title of the article fits in well with the irreverent tone of your comment
. The additional resources are much appreciated, especially the link to Sarah Kennedy Ellis’s fantastic article and Valyn’s thought-provoking comment. His reservations about people who come with the “I’m so f*&king smart I’m going to revolutionize this backwards industry” attitude really rings true today, as (sadly for them) a lot of the upstarts who came in and assumed that a sleek UI and a clever use of a Facebook API could turn a whole industry on its head are dropping like flies (don’t want to sound too harsh, but in some ways it’s true).
The title is hilarious! Ironic but hilarious.
Yes – definitely, definitely ironic!
Hey Andy-
Well thought out piece. I have to say, I agree with pretty much all your predictions – though not certain about the b2b marketplace simply because I don’t know much at all about the current b2b side of this industry and how it works. I’m contemplating writing a post comparing the travel industry to the real estate industry (where I spent 6 1/2 years); there seem to be a wide range of similarities from what I’ve observed thus far in this industry over the past year.
Thanks for the comment Drew. Funnily enough I was recently talking to a real estate investor friend who made the same comment about the similarities about travel and that industry. I’d love to read a piece comparing the two, so please consider writing it!
Top article, I really enjoyed it. More like this please TNooz.
Well,
Andy you’re fabulous, I’m a ecotourism profevional and I really Belive that the next step will be so ported by technology plus face to face service, interconections between companies and locals is how everyone will be traveling into Central America in about 4 years
Andy you’re right technology will speed up in our industry, the value chain will get shorter and stronger, prices will fall and margins get reduced, bad for us but for good for the traveller. That’s evolution, isn’t it?!
But, sorry to say I don’t think comparing travel with finance is correct. Our beloved travel industry is much more human than finance, the human factor will always remain as Isabella is pointing out, and as Stu says, we do not really want to be like bankers, with all their lies and corruption, do we?!
I think the big difference is the product: you cannot compare dry, cold, intangible financial products wirh warm and human touristic products, and so the technologically approach is very different, too.
Hi I come from the financial field now in the travel field purely due to the passion…as truly said technology has definitely improve our connections and make the world much more smaller…but we in this 21st century still believe in touch and feel factor particularly in India. In India the websites are just used for a comparison purpose people still go for the traditional way of business, ;the Travel agency way. The travel agents who ran their agency’s like bankers are either out of business or very less popular. And the agents who are more human in their approach have incidental made their profits too but gradually not rapidly as One would have thought. Andy superb thought even though I might not agree to much of the stuff..
New roles: Dunno if they are that new… but I don’t think our role has been indentified as such. We have been putting travel “events” together in varying amounts of use of lego travel arrangements for some time. I think we use the various elements more out of security rather than anything else. Certainly , with the internet lego travel event construction has been a lot easier.
Consolidation: Vetted travel professional getting together for security … Careful! We had stabiliser which did more or less that. Trouble is, as soon as one gets too together, organisations like the EEC want to poke their noses in. In general, though, consolidation in this line is good for the consumer. We are dealing with large amounts of money for which parts of the pudding are bonded … but others are not. Bit of minefield at the moment.
B2B – Don’t really understand that bit
User Reviews: Agree, but that may be wishful thinking on your part … don’t quite see how you could “verify” a user review. They can be a real pain for some hotels and service providers. We have had to become adept at reading between the lines.
Trade Events. Yeah, okay. I could go along with that. Operator to agent or operator/ agent to end user… or both? You know, what you say about brochures is interesting. They said that 5, 10 and I think 15 years ago.
Technology is a bit of an issue. We, in travel, are plagued by these techys who look at our antiquated systems (which, errr… work rather well, though) and want to change it. Thing is, they all start from “this could work like this” rather than: “does this *need* to work like this?” Ironically, most of our most useful tools today, do not come from any intentionally travel focused development: Google Earth, for example. Apart from that, the only really useful travel development has been the “flavor of the month” flight aggregator site. The rest of tech seems incapable of developing anything new unless there is a handy API and even then all tech manages is yet another way of showing glorified holiday snaps or yet another way of telling you you are stuck at XYZ airport. A GDS for low cost carriers would be nice. Or for rail.
Can we , errr…. take the salary concepts from the world of finance? Would that work in travel? Excellent and thought provoking stuff. Well done. More please, Tnooz.
Thought provoking, as it is Andy; i couldn’t help but write back.
The entire article is based on the comparison of banking and travel industries and as you rightly said, the latter has run on passion, actually for decades now! Rightly so because only passionate people will travel, eventually become specialists and hence understand and recommend correctly.. B2B or B2C or the process is incidental..
The industry in general is far too fragmented for it to get a governing body dedicated for controlling matters. Technology will definitely make a difference and i await your article on OTAs and GDSs; who are holding hands over several platform opportunities and are consolidating tremendously, especially for flight ticketing.
The point i am trying to make (from a customer point of view) is that today, a lot of information (and specialist info i must add) is available over the internet, in form of forums, specialist & user reviews etc. The customer, once equipped with this knowledge has a menu available from OTAs for hotel, flight and experience/sightseeing bookings. The best part is that he/she has no obligation to pick all the parts from one! Do you see any merit in the decentralization of travel for a fairly big chunk of travel market?
