Three Trends Currently Dominating the Travel Industry

May 25, 2018

Gone are the days when a hotel can merely be a place to stay or an airline just transport from point A to point B. To stay relevant, travel brands need to break out of their traditional categories. The new name of the game is experience, which requires travel brands to evolve their core propositions to better cater for customers’ broader travel needs, factoring in growing touch-points, data capture, and most importantly, share of wallet. In a world where consumers are increasingly choice-rich, time-poor and unwilling to compromise, those brands offering the most relevant and enjoyable experiences will stay the most competitive.

The travel experience is no longer the purview of experienced, legacy brands. The opportunity for companies is huge – just last month, Airbnb further overhauled its business to expand its lodging offering to include hotels and last year CEO Brian Chesky said that he expects half of his company’s revenue to come from Airbnb Trips, its experiences division, by 2020. Even finance companies are moving in, as American Express’ recent acquisition of virtual travel assistant, Mezi, highlights.

Agile new players with a tech and data-driven focus are pushing to become the go-to brand for travel experience seekers. It’s an opportunity that travel companies can’t afford to miss out on. Just as the technology sector turns to travel, travel is similarly turning to technology as a tool to facilitate smarter, more personalized experiences, to drive deeper customer devotion.

With this in mind, we ask: how will the travel industry evolve this year and beyond?

Unbundling and improving premium offerings

With airlines placing a greater focus on business class, it’s possible that 2018 will see the beginning of the demise of first class, yet the beginning of a whole new personalized and exciting chapter, ‘Custom Class’ – the truly customized flight experience. At any rate, the divide observed between business and economy air travel will only continue to grow, with a focus on more innovative, higher-quality experiences for those willing to pay more. Airlines are pouring funds into trying to differentiate their top-tier product from that of competitors. For example, last year American Airlines began offering its VIPs access to an exclusive high-end dining room at New York’s JFK airport and partnered with mattress company Casper to offer its sleep accessories to first and business class passengers.

Simultaneously, airlines will continue to simplify and unbundle their economy product, helping them compete with established ultra-low-cost-carriers and new, lifestyle-oriented budget brands. Doing so will be necessary if they are to continue to attract the typical infrequent flyer, primarily motivated by cost. Yet these travellers still want an enjoyable experience and the chance to tailor their journeys as they see fit. Unbundling to deliver basic economy with ancillary services, such as refreshments and Wi-Fi onboard, will allow customers to build the flight tailored to meet their specific demands, while retaining profits for airlines.

Frequent flyers, on the other hand, will benefit from airlines’ investments in improving their premium offerings. For these passengers, the whole customer journey, from the technology they use to the time spent on-the-ground in airports, needs to be seamless, relaxing and luxurious. Airlines will spend more time and resources ensuring they deliver on lounge access and more seamless airport navigation through security and check-in. They’ll also look at innovative ways to extend their reach beyond the airport – be that the hours in the run up to your arrival, or even the days after you land.

Making payment frictionless and personalized

The continued growth of frictionless payments will help make spending easier for customers and drive impulse purchases in the travel space. However, this won’t just benefit airlines. Other travel brands, such as hotels, will look to offer additional guest services, including airport transfers, experiential events, express check-in and check-out, seamless room service via mobile apps, or even childcare.

Rich new consumer data will enable personalization of long-established ancillary services, such as insurance, to individual travelers – as our recent partnership with easyJet and Zurich highlights. Making payments easier, coupled with greater general implementation of dynamic pricing, will create more opportunities for the on-the-day sales of added services. In addition, lounge access and concierge services on-the-go will become the norm for the typical traveler, driving sales and offering additional touchpoints to build loyalty.

As more dollars are spent, airlines will leverage increased amounts of data through their frequent flyer programs (FFPs). This creates a huge opportunity for more targeted upsell and ancillary offers, as well as improving the appeal and presence of their programs within members’ day-to-day lives. Widening the availability of opportunities for both earning and redeeming loyalty points has been a key development for loyalty programs, making them more relevant to infrequent flyers. Tying the cost of flight redemptions to the commercial cost of a ticket and payment-linked rewards (similar to card-linked offers - the online and in-store retail promotions linked to a consumer’s payment card) are two great examples of how airlines can boost revenue while also driving better engagement for their members.

With the general shift in the airline industry from miles flown to dollars spent, we’re also seeing a blatant shift in psyche in terms of how airlines believe their customers should be prioritized and rewarded. The risk, of course, is the disenfranchised consumer. While smarter payment functionality and decoupling of solutions creates increased opportunities to earn and redeem throughout the travel journey, the challenge is balancing revenue generation, personalization and positive customer experience. Paid for memberships is one of many solutions to this conundrum. While it represents a huge step-change for many, it’s hard not to be inspired by the likes of Amazon Prime – the ultimate champion of the paid for membership model.

Connectivity goes mainstream

For customers, greater connectivity means greater control and with it, greater personalization. In short, it’s the route to better customer experiences and a smart way to increase travel business revenues.
To help facilitate this trend, in-flight connectivity will become mainstream. It no longer makes sense for low-cost carriers such as Norwegian to install seat-back in-flight entertainment (IFE) systems on their long-haul flights, which is why they weren’t included in their new 737 Max jets that fly from Europe to the East Coast of the US. Instead, BYOD (Bring Your Own Device) will start to become the norm. In-flight entertainment systems which tie into flyers’ own devices provide an easy solution that improves the travel experience, while providing another opportunity for on-the-day sales and crucial insight into customer behavior.

The Internet of Things (IoT) holds great potential to transform the hotel experience for guests. As Hilton’s ‘Connected Room’ demonstrates, personalized room touches no longer need to be facilitated for the high spenders through a concierge or bellhop. Richer customer data can be used to create rooms that are personalized to individuals, from preloading content to personal greetings, all controlled from a smartphone. It’s not the only hotel moving in this direction, with most hotel chains looking to benefit from in-room IoT deployments.

These same hotel chains are also exploring how voice assistants – already a mainstay in home environments, like Alexa and Google Home – might be used to improve guest experiences. For example, they could be used to advise on local points of interest. Travel companies using this voice technology will benefit from a wealth of data. Over time, advancements in artificial intelligence (AI) will enable voice assistants to offer proactive, contextual responses to travellers, making full use of their user profile, historical patterns and real-time booking information for even better personalization.

Phil Seward is Senior Vice President for the Americas at Collinson Group.

About the Author

Phil Seward | Senior Vice President for the Americas

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