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How Disruption Has Changed the Travel Industry - Technology, AI, and How the Future Will Look Like

↪ 30 MINS READ

Over the last few years, momentous changes in how the world operates has given rise to a new buzzword and hot topic: disruption. Initially coined by Clayton Christensen, the term is currently often used to refer to the “fourth industrial revolution”, where new companies and their products started to deftly interweave technology with various parts of our lives that were then unprecedented, although the term has been used for far longer - something which will be explored later in the article.

Overview

Introduction

Disruption, Defined

What This Means For The Travel Industry

Disruptions In Ground Transport - Uber, Lyft and Grab

Disruption in Hotels

Disruption In Airlines

Disruption For Travel Agents - AI, and the Substitution of Labour

Problems Travel Agents Have To Overcome To Thrive

Conclusion

Introduction

To many, recent “disruptions” have led to drastic changes in how industries function and how consumers fundamentally live, work and relate to each other. As the World Economic Forum (WEF) puts it, the fourth industrial revolution we see today is best characterised by the blurring of lines between “physical, digital, and biological spheres”. Although the description is hazy, several hallmark examples have come to rise as industries all over the world start to experience this revolution. Most of them are recent breakthroughs in numerous fields, such as nanotechnology, quantum computing, and artificial intelligence so advanced it can now beat the world’s best in mind sports - one of which involves the Chinese game Go!, a sport which is widely recognised as one of the hardest games to master in the world. There are even other artificial intelligences which can swiftly navigate the nuances of human conversation, such that now, there are times where they are indistinguishable from another human being. (Watch how Google's new talking AI just beat the Turing test here!)

While these advances may bode well for the future and the world as a whole, the biggest worry that many people hold is this - how ready is society for this new revolution? In the same vein, given the far-reaching effects of disruption, how will this ultimately affect the travel industry, which currently remains one of the most important sectors in the modern world?

However, to fully understand the effects of disruption, we must first ask: what exactly is disruption?

Disruption, defined

The term disruption first took off after its initial appearance in Professor Clayton Christensen’s 1997 book, The Innovator’s Dilemma. In the book, Christensen - a world-renowned American academic and business consultant - introduced the idea “disruptive innovation”, and used the phrase to refer to successful companies not just meeting their customers’ current needs, but anticipating their future and unstated needs as well.

This theory, now taught in many a business school, worked to explain how small companies with minimal resources were able to enter a market against established competitors, and displace the conventional and prevailing system.

In 2015, Christensen also published an update on the term and what it should encompass, but the core ideas remain the same: a disruptive business starts to come about when they look to meet the needs of either less-demanding customers, or when they create a market where none existed before.

This is something that is made even clearer when looking at the different types of disruption that have been laid out: Low-End Disruption, and New Market Disruption, both of which will be referenced throughout the article across the various sectors of the travel industry.

While the terms seem alien, both types of disruption have already been witnessed countless times by the markets they affect.

Low-End Disruption is a form of disruption that takes place when a competitor is able to give consumers a lower-cost offering that often takes away price-sensitive customers from established industry players. This can be observed in ride-hailing apps such as Uber and Ryde, when they managed to steal over a large part of the consumer base from the taxi industry.

However, the second type of disruption, New Market Disruption, is one more commonly associated with the word. Specifically, it refers to disruption that occurs when a product is able to address key needs that consumers have, either current or future, when current offerings do not. A great example would be Ryanair from the airline industry. Ryanair, a low cost airline, created an entirely new market of budget travelers in an industry dominated by full-cost carriers. Rather than just directly stealing customers from larger airline companies by engaging in a price war, Ryanair instead offered routes and personalisation options that no one else did, which also allowed lower prices overall.

Both of these types of disruptions are important to understand when analysing a market as complex as the travel industry. While we now understand disruption a little bit better, for now, let’s go back to look at how ready people are for new industry “disruptors” all around the world.

What this means for the travel industry

According to Forbes, the world doesn’t seem ready for this revolution at all. In fact, they estimate that only about 15% of today’s companies are prepared for the future.

The reason for this is because these companies neglected adapting new and current technology into how their businesses were run, and as a result, they were woefully unprepared when “disruptors” like Uber and Airbnb came into the market and started to dominate a huge part of the market share.

The speed at which technology is progressing also means companies that fail to adapt are going to be easily left behind, and will have a tough time catching up in the long-term if they fail to act soon.

While the outlook for companies as a whole is applicable to the travel industry, the industry is also unique in how integrated they are with the public’s lives, due to the ever-growing desire to travel. This means that every part of the travel industry - from flights, to hotels, to ground transport - will always need to adapt to society’s ever-changing needs and habits, especially in how they make their purchases and their preferred mediums.

But the problem here is this - that oftentimes, technology changes much faster than people do, and people already often have trouble catching up to new technological advancements in their own lifetime. And the truth is, companies usually change much, much slower than people do, for many deep-rooted structural reasons in how they are often run.

Of course, the travel industry is complex and multi-faceted, which means disruption in one of its parts can be completely different from disruption in another. In this article, we are going to look at how disruption has looked like in the past for the transport and hotel industries, and what this may mean for airlines and travel agents in the future.

Disruptions in ground transport - Uber, Lyft and Grab

Founded in 2009, Uber’s ride-hailing app took the world by storm, spreading its reach beyond its own soil in the United States in a mere two years. Only two years after that, the company grew into a behemoth worth billions of dollars - a number that has only continued to grow since - and revolutionised the ground transport industry as we knew it.

This change started to precipitate to other countries, where competitors such as Lyft, Grab and Didi Chuxing (its US, Southeast Asian and Chinese competitors and counterparts, respectively) all sprung up within the same month of each other in June 2012 and grew into million-dollar companies shortly after.

How did this all happen?

Uber was a solution and alternative to a transport industry that consumers always viewed with distrust and uncertainty. It:

set standards and regulations that many felt were missing in taxi industries and companies

worked with newer technology, utilising online booking systems and integrating GPS softwares to make getting rides faster, safer and easier, and

engaged their drivers as agents rather than employees.

All these culminated in a service which provided customers with a cheaper, more convenient app that could give them a peace of mind, and made Uber the go-to for a pricier transport alternative to public transport. This in turn gave drivers a large, growing customer base to tap on if they worked as agents for Uber, and crucially,lowered the barrier of entry for both drivers and riders alike in their ability to provide both supply and demand to the ground transport industry as a result.

This set in motion the actual disruption which took place, where people found an attractive alternative to satiate their needs. Both cheaper and held to a higher standard, these very alternatives turned into a new norm, and changed the industry entirely. In the end, it revolutionised what it meant to be a service-provider by cutting out the need to own inventory - much like in the case of Uber and Airbnb - and changed how people conducted business within it.

Disruption in hotels

Of course, this does not mean shifts in consumer attitudes - often the main reason why disruption occurs in service industries, as supplies move to meet a high demand - all happen for the same reason. A great example of this would be the hotel industry, where, while the disruption that took place is one that is rather similar to that of the land transport industry, the reasons consumers had for moving are slightly different.

A great example to look at would be Airbnb, a hospitality company that also happens to be one of the most iconic examples of New-Market Disruption.

For those unfamiliar, Airbnb is an American company which operates an online marketplace and allows locals to lease their available accomodations to travelers, usually for short-term stay. Currently, the app also links locals up with tourists who are looking for new experiences in the country - such as walking tours, surfing, or exploring the local cuisine - and allows people to make reservations at restaurants through the app.

The unique thing about Airbnb - and what sets its disruption apart from Uber’s - is it added a new dimension to how people can travel and immerse themselves in the culture of the places they are visiting. While cost was certainly a factor, it is not always enough to sway people from age-old brands or established hotels - rather, the real deciding factor in whether or not consumers switch who they buy from is the value that consumers feel like they get out of their purchases. In Airbnb’s case, the value-add was in getting the chance to know the culture of the place you are visiting more intimately, because you are eased into it by either your friendly local host, or the slew of experiences available to purchase on the app. Such experiences were missing before due to the nature of hotels- including the scale of their operations - and thus appealed to travelers who wish to immerse themselves more deeply in their overseas trips.

The Similarities in Both Cases, and What This Shows About the Fourth Industrial Revolution

The single, most obvious similarity between both Uber and Airbnb is this: they are both app companies that made it much easier for the average person to become providers and suppliers of car rides and empty rooms. The lowered barrier of entry and potential for a side-income for their “partners” hence increased the supply of these perishable goods, and created a marketplace which incentivised lower costs in attempts to attract better business - a tactic that has evidently worked, and drew crowds away from the traditional options of standard, metered taxis and clean but impersonal and indistinct hotel rooms.

None of this would have been possible without the technological advances which came from the third industrial revolution - a digital revolution characterised by the use of electronics and information technology to automate production, and the first revolution to involve the internet, computing and wireless communication technologies.

The birth of these advances was able to reach so many people at once that not only did it become far easier for individuals to remain connected with each other with the use of technology, but it became indispensable in how people lead their lives in the modern age.

It was thus this technology that formed a new foundation for our society - where we found spaces for new technological breakthroughs to integrate with our daily lives. The greatest impact of this was that we could lead lives of better quality, as tedious processes are shortened for us and repetitive menial tasks start becoming automated.

In retrospect, it seemed inevitable that the fourth industrial revolution would eventually come about much faster than its predecessors, especially as an extension of the third. The constant use of all of these large-scale technological systems and software by a significant portion of the global population eventually meant that all the information that was and could be collected could no longer to be overlooked.

Years of the internet, social media and increasingly advanced software gave way to the advent of big data, where information and data collected from the past - as an accumulation of most of the world’s recent knowledge and memory - started being utilised for machine-learning (also known as deep learning) and increasingly detailed trend analysis, all of which we still see today. At its simplest form, the effects of the revolution exists in the smallest bits of our lives, in the form of more personalised special deals, targeted advertisement, recommendations for music or travel.

But what the world should brace itself for is the unlimited potential this revolution carries with it. As the computer scientist and futurist Ray Kurzweil elucidates in his book The Singularity Is Near, the technological progress we achieve is often not linear. Rather, we make breakthroughs more and more frequently the more advanced we get - and while the first three industrial revolutions were also disruptors in their own right, the fourth industrial revolution, with these things taken into consideration, could prove to be a different beast entirely - evidenced by the ability for markets to be entirely upended by new competitors with innovative technology and unconventional business models.

Uber and Airbnb are, hence, only symptomatic of the major change that is underway. Still, they were one of the first to shape the path towards a better world, each with their own unique contributions in the services they offer to the public.

Of course, both of these companies have their own share of problems, and in the future, will also struggle to remain relevant to the public as we progress even further along technologically. But these are also struggles that other parts of the industry can learn from - something we will touch on later. For now, let’s first look at how the other major parts of the industry - namely the airline and travel agent sector - will change.

Disruption in airlines

Previously, we did an article on the air industry’s technology here, and discussed the possible futures of the GDS system - including the industry’s possible move onto a new GDS alternative with the use of Application Programming Interfaces (APIs) and New Distribution Capabilities (NDCs), a data transmission standard that uses XML coding lanaguage. What the article didn’t mention is how its alternatives may look like given the context of the fourth industrial revolution, and what the effects of this change will look like if disruption does in fact take place.

According to the Centre for Asia Pacific Aviation (CAPA), the upcoming disruption that is waiting to happen in the airline industry is due within the next decade. This disruption is also one that is long overdue, due to the industry’s inertia and inability to move away from their reliance on the GDS providers who rely on their own outdated technology, while both they and their competitors look for ways to move forward with newer software or ways to circumvent the problems. And most airlines are, unsurprisingly, ill-prepared.

