2 Online Travel 2020: Evolve, Expand or Expire

Online
Travel 2020
Evolve, Expand or Expire
2 Online Travel 2020: Evolve, Expand or Expire Online Travel 2020: Evolve, Expand or Expire 2

“ 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
 Online Travel 2020: Evolve, Expand or Expire 3

Foreword The future belongs to those who prepare for it today

In 16th century London, black swans had never been seen in the
wild. They were considered so unlikely that a Latin expression Sébastien Gibergues
referring to black swans was used to describe things and events that Head of Leisure & Online Travel,
Amadeus IT Group
were deemed impossible. When, in 1697, a Dutch explorer spotted
a black swan in Western Australia, the expression transformed Sébastien leads a global team developing
into a metaphor used to describe major events that were Amadeus business partnership with key
previously unforeseen. customers in the Online Travel Agency,
Tour Operator and Travel Media segments.
With the travel distribution landscape undergoing a period of great For over 15 years, Sébastien has focused
transformation, major players in the industry need to be on the on helping senior distribution and IT leaders
lookout for potential “black swans” if they want to succeed in the develop new business models that capitalise
years to come. on the evolution of travel industry trends.

At Amadeus, prior to his current position

For this paper, Amadeus has used scenario planning to map trends in the commercial organisation, Sébastien
and to devise likely sequences of events that paint a picture of what managed large projects for key multi-
the future may hold for our Online Travel Agency (OTA) customers. national customers around the world,
including complex business initiatives to
optimise travel distribution, as well as
numerous IT systems implementations
and organisational change management
transformations.

He recently brought to market innovative

concepts, such as Amadeus Featured Results
that won 3 awards around the world over
the past couple of years.
 Online Travel 2020: Evolve, Expand or Expire 4

Methodology: scenario planning Introduction

This paper is based on a research study conducted by our Segment Many people are resistant to change. We often ignore uncertain
Strategy and Innovation team, from Amadeus’ Global Customer situations in the hope of maintaining the status quo. But change
Group. It was primarily built upon ongoing research and internal is inevitable and the unforeseen can and often does occur. We are
focus groups of approximately 50 Amadeus experts (Global Pre- already working in a quickly changing industry where disruptive
Sales & Consulting) around the world. The study also includes business models are blurring the lines between players, and new
insights from 13 one-to-one workshops with global customers in emerging technologies, such as Chatbots and virtual reality, are
the LATAM, WEMEA, NECSE, and APAC regions. In addition, two focus taking root.
groups of 25 customers each were conducted in both the WEMEA
and LATAM regions. Our main objective with this project was to help us answer the
question: “What should travel players be doing today to prepare for
Our scenario planning method involves listing all the drivers the different scenarios unfolding before us?”
affecting our business environment. Our research team grouped
these drivers based on the degree of their potential impact and With this question in mind, we have identified the evolution of four
predictability. We then focused on the high impact and uncertain different scenarios:
drivers to map the most critical scenarios.

For each scenario described in this paper, we defined opportunities _ The rise of Mega Online Travel Retailers: The consolidation
and threats for existing OTA business models. Our customers between OTA and metasearch business models, as well as the
have validated and shortlisted the scenarios in this paper based rise of online advertising, could lead to a new kind of online
on disruption capability and probability according to their market travel retailer
specificities.
_ Introducing Digital Tour Operators: Traditional Tour Operators
and OTAs may merge to become the ultimate travel seller.
From handling complex trips to servicing with new generation
travel stores, Digital Travel Operators could provide a happy
mix of digital and human interaction to create a personalised
travel experience

“
_ The rise of more sophisticated Mobile Travel Retailers: Imagine an

Human beings addictive mobile travel agency app that accompanies the traveller

do not like change,

along the entire journey. Rather than being a complementary
distribution channel, mobile could become the only means of

”
distribution and the only app a traveller needs – or wants

but change is inevitable. _ The new Travel Marketplace: With more and more leading IT
players and e-commerce giants creating demand for new and
innovative platforms, the players of the travel industry could
come together and build their own Travel Marketplace platform
for OTAs, airlines, hotels, and other travel-related companies
to sell their products and services. The question is, how will the
suppliers use the platform to create and maintain meaningful
relationships with the travellers?

