What will Online Travel look like in 2020?
Where is online travel heading? How to make the right decisions and plan for a future of uncertainty? These are just a couple of questions travel players are faced with today. Let’s look at the evolution of 4 possible scenarios based on the "Online Travel 2020: Evolve, Expand or Expire" paper by Amadeus IT.
"To remain competitive, online travel players have to think ahead and adapt their product and business models based on anticipated changes and potential disruptions of the ecosystem". Sébastien Gibergues, Head of Leisure & Online Travel, Amadeus IT Group
1. Mega Online Travel Retailers
Before we had OTAs and metasearch companies, with online shoppers being unaware of which site they were using when making a purchase.
Now, OTAs are going into advertising even buying their own marketing channels: Expedia acquired Trivago, Travelocity North America and Orbitz Worldwide; Priceline’s link with KAYAK; and Chinese OTA CTrip’s share swap deal with Baidu, just to name a few.
These marriages have shifted OTA’s business strategy, growing traffic monetisation though online advertising. Metasearch companies on the other hand, are moving on to assisted booking (metabooking)
OTAs + Metasearch companies = Online Travel Retailers (OTR). Mega OTRs are rising from the previous convergence, allowing customers to search, book and pay in the same place and thus, experiencing a great increase in revenues.
Looking at these numbers, it makes total sense for OTAs to seize this huge commercial opportunity and invest in advertising, especially considering that the traveller does not have a specific destination in mind when he or she starts searching. In fact, they are obtaining click-through rates (CTR) of 6.3% (Intent Media Analysis) against 0.8% (Google Display Benchmarking Tool) for traditional display ads. This translates into a $2 billion opportunity, according to Intent Media.
What do they get out of all this?
OTAs are able to produce more – and more accurate – information. They may buy their marketing channels, giving them the opportunity to build a brand, stand out from the crowd and earn more from customers, while metasearch companies get a closer relationship with the customer through OTAs.
2. Digital Tour Operators
For traditional tour operators, human contact is key and customers don’t have to worry about anything as the trip has been organised for them.
But with the exponential increase in holiday offers and competition, tour operators are going digital to capitalize their competitive advantage (huge amount of travel information and all-in-one packages). The market demands them to be online, offline…everywhere! The model is growing towards providing a happy mix of digital and human interaction, combined with personalization and speed. The era of the “Travel Mate” is coming soon, where customers are received in a “cool” store by this "travel mate" (TM) that is using the latest technology. Then, customers download an app through which they will continue to engage with the TM that will provide solutions to their problems (for example, a flight delay) and will make suggestions on the go about where to go or what to see. Digital tour operators = physical + digital + human that provide a customized end-to-end trip experience.
3. Mobile Travel Retailer
Allegedly, more people own a mobile than a toothbrush. Many Online Travel Retailers have a responsive web design or app, but mobile is not generally used as the only distribution channel.
Mobile is more than a platform, it’s a way of life. By 2020, worldwide smartphone subscriptions are projected to top 6.1 billion. Mobile travel bookings are growing exponentially and OTAs and airlines are already reshaping their mobile strategy, adapting to this changing behaviour, and crafting a new travel life cycle (remember the Travel Mate?). Mobile may drive customer loyalty as mobile users only have a limited number of apps and are likely to stick to the same app. New marketing channels will rise, as well as up-sell and cross-sell opportunities.
Who will succeed? The Mobile travel retailers that manage to include:
- New ways of search and engagement (such as beacons or virtual reality),
- End-to-end service
4. The Travel Marketplace
A marketplace is a platform where suppliers connect with and sell directly to consumers.
The Travel Marketplace could be characterised by:
- Control of user profile, marketplace services and partnerships, and possibly auctioning services
- Innovation through the platform rather than the supplier (for example: Amazon Echo and Amazon Assistant)
- New payment options, like the WeChat model of the payment platform, can be used to create the Travel Marketplace. WeChatPay, can be used to transfer money between WeChat users (peer-to-peer) and make payments online and with participating offline retailers
With Alitrip and Ctrip, China is a clear leader in this space, but will other global players follow? Perhaps in the future one of these giants could launch an e-platform for OTAs, airlines, hotels and other travel companies to sell on.
The downside of this for suppliers would be the loss of customer relationship as all the data would be owned by the Travel Marketplace…
This scenario is far from unrealistic and OTAs need to be prepared to adapt their business model to an unforeseen future.
For the OT players to remain competitive they must be prepared to anticipate disruption and respond to changes the market requires. Decisions made today are critical to their survival but no company can stand still. They need to decide to evolve, expand or expire… Which one are you going to choose?
Would you like to see the Infographic made by Amadeus?
This blog post is based on the "Online Travel 2020: Evolve, Expand or Expire" paper by Amadeus