As the report by CAPA puts it: “It seems inconceivable that the structure of an industry with so many artificial constraints can remain intact much past 70 years, while all around it has changed. This decade alone has been witness to major disruptions in the travel and transportation industries. Most prominent have been in ride sharing – Uber – and in hospitality – Airbnb. Telecommunications, media and music industries have also been turned on their heads; banks and payments are in the firing line; retail generally is being rapidly transformed. There is scarcely an industry whose fundamental structure remains intact. Except the airline industry.”

There are a multitude of reasons why this is so, but the greatest problem is that even newer startups have taken on the use of this outdated technology by the GDS, and only tried to apply their own IT solutions onto the software. Meanwhile, the cornerstone of the industry - namely, the GDS systems that most agents and airlines still rely on for a large chunk of their flights - remains stubbornly outdated.

But even as technology progresses far more quickly than ever before, change is still difficult. Currently, the search for better alternatives has long been underway, and many - including CAPA - seem hopeful that the fourth industrial revolution can only accelerate this transition to a better, more technologically-savvy industry. But the ability for disruption to occur in areas that are key aspects of commercial aviation is still undetermined, and while many alternatives - such as blockchain - have been looked into, implementation still remains a question as questions about these alternatives’ limitations arise.

But there’s no doubt that change can still occur in the form of improvements - in efficiency, performance and even customer satisfaction - when it comes to the technology airlines use, both in flights and out.

According to American Marketing Association, the amount of data airlines collected has not only allowed them to offer more immediate resolutions for customer service issues on-board (by offering compensation such as frequent flyer miles and travel vouchers through an app) - airlines can now even integrate data touch points with technology. An example would be Delta Air Lines, which has started introducing software which can track basic customer information for better, more personalised customer service. They also utilised heart rate monitors on volunteer customers to track their heartbeats at 11 stressful moments during the travel experience, including finding a parking spot at the airport, moving through security, and boarding the plane, in a bid to delve deeper into customer behaviour.

Said Andrew Wingrove, Delta’s managing director of product and customer experience: “We do focus groups with biometrics and biodata on where customers are looking at things on screens, where their eyes are on the airplanes to make things more intuitive. The heart monitor was one of the tests we used for focus groups to better understand where their anxiety is.”

Certainly, such changes definitely bode well for the industry and its customers as a whole - but even then, it is going to remain difficult for a proper “disruptor” to come about and change up the airline industry’s operations entirely.

This is because the greatest problem is not that there is a lack of demand in the market for something newer and better, but because, as we explored in our previous article, that the GDS providers have far too much power within the industry, which means that any form of change is going to be quite difficult due to the sheer volume of travel agents they have. Briefly, this is because the sheer volume of inventory and data owned by the GDS leaves it as the most reliable medium by which travel agents make flight bookings. Studies also show that even Online Travel Agents such as Booking.com and Expedia continue to rely on the GDS for a majority of their bookings.

As a result, any airline who shifts onto an alternative might just jeopardise their current earnings and ticket sales if they get taken off the GDS database, and therefore would rather stick with the GDS providers, who guarantee them reach to both the average consumer on the ground and the hoards of travel agents that give the GDS providers traffic, than move elsewhere, even if onto a new “disruptor”.

And the greatest problem is this - that the airline industry’s growth is oftentimes very much because of the GDS’ existence and international reach - something that doesn’t exist in most other industries or businesses, such as Uber. Without its connectivity and ability to aggregate data from a majority of airlines across the world, it is unlikely that the industry would have continued to experience year-on-year growth across international corporate and leisure travelers. Even more crucially, the GDS enables travel agents to make travel services available to consumers globally, including in places where they may not be able to reach these very same consumers through direct marketing efforts - meaning it makes it easier both for airlines and travel agents to sell, and consumers to buy - or even know who is selling in the first place.

But what if we take away the flying process entirely?

If the air travel industry’s way of transportation and conducting their bookings cannot be disrupted in a straightforward manner (such as in the way of Low-End Disruption), then perhaps it is possible to subvert the travelling entirely. In some places, this is already starting to become reality.

The way to achieve this is through the use of Virtual Reality systems such as more advanced versions of the Oculus Rift and HTC Vive that we currently know.

There is already much headway done in the realm of virtual and augmented reality technology, and now the next step of Virtual Reality is this: total sensory immersion.

What this entails is something that is entirely different from all the augmented and virtual reality softwares we’ve seen before. An ability to engage with all five senses in a simulation, the simulation is likely able to let people truly feel like they’ve travelled to a different country almost entirely - while walking around only in a room that has been constructed solely for virtual reality, they are able to hear the sounds of the streets they stroll down on, or smell the aromas of tantalising street foods that surround them at the local markets.

Currently, technology has progressed so far along that even our interactions with others and our sense of taste can be simulated. With artificial intelligence that can interact with people so naturally it passes the Turing test, and special cups that make plain water taste like your favourite beverage, including lemonade and wine, it seems like being in another country when you’re not actually there in person is now in the realm of possibility.

Perhaps the technology involved may not be advanced enough yet for all types of experiences to be simulated, but for now, the future looks promising. Of course, problems unique to the use of technology, such as technical glitches, may affect how real these experiences feel, but this is still a great alternative to having to travel to another place entirely just to wind down and relax - something that often costs not only a large amount of money, but time as well.

This, of course, makes it much easier for more price-sensitive consumers to enjoy some of the luxuries that their richer counterparts do on a more frequent basis, which means that, much like in the case of Ryanair, a new segment of the market has opened up, and the barrier of entry is lowered for people wish to purchase the supply.

Moreover, in the case of technology, it often does not take long before people can also start being the supply, or at least have a hand in its production - which is likely the next step in being able to simulate events or environments that no one else has been able to dream of before.

This kind of disruption, as we looked at before, is New Market Disruption, something far harder for companies to guard against - often because what eventually became an industry’s disruptor never looked like one at all. Technological advances only serve to exacerbate this problem as new tools emerge for creative competitors to utilise, making it easier to disrupt the market with more innovative technology every time it comes about. While some companies can try to prevent their own irrelevance by diversifying themselves and attempting to ride new waves of technology as they spot them - such as the case of Google and their early, initial investment in artificial intelligence - it is unlikely that most existing companies are willing or able to do so due to the high risk from unpredictable directions that technological advances can take. Meanwhile, the race to innovate only continues, even for disruptors themselves - lest they become the disrupted, and left behind.

But when companies are ill-prepared for this change - or at least, often under-prepared - what does this mean for travel agents?

Disruption for travel agents - AI, and the substitution of labour

While there have emerged many reports that speculate the death of the job of a travel agent - mostly by substitution of labour by artificially intelligent robots - this disappearance can perhaps still be prevented.

This is because travel agents are key in being the bridge between different key components of the travel industry - from its consumers, to its airlines, the GDS providers, and even other travel and travel-related agents and agencies across the world.

In a circumstance where change is just around every corner, it is likely that human versatility and adaptability are key in being able to maintain these connections that industry players and consumers have with one another.

This means that while the current job description of a travel agent may become less relevant in the future, the job of a travel agent is not going to be. Rather, the job description of a travel agent is simply likely to have to evolve as technology and the travel industry does. And many travel agents seem to be catching on - over the the past few years, while brick and mortar travel agencies have diminished in number, the number of travelers engaging a travel agent’s services have only risen.

Meanwhile, the latest Portrait of the American Traveler surveyconducted by MMGY Global, a travel and hospitality firm, showed that 19 percent of travelers used an agent’s services in 2016, up from 13 percent in 2013. This increase seems to have happened at the same time there was a widespread move away from traditional storefront agencies, and towards agents working as independent contractors who usually join up with a bigger consortia for training, marketing tools, and access to better travel content.

How is this happening? The answer, fortunately, is quite simple.

Problems travel agents have to overcome to thrive

The key to a travel agent’s survival is to see digitalisation as an opportunity, rather than a threat. As technology continues to take over and it becomes easier for consumers to handle their own bookings, travel agents must first question what unique thing they can offer to consumers that technology and artificial intelligence can’t.

As briefly explored in one of our previous article , the first edge that travel agents have over artificial intelligences is that they are supposed to be reliable collaborators with their customers during the process of trip-planning.

This is especially important, because most artificial intelligences cannot fully adapt to complex, human situations filled with countless variables, such as in the case of driverless cars. Rather, an inability to understand and adapt to social nuances and settings could even cause customer satisfaction to drop, even if AIs were given a large amount of data to work with.

And even if these artificial intelligences were to be developed for very specific and specialised purposes - which we will explore below - this is a cost that companies may not be willing to make - the amount of time and money put into developing these artificial intelligences to completely learn something new can be quite considerable, as these AI often start from scratch and form their own understandings with the abundance of data they have. If the industry were to suddenly change, their investment in these artificial intelligences may even be completely gone in the face of newer competitors and circumstances.

Some may argue that the inability of AI to adapt will change in the future, but even when looking at the world’s newest inventions, it seems improbable that AI will eventually be able to fully understand the complexity of interactions humans have with each other. One example to look at is Google’s new innovation, the Google Duplex, as shown in a recent showcase. While the AI seems impressive on surface - able to mimic a person’s speech down to tics such as “ums” and “uhs” - it did not truly pass the Turing test, which evaluates a machine’s intelligence.

To pass the test, it requires a machine to behave in a way indistinguishable to a human, and while Google Duplex seems to have done so, the truth is the test was conducted under the wrong conditions, where the topic of conversation and the purpose of the AI were both very narrow and focused only on the booking of appointments in two differing contexts - first for a hair salon appointment, and next for a restaurant reservation. And despite its ability to navigate both situations swiftly, it is likely that even as the AI and softwares similar improve over time, most of them are still likely going to only book your appointments, flights or rooms for you, and not with you.

Why?

Because there are too many variables, options and alternatives that can exist during the process of planning a trip. And unlike travel agents, the AI will have to work off of incomplete data collected mostly on the internet, and they cannot personally vouch for vacation spots they suggest to travelers, nor fully cater to the full extent of a traveler’s wants and needs. Even when they do try to suggest these vacation spots, most of these locations are already popular and commonly visited, which means these suggestions may not offer the unique experiences that some travelers are looking for, while hidden gems will remain undiscovered and unexplored.

Therefore, due to the failings of artificial intelligences, it is imperative that travel agents remain sensitive to their clients’ needs and provide them a peace of mind with their expertise and credibility - after all, the process of trip-planning can often become fraught with uncertainty and doubt, especially when you have to plan an itinerary on your own - or worse, leave a machine to plan it for you - without any assurance beyond some online reviews from strangers you’ve never met.

To be able to alleviate these worries and remind travelers they have someone to count on so their travel plans don’t go awry will put travel agents at a huge advantage, at least when consumers consider how they should go about planning their trips (travel agents have other problems they face when appealing to travelers, which we will explore later).

Meanwhile, as disruptors keep popping up across various segments of the travel industry, travel agents that are versatile and adaptable are definitely going to benefit, for more reasons than one. Besides being able to give those unfamiliar a peace of mind - especially for clients that are less familiar with newer technology - travel agents are also able to buffer against one of the greatest problems with disruption: that it causes a lack of maintenance in standards.