These new business models could be your nemeses or the vehicles

for your success. Read on.
 Online Travel 2020: Evolve, Expand or Expire 5

Online Travel 2020

Changing business models

SEO Metasearch Advertisements App Stores

Web/Mobile Web Mobile App (Wearables) New Generation Travel Store eCRM

Payment Revenue UGC e-commerce Platform Auction Marketplace Profiles

Management Logic

Traffic Acquisition Flight IBE Hotel IBE Car IBE Package IBE
Alternative
Methods of
Payment
Sales Orchestration Trips

Referral Ads Flight Book & Hotel Search Car Search Destination Services
Search Merchandise & Book & Book Search & Book

Alternative Supply On-trip Services Disruption

_ Bidding
_ Sharing Mid-Office (Sales & Automation)
Economy

Accounting

Traditional OTA business model Mega Online Travel Retailers Digital Tour Operators Mobile Travel Retailer The Travel Marketplace

eCRM: electronic customer relationship management · IBE: internet booking engine · SEO: search engine optimisation · UGC: user generated content
 Online Travel 2020: Evolve, Expand or Expire 6

Mega Online
Travel Retailers
 Online Travel 2020: Evolve, Expand or Expire 7

Mega Online Travel Retailers

In an increasingly saturated market, with major OTAs already Average traveller online
owning the largest market share, how can they expand and grow
even further?

Until recently, metasearch companies and OTAs lived separate 50

online
12
reviews
but complementary lives, simultaneously working together while searches read
also competing for the same customers. Having made a choice,
online shoppers are often oblivious to which site they use to
make a purchase, i.e. whether it is a metasearch or an OTA site. 38
site visits
15
weeks of
But consolidation blurs the lines between OTA and metasearch research
business models.

OTAs are exploring the advertising model and even buying their own There is a strong commercial imperative for advertising. The
marketing channels. A few examples include Expedia’s acquisition average traveller searches nearly 50 times online, makes 38 site
of Trivago, Travelocity North America and Orbitz Worldwide; visits2, reads a dozen reviews, researches for 15 weeks, and does
Priceline’s link with KAYAK; and, most significantly, Chinese OTA not have a particular destination in mind when he or she starts
CTrip’s share swap deal with Baidu, which owns OTA Qunar, taking looking. This gives OTAs an opportunity to facilitate the process
control of around 80% of the Chinese hotel and air ticket market. by taking advertising from competitors.
CTrip also took a stake in Travelfusion, which links low-cost
airlines and hotels with OTAs, booking tools, travel search, and If this sounds counterproductive, think again. Users do not see it
mobile services1. as advertising but as a core functionality of the site which inspires
deeper engagement, resulting in click-through rates (CTR) of 6.3%
These marriages have also brought a change in business strategy. (Intent Media Analysis) against 0.8% (Google Display Benchmarking
Traffic monetisation with online advertising has become a great Tool) for traditional display ads. This translates into a $2 billion
commercial opportunity for OTAs, which are largely dependent opportunity, according to Intent Media.
on Search Engine Marketing (SEM) and therefore need to
optimise costs. This convergence of the two models is giving rise to a Mega Online
Travel Retailer. OTAs are able to produce more – and more
OTAs and metasearch companies are converging – and to a accurate – information. They may buy their marketing channels,
powerful effect. While metasearch companies move on to assisted giving them the opportunity to build a brand, stand out from the
booking (metabooking), OTAs are now advertising to customers crowd and earn more from customers, while metasearch companies
to increase revenues, and these huge entities allow customers to get a closer relationship with the customer through OTAs.
search, book and pay all in one place. They have become Online
Travel Retailers (OTR). 1
Source: Megatrends Defining Travel in 2016, Skift Magazine
2
Source: Expedia http://www.travelmarketreport.com/articles/Consumers-
We first saw a shift from transaction-based to advertising- Visit-38-Sites-Before-Booking-Expedia-Says
based revenues in the US and there are clear signs that the
wider metasearch ecosystem is changing in several ways. From
being online referral operators, OTAs are becoming super online
advertising businesses, and as a result they are operating in a
highly competitive environment.

