Gatekeepers, mega meta online travel agencies, artificial intelligence, and the use of portable technology may fundamentally disrupt travel distribution in the next decade, according to a new study by the London School of Economics (LSE).
The report, “Travel distribution: The end of the world as we know it?”, commissioned by Amadeus, identifies the disruptive forces shaping travel distribution with insights from business leader interviews, data analysis and a sector-specific survey from global markets.
It lists the five major disruptive factors facing the industry as consumer expectations, mobile, big data and artificial intelligence (AI), regulation, and travel risk.
The four areas of the industry where the greatest changes are likely:
- Complexity and innovation in air travel distribution
- The revolution of shared economy models in the hotel and car hire sectors
- Innovation and hybridisation in online travel retail
- The rise of gatekeepers such as Google and Facebook in traffic acquisition
For each of these areas the study examined the trends, industry drivers and potential pathways to the future for industry players and their business models (see chart below).
The report also recommends six areas for industry-wide collaboration:
- Consumer expectations will rapidly spill over from retail into travel distribution. Players in the travel distribution industry will need to respond with broad collaborations for aggregating, processing and harnessing the big data involved. Otherwise the explosion of complexity and differentiation of services in the short term could translate into potential confusion for the consumer.
- The role of gatekeepers, the giant IT companies with major consumer interfaces, in travel distribution will continue to grow, notably through the use of virtual assistants, payment technologies and integration into social media.
- The size and power of ‘mega-meta-OTA’ hybrids (online travel agents with metasearch capabilities and global brands) are likely to continue growing. Consequently, their influence will penetrate deeper into the distribution chain, with the ability to negotiate better content and conditions, while still receiving commissions.
- The travel distribution industry is rapidly becoming a technology industry. Business models will need a more strategic approach that recognizes the value creation of different technologies across the industry.
- To avoid consumer confusion and lost opportunities, industry distribution needs to go beyond bilateral partnerships and contractual relationships. Distribution business models will need to evolve to encompass more shared innovation, a culture of experimentation and cross-industry alliances.
- Sharing economy platforms will continue to create new markets and erode the market share of suppliers and industry players who intermediate. The industry will need to adapt to this changing market and carefully monitor the impact of competition rulings in different regions as regulators play catch-up.
Holger Taubmann: Report to prompt discussion about industry’s future.
Holger Taubmann, SVP distribution for Amadeus, said changes in the travel industry such as the Internet, mobile, new business strategies have impacted how travel providers distribute their content and how travel sellers present that content to consumers.
“We commissioned the London School of Economics to take a dispassionate, academic and independent look at travel distribution in order to prompt industry debate and discussion about the future of our industry. This report makes a major contribution towards understanding how consumer expectations, new technologies and shifting market dynamics will shape the future of travel.”
Dr. Graham Floater, EGC director at LSE and one of the report’s authors added: “The travel distribution industry is entering a period of unprecedented change – with rapidly changing consumer expectations, advances in data analysis technology and a blurring of the traditional lines between the various players. Our report identifies the disruptive factors that are likely to shape the industry, and eight future pathways for how the industry could develop over the next decade.”
Commenting on the nature of the travel distribution industry within the report, Kenny Jacobs, CMO of Ryanair said: “Everyone looks at their part of the industry from their own point of view and doesn’t necessarily look at the consumer. The retail business is much more consumer-orientated and has been for 25 years. The travel industry could learn a lot from retail in terms of opening up and what’s the best solution for consumers.”
Download the full report here.
• Featured image credit: Ennessy/iStock