This problem of a lack of standardisation is one that starts to appear when disrupting companies abruptly grow in size, much like in the case of Facebook and Uber. Due to the nature of disruption and these companies’ need to cast a wide net, rapid expansion from their success is inevitable. But as a result, they often cannot regulate all the different parts of their businesses. Meanwhile, the quick increase in both supply and demand - sometimes provided entirely by the public in the new “sharing economy” - will introduce so many new variables that these companies cannot always keep up and deal with all of them.

The result is this - that sometimes, consumers suffer, as they receive drivers, hosts or attendants that are indifferent or even hostile to their needs, and who do not provide them satisfactory service for what they paid for.

The problem looks even worse when put in the context of travel, where consumers sometimes sink up to tens of thousands of dollars for their dream vacations. When looking at such a substantial investment, the margin for error is hence lowered, as any problems that arise could easily ruin all the effort and money that has been sunk into the trip to make it enjoyable. For others, they may be put way above their spending budget as they are forced to look for alternatives to what they already bought.

For this problem, the role of a travel agent is not just to give people a peace of mind or a cheaper travel package, but rather, to prevent a ruined experience entirely. And to do this, they must be prepared for changes across the travel industry, and to familiarise themselves with new wants that consumers have developed and turn to these very “disruptor” companies for. This means that inevitably, some travel agents will have to diversify as consumers look for not just good experiences, but unique ones.

Of course, even as travel agents try to bridge this gap, there are also problems they have to face themselves. First, travel agents are still engaged by only a small portion of travelers - hovering around 15 to 20% every year. The reason for that is this: that people often don’t trust travel agents to be good to their wallet, and many clients also report their top concern as their travel packages not being unique or customised enough for them - something that possibly prevents a market of repeat clients from forming.

If these problems continue to persist, it is unlikely that travel agents will see a better environment to operate in anytime soon. And while change in perception is happening, it is still painfully slow. Meanwhile, dubious travel agents and agencies only worsen the problem of perception that travel agents have.

To deal with this, travel agents obviously need to earn their potential clients’ trust, so that they are willing to put the process of trip-planning in their hands. But how?

Perception 1: Travel Agents are Too Expensive / Money-Hungry

Of the two problematic perceptions that travel agents need to deal with, this is perhaps the more insidious one. This is because most leisure travelers are price-sensitive, meaning to say if they think they can save more money arranging their itineraries themselves, they sometimes will.

Worse still, when they know that travel agents get a commission from their expenditure on airfare, tourist attractions and accomodation, they are also likely to start viewing members of the profession with distrust, and suspect that the itineraries recommended are meant more for their own profit, rather than the quality of services travelers receive.

A lack of price-comparison also means that these travelers can sometimes feel like their travel agents are ripping them off, or that engaging their services made the trip more expensive than necessary.

To deal with this, perhaps it would be wise for travel agents to provide their clients with more transparency when it comes to the issue of payment.

One solution would be to offer price comparisons for clients, as well as receipts with a price breakdown. In an industry with constantly fluctuating prices influenced by a myriad of factors, from how far away the departure date is to which day of the week it is, travel agents need to help their clients find some grounding and give them reasons to trust them. And being able to give them some perspective on the price of their trip is one of these reasons, especially when the issue is financial.

This is because travel agents, with their experience and expertise, are definitely familiar enough with the market to do this, and given that they usually save their clients an average $452 per trip, they should have rightly have nothing to hide.

More importantly, being upfront about how much your clients are paying you for your services helps to alleviate the doubt they carry, in part because they understand where their money is going and how it is spread across their itinerary.

Perception 2: Travel Packages by Travel Agents are Not Unique / Customised Enough

The second perception problem travel agents face is one that should be easily fixed - after all, it should be their job to not just plan trips for their clients, but plan ones that they will enjoy, especially if they asked for some customisation options.

But what if they didn’t?

While some travel agents may need to do better at listening to their clients and catering to their needs, this is an issue that could easily be due to a mismatch in expectations and a lack of communication between both parties.

There are countless reasons why what a traveler got was not what they expected, but the best way to ensure that they are satisfied is always active communication - asking for their preferences is only the first step, and following up is always necessary to make sure what a travel agent suggests actually meets their desires.

Asking for their opinions or providing questions are therefore important to get both parties on the same page - and is especially important in when some clients seem suspiciously pliant or quiet during trip-planning discussions.

But more importantly, the ability for travel agents to provide their clients with something unique lies in their knowledge of these places’ or events’ existence to begin with. Meaning to say, a part of the problem could be the supply of experiences that travel agents are offering to their clients. Therefore, as mentioned earlier in this article as well, it is important for travel agents to diversify and look beyond common tourist destinations, and into other possible experiences for more thrill- or adventure-seeking travelers.

And travel agents have a unique advantage here too. Their ability to leverage their relationships with their suppliers for accommodation and experiences means that it is likely they can get their clients into exclusive locations or events that are not widely available or easily accessible by the general public. If travel agents are able to incorporate more of these experiences into their clients’ itineraries and give them something only they can offer, it’s far more likely that their clients will think their trips were unique, and their money well-spent.

Conclusion

In conclusion, while disruption is inevitable across most sectors and the future remains uncertain, there are countless possibilities that travelers can look forward to. In the face of these possibilities, travel agents need to constantly adapt, and find ways to position themselves as trustworthy, experienced, and credible trip-planners who listen to their clients and have new, unique experiences to offer. While it may seem like a high burden, if they are able to do this, then it is unlikely that they will become obsolete in the future even with the advancement of artificial intelligence. Rather, it is more than likely that travel agents will defy the myth of their dying profession, and will continue to be important players in the travel sphere for travelers and travel providers alike. Complete with what technological wonders lay ahead, the future of the industry teems with endless promise for something better, and is definitely one to look forward to.

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How to Convert Your Website’s Browsers into Buyers - Dealing with Competition from Online Travel Agents

↪ 10 MINS READ

Given the prevalence and popularity of online bookings and online travel agents, it should seem reasonable to think that having travel agents or bookings online will make it far more convenient and accessible for customers to book your services, the opposite may rather very well be true.

In fact, one of the greatest challenges a travel agent often faces is actually in converting people browsing their catalogues into people who end up actually booking their travels with them - a reality that goes against the age-old mantra that if you’re available online, you’re far more likely to enjoy huge boosts consumers actually patronising your services.

According to the most recent data from smartinsights.com, the average conversion rate from browsers to buyers of e-commerce businesses are a mere 3%. This is to say that for every 100,000 times someone looks at your catalogue, only 3,000 of these instances will result in actual sales. This statistic is one that has been enforced several times over the last few years by numerous other studies, but for the travel industry, the reality might look even bleaker.

Overview

Maintain your online travel sites, even in spite of low traffic

Boost your conversion rates

Recognise the difference between digital and online shopping - the omnichannel experience

In fact, the average conversion rate for travel websites sits far lower than the already dismal 3% average across e-commerce, resting at only 1.6%.

This is the sad truth even for the websites with the highest conversion rates - according to a study conducted by retailwire, 75% of online shoppers still believe that traditional in-store experience in brick and mortars is important while making their purchases, while other studies suggest that up to 96% of visitors that go to your website are not ready to buy , although the figures may vary across travel websites - possibly being higher across due to the amount of research consumers conduct on their own, or lower, if their site-browsing is just yet another part of their research process.

But the greatest problem with this epidemic is this - that despite low conversion rates and customers favouring classic brick and mortars, most travelers still vastly prefer the online experience, and would like to book through online sites, rather than directly with things like hotels or travel agents themselves.

So what then are the purpose of online travel websites, and in what way can we improve them to eventually match up to the competition coming from online travel agents such as Expedia and Booking.com?

1. Continue maintaining your online travel sites, even in spite of low traffic

While some sources say that shopping online is the new era of commerce and trade, in reality, it often takes a backseat to actual in-store shopping (some websites estimate that online sales only make about 10% of total, retail sales in a store. However, online sites should not be completely written off, especially given how online shopping has increased in popularity year on year . This is even more so for travel, which people sink significant amounts of time into researching.

What should we then do to improve our business?

Surely, large online travel agencies are not going to go away anytime soon. The solution then is to make sure we can differentiate ourselves and gain a loyal following even in spite of their existence.

The obvious, first step then is to therefore reevaluate how conventional brick and mortars can begin better accommodating their shoppers by improving their online services.

But the second, more important part of the equation is also making sure you maintain a good impression and relationship with potential customers.

This is because the internet, as a source of information, can simultaneously give your website or agency greater visibility from search engine optimization, and give information such as valuable peer reviews to consumers that may not be available anywhere else.

This means that even the first impression your website leaves on your potential consumers is important, and factors that may be considered includes the feel, speed and cleanliness of your website and its user interface. The ability for them to easily navigate your website without bugs is especially important in helping them perceive your website and agency is well-run and reliable, and ensures that if they DO end up going through the buying process, they are not going to abandon your website halfway through due to stumbling blocks that arise from technical difficulties.

Moreover, a research conducted by Tnooz also showed just how important visibility is for the online shopper: 95% of the people they interviewed said they read reviews before booking their travel itinerary. Of these numbers, 85% of consumers have to read about 10 reviews before they feel that they can trust a business, and leisure travelers read an average of 6 to 7 reviews while business travelers read an average of 5. All these factors cannot possibly be met without an online presence, and are crucial in building trust and even a relationship with potential customers.

But the most important part of the study is this: In a research conducted by Tourism Research Australia, they found that the most important sources that influenced the decisions of global travelers were first travel review websites (69%), online travel agencies (57%), and tour operator sites (56%).

This means that even if first impressions may matter, the actual service that customers receive is also fundamental in their decision-making process when they are wondering if they want to make use of your services, as these are things that will determine how favourably they see you and your website, and whether or not they will recommend you to other potential customers. This also means that despite how prominent websites like Booking.com are, you still have a chance in standing out to the crowd and setting yourself apart as a travel agent people want to engage.

Of course, there are other ways that this visibility can be garnered. One way is your customers deciding to promote you because of a wonderful, instagram-worthy trip they recently had which you helped them organise. And the close second, when you pay these online figures to put in a positive word for you on their social media pages - a marketing tactic that proves to be important when you want to find a way to kick-start the creation of your online presence.

This is because when peer reviews hold such huge sway in how people think of your brand or website, it is indubitable that some of the best ways to reach the current generation is through social media - as proven by the rise of Instagram influencers, as well as the engagement of these figures for advertisement purposes across a multitude of industries. Especially when you want to start creating an online presence for yourself, this is a solid option to organically reach out to a large online following and guarantee visibility on the internet without spending astronomical amounts of money on traditional media - something large online travel agencies can afford due to the revenue they garner. Ultimately, this greater traffic to your website is important when you need customers to give your website a chance to appeal to them.

This brings us nicely to the second part of how we can then better make use of the internet as a travel agent or travel agency - and how to convert traffic from your site into actual sales.

2. Boosting your conversion rates

When looking at how to better improve your conversion rate, there are tons of tips out there. But when it comes to travel websites, personalisation remains the holy grail. This is the common consensus and one of the top tips even amongst other e-commerce websites, but due to the unique nature of buying travel online, personalisation remains more important than ever, and the reason is quite obvious.

When the internet has a plethora of options and where online travel agents continue to be go-tos for people who seek both autonomy, convenience and as much choice-comparison as possible, it is imperative then that travel agents set themselves apart from these online travel agents like Booking.com. And against such huge online hotel aggregators, the greatest advantage travel agents have is their smaller size and customer base, and therefore their increased ability to cater specifically to the target audience they want, by being able to better listen to travelers needs, and act on delivering what they want to them.