Technology transformation required to become an Online Travel Retailer

_ Revenue Management logic: To arbitrate between reseller content (which you can book), referral content
(which you will redirect to the supplier) and ad content (which you will forward to the advertiser), most
likely based on the probability for a specific session to convert

_ Ad content sourcing: To aggregate your own content or delegate the ad space to a trusted partner,
ideally specialising in travel ads

_ Referral content sourcing: To integrate content that is not available to sell outside the supplier channel
but could deliver additional referral revenue in your flight or hotel path
 Online Travel 2020: Evolve, Expand or Expire 8

Digital
Tour Operators
 Online Travel 2020: Evolve, Expand or Expire 9

Digital Tour Operators

The Tour Operator traditionally provides a physical experience on We see converging models between these two players giving rise to
the high street, with colourful, well-designed glossy brochures and new growth avenues in the area of complex trip handling and
friendly, helpful, well-informed consultants who eventually get to servicing. They are becoming Digital Tour Operators, providing
know their clients quite well. Human contact is key. And everything a happy mix of digital and human interaction, combined with
is taken care of – no need to go online and try to get flights that convenience and speed.
align with the availability of the accommodation, as it all comes
in one package. However, in the 21st century, people expect not only cool
surroundings, a lively atmosphere and human help, but also the
Now consumers are often faced with a myriad of holiday offers technology to be able to do it themselves in a friendly environment,
from many channels, so Tour Operators are fast evolving to which is evident in Apple stores and the lobbies of lifestyle hotels.
capitalise on their key assets and expertise. As holiday shoppers are User-generated content (UGC) is becoming ever more compelling to
increasingly well-informed, with easy access to enormous amounts consumers. Experience is everything. OTAs, on the other hand, are
of travel information, many are looking for ready-made packages, purely digital and have continued to invest in technology.
mostly online. Growth is clearly digital.
Although a Digital Tour Operator has yet to grace the high street, the
Tour Operators have to chart a new course to ensure they stand probability of such an eventuality is high. And the relationship will
out on all fronts: they need to be seen on the street, inspire on their not stop there. We can easily imagine a scenario where Digital Tour
website, be flexible in their offers, active in social media, sharp on Operators will have a cool concept brick and mortar store, where
ads, and mobile right up to their customers’ pockets – and, most customers will be attended by engaging, trained agents – which we
importantly, they must remain relevant to their customers through like to refer to as a ‘Travel Mate’ – using the latest technology.
personalisation and flexibility. As a result, they are looking to
upgrade their technology and ways of working. After the customer has left the store, through an app they will
continue to engage with their Travel Mate (aka agent) while
At the same time, OTAs are adopting dynamic packaging technology travelling, maybe follow their blog and, if they have a problem
that allow them to create packages and are therefore offering the with a flight, they can contact the agent or, better still, the agent
same service to customers online or are giving customers the ability can proactively contact them if a flight is delayed or cancelled and
to create their own. immediately suggest an alternative. This new type of Travel Mate
will also be able to cross-sell at the destination, making suggestions
Multi-channel customer access about where to go or what to see, enabling customers to be put into
direct contact with potential providers of a service at the destination.

Digital Tour Operators are selling the travel experience and handling
complex itineraries, and we see the emergence of new generations
of travel stores to enable travel agents by combining physical,
digital and human aspects. Opportunities arise for other online
players to reinforce their brand by establishing an offline presence.

So, what does this mean? Will we see new generations of travel
stores? Will these extend the user experience from shopping to an
end-to-end trip experience, with innovation through a trial-and-error
approach, continuing to engage with users through flights and then
cross-selling on hotels and services? Will we see an “uberisation” of
travel agents?

Technology transformation required to become a Digital Tour Operator

_ Retail point of sale: Innovation in your own shop will drive consumers to your brand. The point of sale
used by your agents is a key element of the purchasing experience for your offline customers

_ Sales orchestration: Processing the sale of complex packages with the flexibility required by both the
end consumer and your suppliers will be an art to be mastered, in order to deliver the automation and
fraud control that will secure the profitability of your business

_ On-trip services: Sourcing additional destination content and delivering on-trip services will need to be
integrated in your channels and offered to consumers, from the departure window until the last day of the trip
 Online Travel 2020: Evolve, Expand or Expire 10