Having said all of that, brilliant read…
Hi Andy
Fantastic article
From what I have been monitoring, You are absolutely spot on on your ’1) New roles created’ prediction.
Although the traditional “supplier-DMC-tour operator-retail agent-customer” chain will still hold due to the knowledge and legal comfort zones provided, We have seen a lot of ‘client facing DMCs’ emerging in the South East Asia domain. I am sure this is the case in other parts of the world as well.
Some of these ‘client facing DMCs’ receive amazing number of queries on a daily basis from direct clients all over the world. They have set up ‘language-based travel consultants’ to deal with these queries and are given incentives based upon a trip confirmation. On top, Add the social media presence is making this model even stronger day by day.
Although coming from the traditional DMC model myself, I think the client-facing-DMC model is here to stay and will only get bigger in the coming years.
Point (3) is interesting, a centralized place which can include the flights, hotels and the experiences put all together would be the next step to go. Kind of like putting ‘skyscanner’ and ‘Viator/Isango’ together under one roof. Offcourse, touch it all up with a fantastic easy user experience, you have a winner!
Regards
Ajay
Andy,
I would also like to thank you for the article and hope Tnooz can line up more insightful articles like this.
Perhaps to drive the point home about market efficiency, I would observe that the financial markets are efficient (price transparency and low transaction costs) because of technology integration (made easier by considerable consolidation [hundreds of exchanges have closed in the past 50 years]).
However, travel products (especially air and hotels) have clearly become more transparent in the past 2 years (meaning you can find roughly the same price through numerous channels) but not necessarily efficient (low transaction friction and cost). This is curious.
Relatively transparent markets must then become efficient because that is the remaining battleground for intermediaries if they compete only on price/volume. Therefore, it is just a matter of time before we will have more efficient (and open) B2B markets. Not even American Airlines, Amadeus, or Booking.com can stop this trend – and it will extend to OTAs (has started actually).
In any case, with highly transparent markets, companies can no longer compete solely on price. They have to embrace one or both of the only other competitive tools: innovation or customer relationships.
I think many companies recognize this, but struggle to dedicate resources to innovation and building relationships because they get consumed by their day-to-day operational responsibilities (which of course never get better if you don´t innovate).
Saludos, Chuck
Not really curious at all. Prices have always been pretty much the same, in days of yore, they were even more “the same”. If anything, prices have become much more varied of late. One must remember a few things. 1. Contrary to the unflinching belief of most Americans, what works in America, does not (that’s *not*) work in the rest of the world. 2. The thrust for “transparency” will do customers no good at all.
Travel is unique in that probably 99% of travel events are different. Now, in banking transactions are much the same – they may be different currencies or different documents but essentially a similar set of rules can be applied in each case. In travel that does not work. A set of rules may be applied but it is that very setting of the rules which denies choice – and generates cost.
Airlines do not compete effectively on price – unless they are forced to. For example, compare any route flown by legacy airlines only with any route which has a junk-fare airline lurking in the background. Worse, look at provincial airports and see what price patterns you get there. One would think, using the “banking”analogy, that “up – 2 hours flying – down” should be more or less a fixed cost – (a bit of argy-bargy about landing fees etc accepted) but that is not the case. We all know airlines fly some routes uneconomically and compensate where they can. As long as that thinking exists, nothing is going to happen.
What else can you compete on, if not price and volume? Well, not a lot really – and where you can compete, it is only in the cheap fare department – so an overwhelming effort has to go into a section of sales that generates naff all return. As far as the business cabins are concerned (which is where the money is) then it does not matter how good you are – if the flight arrives 3 hours after one is supposed to be at a meeting, it is not good. Coupled with this, most airlines have similar offerings – first, biz and cattle. in first they will wipe your backside, if asked, business class, you get a bed and cattle – well, cramped seats, rubbish attention and lots of irritating extra charges. The only differentiation came with the “premium economy” concept (aka cradle seat biz class) – the only way to do that is by making it a seperate booking class …. United tried to do it differently and so are American – United realised they had it wrong and do it more or less the same as everyone else and American, if they have the noodle, will not be far behind.
Back to square one.
Now, in an (airlines) ideal world, every flight would be a simple point to point ticket – a simple commodity. Nice, apart from air travel – business air travel – falls apart overnight. So, by gaining “transparency” you are in grave danger of losing “functionality”.
One can still innovate, but one needs to come at it from a different perspective: Not from the angle of “This does not work, we must change it” but from the angle of “This is what we have, which works, how can we make it better?” Of course, this is where the techys come in … but they need to take a different stance. They need to, firstly, thoroughly understand travel first … then thoroughly understand it again and then and only then start the improvement process. By understand I mean – understand the mechanics of how travel works … that does not mean simply accept the status quo, as many critics of the present “system” seem to think is the norm. Techys are convinced that we are all old fashioned types who are totally incapable of advancing beyond the concept of carrier pigeons … which is odd, given that the introduction of the GDS – in the 1980′s remember – and the use of Viewdata for booking holidays was widely accepted in travel when Bankers still thought ledger books and quill pens where a “good thing”