This personalisation can come in a multitude of ways - personalised email content, targeted display advertisements and on-site recommendations are a few examples, and all of these can help to improve customers’ look-to-book ratios and brand loyalty towards you.

Of course, there are also plenty of other ways to make your website seem more palatable to them beyond simply trying to personalise, such as having more calls-to-action on your website, the inclusion of safety or quality seals, or even the highlighting of deals and discounts available to your customers.

But the main takeaway is this - that conversion rates, while they can be influenced by a myriad of factors, is often affected by how consumers perceive your website and how much you care about them on a subconscious level, so that they see you as more credible than your competitors. The goal to set yourself apart from online travel agents here is therefore to make the relationship a lot more personal than large online travel websites can, and conduct relationship-building that cannot be done when a company is too large to listen to individual customers and cater to their needs as well as you can.

An example of what is especially crucial is having your consumers feel like your policies are as favourable to them as possible - things like price-matching, or customer-friendly security and privacy policies are therefore things that, especially if you make explicit as part of your unique value proposition, can give you a leg up over your competitors.

Another example could be how your information is presented to your customers. In the case of tours, for instance, if customers can get a good idea of what you’re offering and the unique reasons why they should purchase your tour, they would be more inclined to engage your services because of your assistance in their booking process.

3. Recognising the difference between digital and online shopping - the omnichannel experience

The last way to establish a higher browser-to-buyer conversion rate is to recognise the difference between digital and online shopping. As put by the source here, the difference between digital and online shopping is this - digital shopping forms the foundation of consumer-centric commerce which is contextual, collaborative and connected. Meanwhile, online shopping remains a broad and mostly vague term, used to describe simply shopping on the internet by the consumer.

The reason this difference is important is because digital shopping recognises how the consumer has changed over the ages, and the importance of adapting to their newly formed needs and wants.

Beyond that, digital shopping also merges in-store and online shopping for an omnichannel shopping experience. This omnichannel shopping experience finds its foundation in bringing together marketing efforts and technology to make shopping and customer assistance available to the consumer regardless of whether they are online, or in-store, and is great for brands that are still trying to figure out who their core audience is, or when they, much like travel agents, have more than one type of customer.

As the article puts, the omnichannel shopping experience is this:

“Real omnichannel requires making the customer the focus, no matter what the channel is. It means that you’re understanding and responding to conversations in real time, not just having a lot of conversations at once. No matter where they contact you, the customer journey has to be progressing—no repeating, no steps backwards. Wherever your customers contact you, it’s crucial that you have the full context of their history with the business. Each interaction has to be pushing the customer journey forward. A customer that’s chatting with an agent on a desktop site can switch to SMS while they’re on the go, pick up the phone and speak to the agent if they need to go into detail, then receive a recap over email from the agent after they’ve finished the conversation. No matter if your customer is asking a question on your site’s live chat or sending an email to support, the response needs to be informed by their past behavior to get the right response and drive the right action. This means a fundamental shift in the way service and experience organizations operate.”

This form of shopping may sound like personalisation, but it also surely goes above and beyond to put the customer first, regardless of who they are.

Simply put, it’s the effective integration and execution of the human touch in your business proceedings. At the end of the day, when the service you receive is still the main thing that people will judge you off, this is likely going to be the most important factor that consumers care about - that .they have someone they can reliably contact and count on, and whom they can trust in the face of any needs or difficulties they have.

Your ability to deliver to your customers what they want, and assist them when they need it, is important in building a presence for yourself - especially when you are competing against other large online presences - that can translate to higher conversion rates and brand loyalty, when customers feel like they themselves are able to trust you and willing to recommend you to their peers. But more importantly, this support is often times some of the most valuable to travelers who entrust their travel agents with their travel plans and safety. The kind of customer support that can be achieved and goodwill that can be garnered by carefully listening to your customers and following up on them is something that large online travel agents cannot necessarily do, and therefore is one of the biggest ways to bring customers over to your side.

Conclusion:

Ultimately, your brick and mortars are still going to have the greatest influence on the success of both your brand as a travel agent and your website, but your existence on the internet remains important in conferring you greater reach and legitimacy to other potential consumers.

Meanwhile, your ability to effectively create a good or even lasting impression on the internet through your website is important for when customers are deciding if they should engage you.

Once they do, your ability to provide to your consumers even through online platforms is crucial in your website’s success, both so people trust you, and are willing to endorse you.

Every step of the way, there are things that are important to consumers that travel agents need to take note of, and to be able to provide good service is always going to be important in the long-term. But to do this, brick and mortars and websites should not be seen as exclusive alternatives to each other. Only through this can travel agents eventually build enough of a following and legitimacy for themselves in the long-term, such more people are willing to engage them online over time and even in spite of the existence of online travel agents, they can still continue to thrive.

[pytheassg]

How to Plan Your Calendar as an Inbound Travel Agent

↪ 19 MINS READ

Last week, we looked at the travel trends of Singaporeans in 2018. To round up the article, let’s now look at travelers coming into Singapore to see who they are, and how they spend.

The state of Singapore’s tourism industry, especially with regards to its inbound flights, is often directly correlated with the global economy at large. And with that comes good news - in 2017, global travel industry gross bookings reached 1.6 trillion US dollars, which makes it one of the largest and fastest growing sectors in the world - mostly due to the rise of middle class families around the world, particularly in key markets such as China, which has once again generated strong growth in arrivals.

Overview

Top 10 Visiting Countries

The Highs

The Lows

The Analysis / TL;DR

Factoring in indirect economic contributions, travel and tourism (according to deloitte) now accounts for a staggering 10.2% of global GDP, and Singapore is likely to reap these benefits. And while projections of the growth of Singapore’s tourism sector have been modest, the country has so far been exceeding its own expectations. In 2017, the Singapore Tourism Board estimated the growth of its international visitor arrivals to hover from 0% to 2%, while the actual growth was 6.2% from 2016. In actual numbers, this means that about 17.4 million people visited Singapore, almost 1 million more than the forecasted amount.

Meanwhile, the tourist spending in Singapore is also at a historical high. Visitors to Singapore spent a combined $26.8 billion Singapore dollars - $1 billion more than the estimated range of $25.1 billion to $25.8 billion, and a 3.9% growth from tourist spending in 2016.

This growth is one that is, along with 2016’s performance, a new record of year-on-year growth for two years running, and does not look like it will slow anytime soon.

The year before, Singapore’s international visitor arrivals reached 16.4 million and received a 7.7% growth in comparison to the number of visitors in 2015. The tourism receipts of that year also grew by 13.9%, and tourists spent $24.8 billion dollars in Singapore - almost $2.4 to $2.8 billion dollars more than the forecasted amount, primarily due to growth in visitor arrivals that was seen across all of Singapore’s Top 10 markets.

Currently, Singapore forecasts its tourism receipts to grow by 1-3%, and its international visitor arrivals to grow by 1-4% for the next year. A flourishing industry, the International Air Transport Association (IATA) expects Singapore’s aviation industry to be worth S$ 88 billion dollars in 20 years’ time, and Asian air travel is expected to double by 2030, and even more modest estimates by the World Travel & Tourism Council (WTTC) suggest that Singapore’s tourism revenue will reach US$18 billion dollars by 2027. As such, there is likely much to capitalise on from the holiday-makers visiting the little red dot, given how willing international travelers are to visit Singapore. To understand the context and what Singapore should move towards in order to achieve that growth, let’s look at the breakdown of Singapore’s International Visitor Arrivals and see which countries’ citizens come into Singapore most often, the size and stability of each of these markets, and what this means for the future.

NOTE: The following figures below, referencing International Visitor Arrivals to Singapore, makes use of the definition from STB: International Visitor Arrivals, which refer to travellers taking a trip to Singapore whose length of stay is less than a year. This excludes:

All Malaysian citizens arriving by land

Returning Singapore citizens, permanent residents and pass holders

Non-resident air and sea crew (except for sea crew flying in to join a ship) and

Air transit and transfer passengers

Top 10 Visiting Countries

From the current statistics available, the top 10 countries that make up most of Singapore’s International Visitor Arrivals are China, Indonesia, India, Malaysia, Australia, Japan, Philippines, South Korea, the United States, and Vietnam.

However, not all countries travel equally - of all the countries mentioned above, China and Indonesia prove to be invaluable markets, both of which are often neck and neck for top inbound travelers to Singapore; the number of tourists from both of these countries hover from lows of just above 200,000 to more than 325,000 a month.

The next two notable exceptions are India and Malaysia, which contributes about 130,000 to 175,000 to the numbers Singapore receives monthly. Meanwhile, most of these countries also have different peak periods from each other - the holiday season for Koreans, for instance, is vastly different from Philippines’, evident in how when holiday season arrives for Koreans in the month of January, bringing many visitors from the country to Singapore, the Philippines’ keenness to travel is at some of its lowest.

The differences across these ten countries have been charted out across several tables below, where we compared all in-bound travelers from these countries based on the data from the Department of Statistics Singapore across the years 2014 to 2017, looking at factors such as their preferred months of travel and how volatile each individual market is in comparison to each other.

DISCLAIMER: ALL DATA USED FROM THIS POINT ONWARDS, FOR CALCULATIONS OR ANALYSIS, IS FROM SINGAPORE’S BOARD OF STATISTICS WEBSITE AND IS FREELY AVAILABLE TO THE PUBLIC.

The graph primarily uses shades of two different colours, green and red, to differentiate between the highest and lowest interest in travel to Singapore, from its top 10 visiting countries. Green indicates when travel interest is high, and red indicates when travel interest is low, while the intensity of the colours indicate the consistency and greatness of the level of interest - the darkest shades of each colour therefore indicate that travel is either usually highest in a particular month, or the lowest (i.e. China has always had highest interest in Singapore in Feb, and lowest interest in Sep.)

Another consideration this chart took into is the consistency of travel interest, taken from the variance in the numbers across the months in 2014 to 2017. Months that are more inconsistent with its interest levels are colour-coded to show if this inconsistency is favourable (i.e. if it is more often on the higher side, or the lower).

However, not all demand is equal, at least while looking at Singapore’s inbound trips; The sheer volume of visitors from some countries, even in their lowest, can trump the numbers of some countries at their peak. Meanwhile, visitors from some countries may be more willing to spend than others, while some countries’ worst periods may pale in comparison to others with far steeper falls when it comes to visitor numbers.

To get a better insight on this, we have also compiled some other tables to illustrate this difference.

The Highs

The first table below, taken from calculations from Excel, shows the size of the markets, and how large they are compared to other countries in the top 10:

Size of market in Percentages from 2014 to 2017   CHN IDN AUS MYD IND JPN PHL VNM USA KOR % 21.21 24.66 9.02 9.99 9.21 6.76 5.87 3.90 4.41 4.96 Rank 2 1 5 3 4 6 7 10 9 8

Ranked, they look like this

  IDN CHN MYD IND AUS JPN PHL KOR USA VNM % 24.66 21.21 9.99 9.21 9.02 6.76 5.87 4.96 4.41 3.90 Rank 1 2 3 4 5 6 7 8 9 10

From this, it is easy to see that the largest market, and therefore the one most important to cater to, is the Indonesian one, followed closely by the Chinese one. However, there are also times when the number of Chinese tourists surpass the number of Indonesian tourists as well. Both of them combined makes up almost half of all international tourist visits from Singapore’s top 10 visiting countries in a year. The Malaysian market falls into third place, unsurprising given the country’s proximity to Singapore, but still a far cry from the numbers seen from its Indonesian and Chinese counterparts. It is followed closely by the Indian and Australian demographic, which are fifth and sixth place respectively. The numbers start to taper off from the sixth place onwards, and see Japan, Philippines, South Korea, The United States, and Vietnam as the smaller markets of the biggest 10 countries.