Mobile
Travel Retailer
 Online Travel 2020: Evolve, Expand or Expire 11

Mobile Travel Retailer

Go to almost any country and look around: people are surgically _ Customer loyalty: Mobile users will have installed a limited
attached to their mobile. We are nearly always either talking on it, number of apps per activity (social media, news, travel). While it
processing emails, texting, shopping, or enjoying other so-called is easy to move from one website to another in a browser, app
micro-moments 3. Allegedly, more people own a mobile than a users are likely to stick to the same apps and be more loyal
toothbrush. And we can’t forget that wearable technology is fast
gaining ground, whether in watches, glasses or armbands. _ New marketing channels: OTAs widely use leading IT companies
for advertising campaigns on desktop but have to think of
Currently, many Online Travel Retailers make their offer available alternative ways to advertise on mobile
on a number of distribution channels, including mobile with
responsive web design or apps, although this is usually used as a _ Cross-sell and up-sell: By pushing relevant notifications at the
complementary channel rather than the only means of distribution. right time in the traveller’s journey
In this scenario, we imagine a mobile travel retailer with an
addictive app, accompanying the traveller throughout the journey. Mobile is definitely a game changer for everyone. However,
mobile with advanced technology and social media will push the
boundaries still further and the same may extend to the world
of wearables.
6.1
billion
The Mobile Travel Retailer would be characterised by:
smartphone
subscriptions New ways of search and engagement: Mobile brings
by 2020 together many technologies (voice recognition,
Bluetooth, sensors, fingerprints, etc.) and leverages
other innovations such as Beacons, Internet of Things
and virtual reality. Together, these technologies
can lead to unprecedented opportunities for search
and inspiration
Mobile is no longer a platform but it’s a way of life. By 2020,
worldwide smartphone subscriptions are projected to top 6.1 billion4 Chatbots: enabling full booking flow, servicing
and these numbers will continue to increase as prices decrease. and payment
53% of Cleartrip’s 5 traffic comes from mobile and 70% of its
mobile customers are now using mobile as their only channel for End-to-end service: the app would go beyond just
transaction. And mobile travel bookings in Europe are growing servicing the traveller but would also be used by someone
exponentially, as is general mobile commerce. not travelling for destination services, user generated
content and other innovative services that will keep
OTAs and airlines are already adapting to this changing behaviour, servicing and inspiring the customer for their next trip
imagining a new travel life cycle and rethinking their mobile strategy:
Mobile Travel Retailers will disrupt markets with high mobile
_ Mobile-first design: With the proliferation of tablets, smartphones penetration and present a new way to stay with customers before,
and other smart devices, mobile-first design is essential during and after a trip, presenting further opportunities to sell. They
will facilitate the ultimate end-to-end experience.
_ New travel life cycle: Giving travel retailers the ability to connect
with travellers throughout their journey from booking through to 3
Source: Google
their return home and beyond 4
Source: techcrunch.com
5
Source: Blog cleartrip.com

Technology transformation required to become a Mobile Travel Retailer

_ Mobile-first: Becoming a mobile-first travel retailer will impact every component of your architecture,
as each feature will need to be adapted to work better in this channel

_ Chat-enabled: Chat channels will require their own investment, with a number of specific components,
such as natural language recognition and artificial intelligence logic, specifically designed for travel
specific cases

_ Open payment platform: Alternative methods of payment (AMOP) (for example: virtual cards, PayPal,
m-Pesa (East Africa mobile payment), Paytm (an Indian alternative payment system), Apple Pay, Google
Wallets, WeChat wallet and Alipay, to name but a few) will be the norm moving forward
 Online Travel 2020: Evolve, Expand or Expire 12

The Travel
Marketplace
 Online Travel 2020: Evolve, Expand or Expire 13

The Travel Marketplace

With millions of leisure travellers annually and many vendors China is a clear leader in this space. The question is, will other global
and partners, how will the marketplace evolve? A marketplace players follow? A few unknowns arise from this scenario. If the market
is a platform where suppliers connect with and sell directly to evolves this way, this will mean quite a change for Online Travel
consumers. It changes the business models and relationships Retailers. Should they participate or compete? Could this marketplace
between suppliers and travellers. enable auctioning? Could there be more flagship stores in the offing?

