t’s among the biggest e-commerce markets, and maybe its most turbulent. To compete, players must define their place in travel’s next wave.
A decade after the Internet spurred airlines, hotels, and other travel players to sell directly to customers, the sector’s ecosystem is fracturing. Companies are abandoning the systems that are supposed to provide consumers with one-stop shops to book flights, accommodations, and other services. Lawsuits are being filed. And the very people whose interests should be paramount—customers—are being caught in the cross fire. That’s giving newcomers a chance to swoop into a sector that today boasts annual online sales of almost $100 billion, around a third of all global e-commerce activity.
This turbulence isn’t a bad thing: the travel sector has reached the next phase in its evolution, and some creative destruction is necessary. In fact, companies are already investing billions of dollars in the next wave of travel e-commerce, from revamping Web sites to changing the technology infrastructure. Consolidation is also creating opportunities that didn’t exist before. But the critical question is whether the sector’s players can find a sustainable path forward before new rivals blaze the trail for them. To name just two candidates: Google recently paid $700 million for ITA Software, whose algorithms form the backbone of 65 percent of flight sales by carriers, while Apple has filed a series of patents for a mobile-device application called iTravel.
The bottom line is that travel suppliers, aggregators, and service providers each need to define the sector’s next wave quickly. We suggest that industry incumbents move away from a model focused almost exclusively on reducing channel costs and toward one that seeks to maximize returns by best serving customer needs. And the incumbents must understand that the customer experience not only begins before the time of sale—and even before the time of search—but also extends well after purchase and travel. The changes we recommend don’t require reinventing the wheel: many solutions already exist, but the sector’s myopic focus on costs rather than returns prevents their implementation. Balanced business models that give all value-adding players a seat at the table are what’s needed.
A troubled history
For a long time, suppliers in the travel sector regarded themselves as service providers and let distributors handle the technology-intensive process of actually selling airline seats or hotel rooms. The airlines facilitated this approach in the 1960s by creating global distribution systems such as Apollo and Sabre—used by travel agents to search inventory across the world—only to spin them off in the late 1990s, when cash got tight and valuations looked rich.
As with many other sectors, the Internet’s arrival changed everything. Online travel booking took off as aggregator sites, such as Expedia, began to give consumers a one-stop shop, in return demanding commissions that forced airlines and hotel operators to rethink their hands-off strategy. US airlines responded by creating a rival online travel agency, Orbitz, but their return to the distribution business was short lived: as financial pressures on the airlines’ core business continued to build, they spun off Orbitz. Recognizing the low-cost direct sales model offered by the Web, the airlines set about redirecting shoppers from aggregators’ sites to their own.
American Airlines (AA), for example, withdrew inventory from Orbitz in late 2010; in solidarity with Orbitz, Expedia fired back by removing AA’s listings (the airline is now back on both sites). Enterprise Rent-A-Car also left Orbitz, citing high costs, while US Airways piled onto AA’s disputes by filing suit against Sabre on antitrust grounds. Such disputes are common whenever industries confront the problem of who owns the content and who owns the customer: cable television companies, for example, regularly battle networks over channel-access issues, and insurers have created their own Internet portals to combat the brokers’ entrenched power.
The travel sector’s problem, however, is that the underlying model is fracturing. Traditional travel agencies now tend to tailor their services to business travelers, rather than provide options and products for a broad set of customer segments. Suppliers are making huge investments to lure customers to their direct channels, inadvertently reducing return on investment (ROI) by lifting costs with little immediate increase in revenue. Online aggregators are not only pushing suppliers out and undermining their one-stop-shop proposition, but also digging their heels into a format that emphasizes price as the primary product differentiator. Fundamentally, and most damagingly, consumers increasingly find that they don’t have what they really want: all travel options at their disposal in one place. If this problem persists, they will become more willing to consider superior alternatives.
The path ahead
So what should be done? We have identified four imperatives for travel companies: making customers the strategic focus, using data to understand them, serving them better through partnerships, and providing the best end-to-end experience to promote both sales and ongoing loyalty (…)
Font: noticia de Mackinseyquarterly.com febrer 2012
Fotografia de Me-Joanquin CC,2.0 (by-nc-sa)