The second graph, showing the 10th percentile, average, and 90th percentile of each of the 10 countries’ visitor numbers of the same time period (2014 to 2017), also highlight some interesting things:

  IDN CHN MYD IND AUS JPN PHL KOR USA VNM 90th 306,775 295,179 107,390 119,182 108,278 83,023 73,695 60,566 52,176 52,902 Avg 242,208 208,374 98,181 90,509 88,624 66,422 57,616 48,723 43,350 38,354 10th 205,452 129,926 86,124 69,027 71,274 52,963 45,052 37,712 36,282 29,108

The first it highlights is how volatile some markets are than others - the highs and lows of India relative to their average, for instance, is much farther apart than the highs and lows of Malaysia. This is the same for the Indonesian and Chinese markets, where the Chinese market takes a much farther dip and a much higher rise than its Indonesian counterparts. For the most part, however, most of these countries are comparable to each other, and seem to be less volatile.

This data also shows which market is the most stable or profitable even at its lowest - the Malaysian and Australian market, for example, do not have numbers too far off from its average even in their yearly slumps.

On the other hand, this also highlights which markets have great highs that can be capitalised on, such as Vietnam.

A better way to look at this data will be to look at the standard deviation of the information we have on these countries. However, to accurately look at this data, we should look at standard deviation relative to the country’s averages.

To do this, we first obtained the standard deviation between the average, 10th and 90th percentile of the volume of travel for each country, then we divided the resulting standard deviation by the averages of each country’s travel volume. The formula then resulted in the numbers in these tables below, with the decimals showing how far the highs and lows stray away from the average international visitor arrivals of each country. The countries have also been ranked, and the smaller the decimal number of each country, the less volatile the market is, relative to its size:

  IDN CHN MYD IND AUS JPN PHL KOR USA VNM Std Dv (In Decimals) 0.17291 0.32383 0.09007 0.27700 0.17056 0.18509 0.20346 0.19153 0.14998 0.25535 Rank (Most Volatile) 7 1 10 2 8 6 4 5 9 3

From this, we can see that some countries are easily more reliable than others when it comes to having a steady stream of customers to tap on all year around.

But this by itself does not give a good picture of what this volatility looks like in reality, as some countries could have much higher peaks than lows. To get an accurate impression of which countries are more volatile than others ways that are good (i.e. which countries often experience great peaks and not-terrible lows), we have to go into the data a bit more. Below this are figures that have been charted to show which countries have the greatest highs and worst dips. This time, the formula we used for the tables took the difference between the averages of the countries and its 10th or 90th percentile. The difference is then divided by the averages of each country to reflect proportionality (i.e. if a country has a smaller market, it is possible that the market size doubling will still not seem large compared to other larger markets. This is to account for the difference in market sizes), and is put in percentages to show how much higher or lower a country goes from its average (rounded up to 2 decimal places).

The Highs   IDN CHN MYD IND AUS JPN PHL KOR USA VNM % Increase from Avg (peaks) 26.66% 41.66% 9.38% 31.68% 22.18% 25.06% 27.91% 24.31% 20.36% 38% Rank (Largest peaks) 5 1 10 3 8 6 4 7 9 2

The Lows

The data here shows the country that Singapore experiences the greatest surge of tourists from at its peak is China, which makes it the market that increases its own profitability the most as a result. Right behind is Vietnam, with an increase of 38% of tourists from its average at its peak, then India, and so on. Meanwhile, the second table below shows the countries with the sharpest declines compared to their average:

The Lows   IDN CHN MYD IND AUS JPN PHL KOR USA VNM % Increase from Avg (peaks) -15.18% -37.63% -12.28% -23.73% -19.58% -20.26% -21.81% -22.60% -16.30% -24.11% Rank (Largest dips) 9 1 10 3 7 6 5 4 8 2

From here, we see that markets that remain most profitable during their lows, proportionate to their averages, are first the Malaysian and Indonesian markets, followed by the US market, and so on.

All of these factors taken together gives us the most comprehensive view of the various markets and their natures. Below are all of Singapore’s top 10 markets and how they fare across varying factors mentioned before. Some of the factors have been reversed for easier comparison (i.e. Most volatile market > least volatile market, Largest Dips > Smallest Dips).

Coupled with the initial data found on which months are most and least favourable for each of these countries, we can now see which of these countries can be directed more focus in certain months compared to others. This can possibly come in many forms, such as tour packages or advertisements of travel into Singapore.

This is especially important for travel agents, who may want to redirect their focus onto visitors from another country - either because there is a large boom in the number of travelers from one country, or because a lower demand means being able to cater to a smaller market in a niche, more personalised manner.

Alternatively, travel agents who value stability can also choose to market towards holiday-goers from countries like Malaysia or Australia, where even though the market does not experience great peaks when interest in travel surges, it is also seemingly more protected against sudden drops in demand that can leave travel agents devastated and desperate for customers.

The Analysis / TL;DR

For travel agents looking to better plan their calendars and cater to the markets when they are at their peak, you can also refer to this table below, which uses the previous three years’ trends to predict future demand in each individual market.

 Month Best Countries January Indonesia, China, Korea, Australia February China March USA April Philippines May Philippines June Vietnam July Indonesia, India, Vietnam August China, Japan September Japan, Australia October Australia, Philippines November Malaysia December Indonesia, India

The Breakdown

 Month Best Countries Why? January Indonesia, China, Korea, Australia China: January is a good time to start focusing on China, because it acts as a build-up to one of China’s peaks in February, which is the greatest at a 40% increase, relative to its size compared to all the other top 10 markets. This means not only can you prepare for the next month, but this month is also likely to yield a lot of customers. Indonesia: Indonesia, as one of the largest markets, is just coming down from its peak in December this month. As a country with moderate peaks but very small dips, it remains a reliable country to cater to, especially given the high demand of this month. Korea and Australia: Both of these countries are comparable when it comes to their peaks, and both of them are at their strongest in the month of January. While Australia is a bigger market than Korea, given that the percentage rise in the demand is roughly the same, they are both equally viable options to look into in this month. February China China, being one of the two largest markets for Singapore’s inbound flights, should be many agents’ main, if not sole focus, due to both its market size and large increases in demand (which stands at 41.66%). Crucially, China is also a market that can be relied on during this month, where travel demand is extremely low – and often times at its lowest – across most countries. March USA While March is not a particularly good month for travel, it is one of the two months during which the USA market is strongest in demand, the other being December. Despite its small market size and low peaks, the USA market is still one can be relied on to have a traveller base, and March is a good time if you want to establish a presence in the country. It is also the country with the highest demand relative to its size during the month. April Philippines In the months of April and May, while demand in travel remains low to average in most countries (with the exception of Australia, Indonesia and Vietnam, which have higher than average demand), the Philippines is a great market to look into. Not only are they at their peak during these two months, but they also have reasonably good increases in demand relative to their market size, at 27.91%. This puts them in the fourth place of which countries have greater peaks when they have high demand, and hints at a possible opportunity to develop your presence in the market at this time. May June Vietnam A rather interesting market, Vietnam has the second highest peak during the height of its demand at 38%, falling behind only to China. In the month of June, Vietnam is moving towards its golden month in July, where it will experience its greatest peak in the year. While Vietnam is the smallest of the 10 countries when it comes to market size, its hike in demand relative to its average means you’re very likely to find success in the country if you play your cards right. This hike in demand also means you have a better chance of establishing your brand and customer loyalty during this time if you choose to try catering to the market. July Indonesia, India, Vietnam In the month of July, interest in travel picks up significantly in some countries. While some travel agents may feel spoilt for choice, here are three suggestions for those that are unable to decide. Vietnam: The month of July is typically when Vietnam reaches its peak. As the market with the second highest peaks, this increase in demand ensures that travel agents catering to the country’s natives have plenty of business to go around, assuming the number of travel agents operating within the country is relative to its market size, which is likely. Indonesia: Indonesia, which remains as Singapore’s largest in-bound market, remains a reliable choice for travel agents who don’t know which country they want to focus on. As a relatively stable market, travel agents can rest assured that demand will remain positive – and even if it does not, the numbers that Indonesia will receive is at least not that far off from its average, making the country an extremely safe choice. India: India, as Singapore’s 4th largest market and third in the best peaks, has historically experienced good growth in its arrivals to Singapore. A market with great potential to expand due to its yearly growth and great peaks, the country is surely one that travel agents should look into for the future. August China, Japan China: China’s best month rests in August, where they can reach up to 41.66% more than their usual average demand. This peak is the greatest amongst all the top 10 markets of Singapore’s inbound flights, and means that travel agents can anticipate high traffic and more business during this time. Japan: Despite being the middle of the pack under most of the metrics used to measure the countries above, Japan is still a Singapore’s 5th largest market, and experiences a reasonably high peak that brings its demand up by 25.06% from its average. In its best month, this is an option that travel agents could consider, especially when other countries’ travel interests experience slumps during this period. September Japan, Australia According to data that was garnered and analysed above, September is the worst month for travel across most countries. In fact, only the two countries recommended in this month, Japan and Australia, have slightly above average demand in their individual markets. While this month is particularly bad, travel agents who want to compete in a market with that has more demand than their usual can look towards these two countries. Between the two, Australia is a less volatile market (ranking 3rd) compared to Japan (ranked 5th). Australia also has smaller dips (ranked 4th) compared to Japan (ranked 5th). Meanwhile, Japan experiences slightly better peaks (ranked 6th) compared to Australia (ranked 8th), which means Japan may prove to be a slightly better option. However, given how close most of their rankings are to each other, there should be no large or glaring differences between the two. October Australia, Philippines While interest in travel in the month of October is slightly better in comparison to September, most countries’ travelers still do not seem that keen in going overseas. The situation is largely similar to September’s, where there are only some countries with a slightly above average interest in travel. Both of these countries, Australia and the Philippines, have different characteristics that different travel agents may favour – while Australia is the less volatile market and ensures stability in times of lowered interest, the Philippines is one of the more volatile countries, coming in at 7th – but this also means it has a better peak than Australia, coming in at 4th while its counterpart, at 8th. November Malaysia During November, some markets look like they are beginning to pick up, such as the Japanese and US market. However, the situation is still largely the same compared to the previous two months. Thus, in climates like this, the best country to look at in this month is most likely Malaysia. Standing at 1st place for both being the least volatile market and having the smallest dips, and 3rd on the size of the market, Malaysia is sure to be full of opportunities while remaining relatively stable in times of low demand. Despite their coming in last on how good their peaks are (their peaks only bring in 9.38% more customers compared to their average), this stability is still something that is welcomed. Coupled with the size of the market, this means travel agents can safely opt to cater to Malaysian travelers without having to worry about a lack of customers from low demand. December Indonesia, India While Malaysia and the USA are also experiencing their greatest peaks this month, their standings as countries as some of the lowest peaks (at 10th and 8th respectively) means they should not be countries to focus on when other markets are similarly in their golden month. In December, the two countries you should look at instead is Indonesia and India. Indonesia: Singapore’s largest in-bound flight market, Indonesia is surely a country to look out for during the month of December, when travelers’ interest in Singapore is at its peak. While ranking only 5th in how good its peaks are, when coupled with its size this means that travel agents can be sure that business opportunities in the country will be prosperous. India: As Singapore’s 4th largest market, and ranking 3rd in greatest peaks, India is yet another country to take note of when deciding which country has a promising customer base for the month. December is also the peak for India, which means the prospective customer base will be huge and awash with opportunities.