Leading IT technology players have grown over the years in defining In the not too distant future, could we imagine an e-commerce
how successful marketplaces work. Could we imagine the same in giant, a technology company, or one of the large OTAs like CTrip
travel? In 2014, Alibaba created the e-commerce travel platform, or Expedia developing an e-platform for OTAs, airlines, hotels, and
Alitrip, now known as Fliggy, a spin-off from its travel booking other travel companies to sell on? It’s not hard to imagine the Travel
website. Fliggy already has 100 million users (excluding Alibaba’s Marketplace moving beyond travel search and booking into at-
group members) and many suppliers make sales of more than destination services (restaurant, tours and activities) and upselling
$100 million a year with Fliggy 6. other travel services (rental equipment, insurance, etc.). Travellers
will have a one-stop e-commerce platform where they can buy
There are some indications of a potential evolution of the Travel anything they want: the ultimate package.
Marketplace. CTrip announced this year it will create flagship
stores, adding another dimension to the picture 7. It has an There is, however, a downside for suppliers. They risk losing their
advertising portal and product display pages extrapolated from relationship with the customer because the Travel Marketplace will
each travel office to increase its range of destination products. control the profile and the payment method. Suppliers who want
access to customer profiles so that they can advertise, will find that
Now, as Amazon and Alibaba have shown, the channel ensures they are deprived of that information. Whoever owns the Travel
differentiation. Amazon Prime is a good example of this, offering Marketplace will own the traveller for the entire journey.
one-day delivery, unlimited films and TV shows, secure unlimited photo
storage, early access to ‘Lightning Deals’, and more, all for $10.36 Another example is WeChat, a cross-platform instant messaging
a month or a lower annual fee of $102.48 ($8.54/month). There are service app (and so much more, as described above) which has
many more examples around and innovation will set the pace. successfully created a payment platform and connects suppliers to
sell a range of products and services.
The Travel Marketplace could be characterised by:
Is such a Travel Marketplace likely? Could Amazon follow the Alibaba
Control of user profile, marketplace services and model? Could Apple partner or purchase a large aggregator or even
partnerships, and possibly auctioning services a GDS to distribute travel content through their mobile apps? The
sky is the limit but what we do know is that travellers are looking
Innovation through the platform rather than the supplier for the one-stop shop that meets their travel needs.
(for example: Amazon Echo and Amazon Assistant)
This scenario is not beyond the bounds of possibility. Online Travel
New payment options, like the WeChat model of the Agencies need to be prepared for a future that is very different
payment platform, can be used to create the Travel from anything they are experiencing today and these scenarios
Marketplace. WeChatPay, can be used to transfer are to help them do that: if they want to participate in the Travel
money between WeChat users (peer-to-peer) and make Marketplace, they will need to adapt their business model.
payments online and with participating offline retailers
6
Source: Tnooz https://www.tnooz.com/article/alibabas-alitrip-has-a-
distinctive-travel-model/
7
Source: China Travel News http://www.chinatravelnews.com/article/88204

Technology transformation required to become a Travel Marketplace

_ Travel Customer Relationship Management (CRM) (profiles and trips): In order to own the
marketplace, you need to master both consumer profiles and a trip itinerary repository, which will drive all
of your marketing activities as well as the user experience on your marketplace

_ Partner store: You will need to be able to host the online store of each of your marketplace partners so
they can sell their own products through your marketplace, within your ecosystem

_ Mid-Office upgrade: Initially it will be just about monitoring the transactions between the actors of your
marketplace (partners and consumers) to secure proper sales reconsolidation and smooth customer
service, but this is also where most of the business model innovations will emerge
 Online Travel 2020: Evolve, Expand or Expire 14

Conclusion

These scenarios may be projections but there are already clear indications that they may materialise. To remain competitive, online travel
players will have to respond to the changes already taking place and anticipate the potential disruptions of the future, or they will be
overtaken by more relevant and agile competitors. Decisions made today are critical to their survival, and however tempting it is to remain in
the comfortable and familiar status quo, standing still is not an option. Companies need to decide to evolve, expand or expire. Embrace the
"black swan"!

So, which future are you going to embrace and how are you going to adapt?

At Amadeus, we focus on delivering more content and technology to support your business model, so that you can focus your investments
in customers and marketing and adapt to the future you want to be a part of. We also continue to invest in travel search and merchandising
technology to help you deliver the ultimate online travel experience.
15 Online Travel 2020: Evolve, Expand or Expire Online Travel 2020: Evolve, Expand or Expire 15

Credits: A special thank you to all our customers around the world who participated in the elaboration and
validation of these trends, and special credits to Pascale Caron, Associate Director, Segment Strategy, Pre-
Sales & Consulting, Global Customer Group at Amadeus and her Segment Strategy & Innovation team.

“ It is not the most intellectual

of the species that survives;
it is not the strongest that survives;
but the species that survives is the one
that is able best to adapt and adjust
to the changing environment
in which it finds itself.
Charles Darwin ”
16 Online Travel 2020: Evolve, Expand or Expire

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