The information from this table was derived from the 3 graphs: 1. Top 10 Visiting Countries 2. The Highs 3. Best and worst months

Back To The Point

While travel into Singapore is unlikely to wither away anytime soon, it is still important for the country to retain and develop the current markets that a huge proportion of its tourists hail from.

Evidently, it is unrealistic for travel agents in Singapore to completely pivot away from their biggest markets in China and Indonesia. No doubt, trying to compete with other travel agents in booming markets such as China may make the most sense in the short-term. However, when it comes a time where demand starts slowing down in these countries, perhaps it would do well for travel agents to consider focusing on the smaller, yet still growing and popular, markets that Singapore has. In fact, some travel agents may even find greater luck in trying to market themselves to locals in countries that make up a smaller part of the Top 10 pie, due to the fact that that the number of travel agents in any one market is often proportionate to the size of the markets - meaning to say, the larger the market, the more travel agents there are in said market, and therefore the harder the market is to compete with or break into for a myriad of reasons such as choice overload and having to compete with large, established travel agencies in the country.

The focus on the smaller markets of Singapore is also likely something that will be crucial for Singapore’s tourism industry in the future. When the interest of travelling to Singapore in markets such as China and Indonesia hit a saturation point and cease to grow - despite their current status as top growth markets for Singapore - the interest of travel agents in smaller markets such as Vietnam will start to become more important than ever before, due to their presence’s ability to develop a stronger market in these very countries.

This is because a saturated market means an increase of travel agents in these countries will be unlikely to have a huge impact. In fact, newer travel agents or travel agencies may even find it difficult to attract customers against behemoths that have made a name for themselves in these established markets, such as Ctrip.

On the other hand, the small size of some of these growing markets will be easier for newer or smaller travel agents to break into, and an increase in the number of travel agents catering to these markets will also be good for these markets’ growth - increasing competition between travel agents in these markets means that the overall quality of services received by travelers will most likely improve, as travel agents fight to remain relevant against their competitors in a growing market.

In turn, Singapore now has an even greater likelihood of retaining travelers from these smaller countries and growing their customer base in them. This is especially so for countries that experience great peaks in spite of their size, such as Vietnam and the Philippines, which gives travel agents a window to capitalise on as opposed to smaller but more consistent markets, but this benefit is one that can be applicable to all the smaller markets that Singapore has. This is because in these smaller markets’ countries, an increase in the competition and quality of services amongst travel agents will likely leave travelers with better deals than ever before, as well as higher-quality services and memorable experiences - factors that drive up interest in travel to Singapore, and that act as incentives as to why they should visit - and revisit - the island state in the future.

Ultimately, while the data that exists in this article may help a travel agent decide which country they would like to look into and eventually serve, the most important takeaway here is this: Singapore’s ability to develop its smaller markets is one of the most important things it should consider in its attempts to ensure the country’s continued growth of its tourism industry - not only because developing these markets can ensure the industry’s future advancement when growth starts to slow in large markets crucial to Singapore, but also because in the event of crises where one country’s interest in travel to Singapore swings dramatically downwards, the risk of Singapore’s tourism industry being hit too hard is at least minimised and mitigated. And one of the biggest contributing factors to this change may very well be travel agents and the markets they approach.

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A Guide for Outbound Travel Agents: A Review of Where Singaporeans Are Travelling, How Often, and Why

↪ 12 MINS READ

Across centuries, travel has remained as one of the only constants in human civilisation, something so essential to the human condition it has never ceased improving.

Over the last decade, the Asia Pacific region has been the fastest growing tourism region in the world, which is one of the most important sectors in a large number of Asia Pacific countries. The growth in tourism can easily be attributed to increases in a country’s economic growth, its citizens’ disposable income and leisure time, as well as political stability and aggressive tourism campaigns, among other factors. But what is significant about tourism is that it often contributes to a large part of a country’s GDP as well.

While we will eventually look at the in-bound flights Singapore receives in the future, let’s first see how Singapore is going to fare in its tourism sector’s outbound flights in the near future.

Overview

Statistics - What Data tells us

Where Singaporeans likely to travel to, and when

Trips they want

How to win over a Singaporean traveller

2018 Travel Trends

Statistics

Currently, what we get from the graph above shows that Singapore’s Outbound Departures has been growing steadily over the years - something that is attributed mostly to the growth in air travel as a whole, as interest in sea travel has not grown significantly over the past few years.

A more in-depth look at this data collected by the Immigration and Checkpoint Authority of Singapore shows that over the last four years (2014 to 2017), the number of trips taken by Singaporeans travelling out of the country by sea has hovered around the 1.7 million range.

Meanwhile, air travel has steadily increased year on year, with an increase of almost one million more flights over four years, from 7.16 million flights in 2014 to 8.01 million flights in 2017. This nearly 12% increment is likely because of the rise of low-cost carriers in Singapore, which made going overseas more appealing and cost-friendly for Singaporeans. If you’re interested, look out for our future article on cruises in Singapore - coming out soon! We post an update on this article when it’s ready. However, AsiaOne does predict for cruises to be one of the main vacation options for Singaporeans in the future, which means greater outbound departures by sea could be expected in the future.

But given that air travel makes up the bulk of the total outbound departures in Singapore, they are going to be the main focus of this article, where we will inspect emerging trends among travelers, such as how they are travelling, with whom, when, and why.

Where Singaporeans likely to travel to, and when

Data from Booking.com predicts that there are 8 main travel trends among Singaporeans to look out for in 2018.

Combining customer insights from over 182 million guest reviews and research from 19,000 travelers across 26 countries, Booking.com predicts that classic travel destinations are going to retain their popularity.

From their data, some travelers are looking to go back to destinations they visited and loved in their younger days. Of these people, 33% of them will consider a holiday they experienced as a child, while up to 52% of millenials (18 to 34 year-olds) are keen to return to favourite family destinations they’ve been to.

This information can be found reflected in the locations that Singaporeans look into while planning their holidays, where the most popular locations searched on Google in 2016 and 2017 continue to be places somewhat familiar with them - such as Bali, Jakarta, Shanghai, London, Hong Kong and Seoul.

Meanwhile, more Singaporeans may wish to travel to bucket list locations in 2018. Of all the people Booking.com looked into, 46% of them have a travel bucket list in mind, and 83% of them aim to tick one or more destinations off their list this year.

Of all these people, 56% put seeing one of the wonders of the world as a part of their bucket list, 49% want to visit a famous international theme park, and 38% want to give it a go at local delicacies in other countries. From this data, it is possible that Singaporeans might feel the same way, even though most outbound trips are short-distance getaways that do not bring them outside of Asia.

However, some television junkies from Singapore may also look to visit places where their favourite TV programmes are set in, with 42% of international travelers show an interest in on-screen locations from films, television shows and music videos. As a result, the top two TV programme locations most popular with prospective travelers are South Korea (36%), as seen in Descendants Of The Sun, and Croatia, Spain and Iceland (27%), a location familiar to fans of the Game of Thrones series.

As for when they travel, the Department of Statistics Singapore has some valuable data that shows which months are most popular with different travelers across the year.

The data of both land and air outbound trips in 2016 and 2017 are as below:

Outbound Departures of Singapore Residents by mode of air transport

The data from these last two years are largely similar in pattern to the years before them, and suggests that Singaporeans travel most in December, followed by November, June and March - which are also months known for their school holidays.

But other sources such as the Singapore Skyscanner Travel Report can also give us a good idea.

Based on their data, they found that the week before Christmas is usually the most popular school holiday week for Singaporeans to fly, while some others instead opt for the strategic use of their leave days - by using them during long weekends, or in the days between public holidays and their normal weekends.

The increase of such long weekends that allow for overseas travel when planned strategically has also seen an increase in recent years - perhaps a move by the government to stimulate travel, a strategy that has evidently worked.

How they want their trips to look like

Some specific things travelers wish for, according to Booking.com’s 19,000 surveyed travelers.

Hiking Interest

The Local Experience

Group Getaways

1. Hiking Interest

Interestingly, almost twice as many people are looking to take healthier trips around the globe. Currently, 1 in 5 travelers plan to take health and well-being trips this year, compared to 1 in 10 travelers last year. And of these people, over 50% say they want to walk or hike.

2. The Local Experience

If you ever wanted a more authentic, local experience overseas, and someone to introduce you to their favourite local foods and places during your own travels so you can get a better taste of how the country (which is even true for travelers going only across the border and into Malaysia) is like - essentially, your personal tour guide - you are not alone.

Rather than staying in hotels, 30% of travelers said they would prefer to stay in a holiday rental, be it a holiday home or apartment. Individuals keen to have a more authentic local experience will also look to hosts for their expertise, with 25% of these individuals saying it is important for their host to have strong local knowledge, so that they can recommend to them local food and places to visit.

3. Group Getaways

It should come as no surprise that people love traveling overseas with their friends. When travelers were asked who their 2018 traveling companions were likely to be, 34% of people stated it was likely to be their friends - a rise from 2017’s 29%, and the segment with the greatest increase compared to 2017.

The reason? That these group getaways makes accomodation cheaper for them - especially accommodation they would not be able to afford on their own - a sentiment held by 47% of travelers looking to journey overseas with their friends.

FINALLY, how do you win a Singaporean traveller over?

Of course, just knowing where people would like to travel is not enough. Some promotion is more valuable than others, and this seems to be the case especially amongst travelers in Singapore.

1. Start advertising online - especially on social media

According to Booking.com, more than half of Singapore’s travelers are inspired by recommendations from friends, family members or colleagues (58%), while social media also tempts some people towards locations they may not have had an interest in prior (43%).

Other things that influence where people want to travel include recommendations that prospective travelers see from blogs or on YouTube (51%), while on-screen locations from television, film or music videos will possibly win over 42% of travelers in 2018, as mentioned prior.

This means investing in social media and online advertising might be a good strategy of not just getting a greater reach, but stimulating more interest as well.

However, other research also suggests that other platforms may be equally powerful in stimulating interest in travelling to an overseas destination.

2. Invest in Search Engine Optimisation

Data from Google’s 2014 research shows that search engines are the most popular online planning source for leisure travellers (60%), and second most popular for business travellers (55%), and this is unlikely to have changed so far, especially given how visibility of different websites and locations sharply increases when these results turn up onto the search engine’s front page during a potential travelers’ browsing process. This means that an investment in Search Engine Optimisation and the development of cleaner and more intuitive and friendly user interfaces for travel sites is likely to boost not just a travel agent’s webpage’s visibility and page traffic, but give them more chances to leave a good impression on their prospective customers - which may just convince some of them to book their trips through them.

3.Include more experiences that are unique to the local country

The rising interest of getting to know a country and its cuisine and citizens better means that travel agents and agencies have to adapt to the new demand for these experiences. To do so, start specialising more deeply in certain countries - while travel agents already do this to some extent with things such as familiarisation trips, the kind of on-the-ground experience that travelers are starting to look for means you’ll have to know more than what is a good hotel and sight-seeing spot.

4. Bring back (and advertise differently) age-old classics

Some of the most popular tourist locations with Singaporeans are places that even their parents and grandparents have been to - but now, millenials are poised to be the most nostalgic demographic, in that they now want to explore these same places and tours once again.

While most people will already travel with their friends and some tours already give discounts for people who travel in groups, perhaps try spinning these classics in a new light - that this is their chance to rediscover a place full of childhood memories and happiness, and this time, they get to do it with their friends - and learn more about their beloved tourist spots or countries while doing so.

But what about possible disruptions to travel plans?

Other factors affecting your travel plans

These things happen all the time, and can influence desire to travel so drastically that some people end up cancelling their plans entirely. Such events include civil unrest, or can even include terror attacks, such as when some people cancelled their travel plans after the Paris terror attacks in 2015.

The outbound travel market in Singapore, however, currently seems to be rather resilient. A recent shift in attitudes has seen Singaporean travelers less put off from traveling overseas even in spite of terror attacks. In fact, some people no longer think it should be the first consideration when deciding if they should travel at all.

Moreover, some Singaporeans even capitalise on certain global events - such as Brexit - to take vacations in countries using the Euro, after the currency weakened due to uncertainty in the future of the United Kingdom. Similarly, when the Ringgit weakened, Singapore also saw an increase in locals traveling across the border to Malaysia to get more value out of their money.

The data here suggests that Singaporeans are growing to be a more tenacious market even in spite of global unease, and respond quickly and positively to ways they can benefit in their travels - another sign that the market is set to continue its steady growth.

This is on top of the fact that Singaporeans are willing to do large amounts of research prior to the confirmation of their trips, mostly online. Besides that, they also travel very frequently (in a year, there was a report that averaged the number of trips a Singaporean took to be 5.2 a year), and often prioritise cost and convenience - which means they are likely to book their trips early, usually online, and are less likely to back out.

Main travel trends of 2018

1. Singaporeans are likely to ride on trends, such as popular, “bucket list” locations, popular TV show destinations, or even places which have been granted a stamp of approval by people like their friends, or even bloggers and content creators on YouTube.

2. Singaporeans want to get on the ground more, and better experience local culture by receiving more personalised recommendations on where to sightsee, visit or eat. Some of them might even opt to stay under the same roof as their hosts, while others who are more health-conscious want healthier travel plans that include a walk or a hike.

3. Singaporeans are likely to return to popular tourist destinations from their past - and revisit them with new eyes. Places such as Bangkok have always been extremely popular, but now that the millennials have grown older, bringing them back to places such as Dreamland may incite bouts of nostalgia that leaves them hoping they could stay just a little bit longer.

4. Singaporeans are more likely to do a lot more research beforehand, especially online, and capitalise on ways to make the most value out of their money.

5. Singaporeans are currently forecasted to be tenacious in the face of regional unease, such as tensions from terror attacks occuring in some notable European countries.

All these trends signify a healthy tourism sector that bodes well for the future - a confident market is one that is likely to grow, and with this growth comes likely more, if not better, travel options and alternatives Singaporeans can choose from in the future.

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Why Haven’t We Upgraded The GDS? –  The Future of the GDS System 

↪ 17 MINS READ

The Global Distribution System (GDS) is an indispensable part of how people book their flights today. Acting as a conduit between the travel suppliers (airlines, hotels, cruise, car rentals, etc.) and travel agents, they have two core value propositions. The first one lies in enabling live bookable inventories of travel suppliers to travel agencies with a few host commands, thus making bookings more efficient. The second value they provide, especially to the travel suppliers is their global reach and scale. For the uninformed, the GDS represents the factories of the world combined in a typical supply chain.

From websites like Expedia and Skyscanner/Ctrip to brick and mortar agents, you’ll find the use of the GDS integrated into their daily operations and every flight booking they make.

But there is one big problem – the GDS, former pride and joy of major airlines for being at the forefront of technology back in the 1980s (or 1960s, if you include the CRS period), is now horrendously outdated.

So why haven’t we upgraded from the GDS?

To understand why it is so difficult to upgrade from the current GDS system, we must first go back to the very beginning of how and why the GDS came about.

The GDS was invented in the 1960s following World War II, when a surge of interest in aviation resulted in leaps of development in technology. The progress made by the travel industry in the past was made true because of a universal aim in the industry to improve the efficiency of transactions between airline providers, and companies that purchase travel for their customers.

What first started as travel agents and consumers ordered air tickets by phone transformed into a streamlined process that allowed travel agents to place remote bookings from their offices, via terminals which allowed direct access to the GDS systems.

Back in the 1960s, this system (then called a Central Reservation System) was a culmination of efforts by several parties – namely American Airlines, IBM and United Airlines, as well as other major airlines that jumped on board as major shareholders – and solved the greatest problems of inefficiency and lack of standardisation plaguing the industry at the time using a central database.

However, the GDS was built using technological standards back in 1960s and 1970s, long before the internet existed. And now, none of the major distribution systems are majority-owned by the airlines directly (Joint Ventures excluded), nor are they publicly listed.  

What does this mean?

The biggest problem preventing the upgrading of the GDS system is fourfold – the first, that it is built on a foundation so old that most modern coders won’t understand or know how to use; the second, that the major GDS’s have too much power within the market against other stakeholders; the third, that they have been traditionally resistant to change and have no incentive to do an overhaul anytime soon; and the fourth, that its existence was never meant for the internet to begin with.

Behind each of them are several causes, and some of these problems and factors play into each other, so let’s break them down and examine them one by one.

Overview

Problems of GDS

Too outdated to update

Too much power in travel industry’s supply chain

Have no incentive to change

Never meant for the internet

Future of GDS and travel industry

Continues to operate primarily using GDS

Moves to GDS alternative

Industry splits up

Problem 1 – The GDS is far too outdated to update 

This problem is fairly self-explanatory, and is a result of the GDS being built on “legacy” technology. But the host of inconveniences that come with this problem prompts people to wonder why exactly the travel industry has not moved on to newer, improved systems that can serve the same function as the GDS.

After all, because the GDS’s core is so old, consumers often wait for some time for their results to load before they can book an air tickets online. In fact, speed is such a big part of deciding which online sites consumers prefer using for booking their tickets, that Expedia spends millions of dollars each year just to have faster, priority access to the GDS database such as the availability cache. 

Moreover, this outdated system does not allow airlines to adapt to consumers’ more modern wants and grant greater personalisation, which prevents airlines and travel agents from being better able to serve their customers. It also effectively locks out low-cost carriers from entering the system, given that most of their revenue comes from ancillary revenue – upgrades that customers choose to buy on top of their initial basic seats.

And herein lies the problem – even though there should be more than enough support to improve speed and integrate better personalisation features into the airlines’ operations, the GDS still does not support these features.

This is because the GDS is only a channel for airlines to access inventory – the sale of airline tickets will benefit the GDS providers regardless of the airlines’ inability to better cater to their consumers, which is a problem airlines have to bear on their own.

This leads us to our second problem, which answers why this is the case:

Problem 2 – The GDS providers have too much power in the travel industry’s supply chain

The greatest problem holding back any movement towards better technology is likely this – that the GDS providers have far too much power for anyone to move away from using their services.

Here’s why – when the GDS became the main system by which most airlines conducted their bookings, the amount of data which accumulated and currently exists on the GDS became unparalleled.

And now, they carry with them the information of all available full-service carriers in the world, which can be conveyed in real-time to anyone with access to the system.

Meanwhile, because of how important the GDS was in the commercialisation of air travel in the past, most airlines spent millions of dollars integrating the system into their own operations during the initial burst of excitement surrounding it.

This is where things become particularly problematic for people who start realising they need an upgrade from the GDS. First, airlines find it difficult to shift away from the GDS system to begin with, given how much effort they put into trying to integrate it into their operations.

Sabre CEO, Sean Menke, noted that all kinds of travel agencies have spent “millions and millions of dollars aligning their systems to the GDS and [its] capabilities,” so they are now deeply entrenched – and stuck – with traditional, “native” GDS technologies.  

Source

But second and more importantly is the relationship between the various parties involved in the air travel booking process.

The current relationship that exists within the supply chain is this:

                                         (Image credit: Amadeus, Skift)

1. Travel agents, who get paid by their clients to book their flights, are offered incentives by the GDS to book flights using the system.

2. Meanwhile, because these travel agents are guaranteeing seats and volumes on the airlines’ flights, the airlines will have select benefits for them depending on the circumstance (such as lower flight costs, commission, etc).

3. And lastly, airlines are deemed to be benefitting from their fares being up on the GDS because the travel agents booked these flights through the GDS, and thus airlines will also have to pay the GDS providers some money for each segment.

This breakdown makes it quite clear that the current situation means everyone who is involved in the supply chain has an incentive to continue using the GDS – except for the airlines. But because most of their customers are obtained exactly because their flight information exists on the GDS, there’s no way travel agents can move away from the system without risking losing their customer base and astronomical amounts of money. Sometimes, they even risk breaching the contract agreements signed between the GDS providers and airlines.

And even if some of these airlines are willing to move away from GDS providers, there currently exists no viable alternative that will let them recover from their loss in revenue.

In fact, some airlines had already tried developing their own alternatives, but the air content provided to any travel agent would not be meaningful for them to want to use it to serve their clients.

The flights these airlines offer are also often limited to select regions, making it less appealing for people to check out their websites to begin with. This leaves the GDS, with its heavily-stocked inventory, to remain as one of the most convenient and reliable ways travel agents to book their flights.

This problem is also magnified when looking at Online Travel Agents – sites such as Expedia or Kayak.com – because the information found on these price-comparison sites are all obtained from the GDS. This means that if their information is pulled out of the GDS system, it will be far harder for these airlines to reach the average consumer on the ground, who make their flight ticket purchases based on the results they find on price-comparison websites.

Ultimately, these airlines are caught in a situation where they benefit little, but their fate lies in the hands of other stakeholders’ willingness – particularly the travel agents’ – to eventually find a way to break free.

Problem 3 – The GDS providers have no incentive, and have been traditionally resistant, to change

Given the immense power and unshakeable standing the GDS has within the air travel industry, it becomes quite clear that the GDS providers don’t have any actual incentive to improve the system.

The most notable instance is the GDS providers’ resistance in embracing the rise of New Distribution Capability (NDC), which is a data transmission standard promoted by the International Air Travel Association that uses XML coding language. NDCs essentially simplifies transactions between different members in the ecosystem. The implementation of the code by different airlines onto their websites also allows for the sale of ancillary products, such as seat upgrades.

When the GDS providers failed to adapt to the rise of popularity surrounding NDCs, as well as the existence of branded fares and sales of ancillaries, several airlines began to shift strategies, trying to redirect their consumers to their own agency’s websites or call centres. To do this, airlines like British Airways and Lufthansa added a GDS surcharge onto bookings made through the GDS system and online travel agents, leaving GDS companies to play catch-up with what these airlines could offer their customers directly.

This allowed the airlines themselves to finally start offering their travelers greater personalisation options, and eventually became one of the most common methods airlines used in attempts to become become less reliant on the GDS, without breaching or complicating the professional relationship both parties have as a result of contracts signed.

With the GDS and its providers finally lagging behind as a result of their rigidness, even if the GDS does start embracing the concept of NDCs, they will no longer be able to mend this new opening in the market, and capitalise on this technology to further enforce their staying power.

This sentiment is shared by Jim Davidson, the CEO of the Farelogix, a company that facilitates connections between travel sellers and airlines.

He said: “[It was a mistake for GDSs to] not embrace the concept of NDC early. By the time NDC was introduced to the market, it was clear that the existing airline connectivity to the GDSs would not scale or accomodate airline demand for differentiation. Again, the GDSs dug in hard early to fight any change in the distribution technology and connectivity, which over time will cost the GDSs significantly as they are either bypassed or made less relevant by new commercial and distribution models. They could have championed this and managed its development, rather than losing total control of it.”

Source

However, despite this new development in the market, information obtained from released court documents showed that most online travel agencies and travel management companies still rely on one GDS system for the majority of their bookings. While many factors could be at play, part of the reason is that most of these airlines will have to invest in a team of developers to build on and develop the NDC code for their own websites and booking systems.

As a result, even with NDCs becoming more popular, not all airlines are inclined to spend money to build their own booking systems, especially when they cannot guarantee traffic and use of their own websites, and when they often already signed contracts with the GDS providers. Thus, while most airlines have the capabilities to incorporate the use of NDCs in their operations, only a handful of them have fully utilised the opportunity. For the vast majority, of the three tiers to the NDC standard available to airlines and travel sellers, they have only implemented some aspects from level one, the most basic level, and would still rather use the GDS. 

This means that the GDS’s limitations, as well as lack of willingness to adapt to change, is still something that holds many airlines and travel providers back in their ability to provide for their travelers.

Problem 4 – The GDS was never meant for the internet 

For these airlines that still rely on the GDS providers for most of their transactions, the only hope they have left is that the competition between the GDS providers and airlines’ in-house booking systems, built atop of the NDC codes, will heat up enough to drive the GDS providers to improve their own system.

But therein lies the fourth problem – that the GDS was never suited to go online to begin with.

Given that the GDS, then called the Central Reservation System, was built in the 1960s before the advent of the internet, even the very purpose of the system diverges from what people actually want out of it. The very code that the GDS rests upon was meant solely for inventory purposes, rather than online transactions and the sale of ancillary products with the system acting as the middleman. Thus, after the GDS providers first made the shift from being a fully offline database to being an online one and provided the airlines with the software to put their inventory up onto the system themselves, nothing much has since changed.

This means that the very core architecture of the GDS, while revolutionary when it first arose, is now ill-suited for the role that the current ecosystem asks of it. The shoes the GDS was meant to fill gradually grew larger and larger as a result of technological advancements it was never prepared for, and so even if the code of the GDS were somehow to be improved upon, the ability of the GDS to serve the industrial needs of this century is now questionable at best. To make the GDS serve the function of being a platform for reservations of flights, hotels, and even cruises, rails and car rentals, rather than just for inventory purposes, would require such a huge revamp that the system’s code may as well be written from scratch. But doing so could then possibly remove the largest value that the GDS adds to the industry – that it serves as the greatest aggregator of airline information across the entire world, especially in the case of full-cost carriers.

The future of the GDS and travel industry

At the end of the day, the main point is that the GDS will one day no longer be able to keep up with change that the industry desperately needs to move forward. But given that the industry is still very much tangled up with the existence of the GDS, the future of the industry and how they move forward looks uncertain. However, the rising demand for better software is a trend that can help pinpoint the three possible futures that exist.

1. The industry continues to operate primarily using the GDS

The possibility of this playing out in the future should not be written off even if seemingly unlikely at first glance. This is because despite the GDS providers’ previous resistance to change, they are now gradually warming up to it. 

From these providers also come new technology built around the GDS’ core architecture, meant to improve the system and upgrade its current capabilities to help travel agents with their searches and bookings An example would be GDS provider Travelport’s new desktop system developed in the past decade. 

Judging by the industry’s still-heavy reliance on the use of the system, as long as the GDS providers makes enough effort to keep up the rest of the industry and fulfil its demands of change, it is unlikely that they will lose their position as some of the most important and power members of the market anytime soon.

There are two reasons for this, which makes it so that even if the industry would like to part ways with the GDS, they find it extremely difficult.

The first is the GDS’ current hold on the wealth of information in its database, which gives its providers a huge advantage over emerging competitors in appealing to travel agents in the longer-term. And the second, the money that the GDS providers earn.

With its plethora of wealth and clients, the GDS providers can often offer irresistible contracts to travel agents, which ensures the GDS providers with a steady stream of profit, all while enjoying economies of scale and more efficient spending required for the system’s maintenance.

Especially because of the industry’s reliance on the GDS, airlines also fear getting pulled out of the system, as having reduced accessibility of the airlines to their consumer base would mean a big hit to their business. Meanwhile, even if airlines insist on using their own booking systems, they still have to spend a lot more money if they want to use their own booking systems. To approach another country and market their airline, not only would they need to spend marketing dollars, set up brick and mortars for citizens to access and sometimes even appoint General Sales Agents to act as a representative for their airlines, they also can’t guarantee traffic and will be unable to sell seats as cheaply as the GDS does. All these factors make the GDS difficult to separate themselves from

However, having the GDS remain as a powerhouse in the market could eventually see all the problems that held back both consumers and travel agencies alike resurface. While these problems are likely to be far more easily solved if the GDS providers can update the system, it is still uncertain if that’s entirely possible. Given that that is the case, the ability for the GDS providers to keep up with the growing demands of the industry means that it may very well lose its position in the future.

2. The industry moves to a GDS alternative

Another possibility is the industry’s shift to a GDS alternative, an outcome currently seems to be a likely conclusion of the bubbling uncertainty within the industry.

This change of heart is something that’s been long underway, as the industry explored ways where bookings can be made both easier and cheaper for airlines and consumers alike. The International Air Transport Association (IATA) has long been promoting the use integration of NDCs since 2011, while technology giants such as Google have also started to get involved, buying over a company that built their own parts of the solution for a better GDS alternative – albeit with a different approach.

However, even with the industry’s willingness there are several factors that prevent it from fully moving past the use of the GDS – one of the largest being corporate travelers.

Said Euromonitor analyst, Nadedja Popova: “The airline must ensure that the new direction it is taking does not alienate a very sought-after and lucrative customer segment – the business traveler – who traditionally relies almost entirely on GDS providers for booking flight tickets.”

Source

The reason for this is fairly simple – as their name implies, they travel very often, and usually for business. This means that their priorities are often different from the average traveler. Because they are sent overseas by companies that are willing to pay for their expenses and sometimes need to travel on short notice, they are both price- and time-insensitive, with the latter sometimes being a cause of the former. These business travelers also require travel accommodations acceptable to these companies and their policies’ standards.

Due to these reasons, the corporate travel agents these companies request flights from often go to the GDS providers for their bookings. Because the GDS has an extensive database, these corporate agents can easily book flights regardless of where the departure and arrival locations are, and can ensure that standards set by the companies’ travel policies are met. This information is even more valuable to this demographic given that they need to travel extensively all over the world, and the GDS ensures that they will always find a flight that caters to their needs. 

However, if the airlines decide to move onto an alternative to the GDS, they will now be inaccessible and made uncompetitive if the providers decide to take them out of the database. Moreover, the extensive database the GDS has also means that they are less inclined to move to alternatives if it means they need to spend more time looking for the right airlines – especially when the GDS already helps them do just that.

As a result, they form the airlines’ most loyal – and profitable – customer base, if only because of the GDS.

For this demographic to also move onto the GDS alternative, they first need to overcome their price insensitivity. But how?

For starters, this is already something that has been happening. As a new generation of travelers arrive, we witness the rise of a growing demographic that is not only more technologically savvy, but also financially so.

But beyond that could also be larger environmental factors at play.

The new generation, having grown up at a time where unemployment was at an all-time high and financial futures were uncertain due to the Great Recession and 2008 financial crisis, are far more cost-sensitive than ever. This new shift in attitudes can be seen in even large corporations as well, where some of them are wary of spending too much when the economy turns south, and take to reducing travel expenses as one of the main ways to buffer against the economy.

This means that for corporate travelers to become more price-sensitive and thus make it more likely for corporate travel agents to move onto a new GDS alternative, all that needs to happen is a push for these corporate travelers to start considering economy options, and move onto a GDS alternative that also contains low-cost carriers.

Another possibility is for airlines to realise that the GDS providers are cutting far too deep into their profits during times where they cannot afford it, such as when all the 400 over full-cost carriers around the world paid a combined 7 to 8 billion US dollars to the GDS providers in the 2008 recession, but altogether lost a combined 26 billion US dollars as a result of the poor economy. When this is the case, and the airlines move onto an alternative that carry the potential to be more all-encompassing, it is likely for the agents to follow onto the new booking platform thereafter.

If this becomes the case and the entire market as a whole, including corporate travelers, are now price-sensitive, then competitors to the GDS who can afford to be far more competitive with pricing will be able to emerge, now joined by lower-cost carriers and better able to carry an inventory suited to the economy’s new needs.

Meanwhile, the GDS may simply remain fundamentally incapable of adapting to a new price-sensitive market. Currently, all the profits they earn, up to 95% of the money goes into things such as the maintenance of their systems, as well as to pay the travel agents. This means that even in spite of their high revenue figures, the GDS providers only rake in a net profit of about 5% (Travelport) to 19% (Amadeus) in total each year.

But if they start reducing the amount of money they pay travel agents, less of them are inclined to keep booking with airlines through the GDS, especially due to how sensitive they are to their customers’ demands. As a result, this drop in the profits they receive from using the GDS may become yet another driving factor in the rise of a new alternative.

Once the market decides it is ready or willing to embrace a new booking system, all that needs to happen is for the full implementation of the full NDC capabilities onto the airlines’ own passenger service systems. As the airlines move onto a phase where they heavily use NDCs, the new alternative is likely to emerge in the form of a new aggregator of information, where not only is information of the flights far easier and quicker to obtain, but it is also cheaper for airlines, and better suited to serve all travelers as a whole, with better price options and technology that finally allow for the sale of ancillaries.

However, the ability for the entire industry to move away depend on a very specific set of circumstances and events to occur, meaning there is also a possibility that the industry finds itself unable to fully move on from the GDS, which leads us to our third conclusion:

3. The industry splits up, and corporate and non-corporate travelers use separate systems

This outcome is likely to occur if the business traveler demographic does not budge from their current price insensitivity, and thus continue to use the GDS system as their one-stop booking system for all their travel accommodations (including their hotels and flights). Their inertia in this regard will then prevent some airlines from moving onto another booking platform, due to their being a huge market for most full-cost carriers.

But for people who are more price-sensitive, primarily the leisure travelers, a new system is likely to emerge, carrying with them low-cost carriers that sell ancillaries as their main profit avenues. While leisure travelers often have time to do research and price-comparisons on their own, the rise of an aggregator that is suited to their needs makes it a lot easier for them to do their browsing and bookings. Meanwhile, airlines will have to fret less about their visibility on the market while using a system that costs less to use than the GDS, and are therefore more likely to jump on.

While the full benefits of this is not very clear, the most obvious is that the market will be far better in being able to adapt to its own consumer base. Given that it now has two different platforms for two very different demographics that they often appeal to. The ability of a market to adapt to a smaller, more specific market better means that consumers as a whole benefit from having better price transparency and personalisation options, where they can better balance their own spending and comfort.

But the impact of this goes even further. If the entire market’s current needs can be better met by two different players in the market, the industry can then move on to other ways in which they can better the travel experience for all travelers as a whole, no longer bound by old technology and its limitations. Moreover, the existence of a competing system, even if they cater to a different demographic, means that all the competing system providers in the market need to try their best to remain competitive and relevant, acting as a check and balance for if one of them become too money-hungry or complacent and outdated.

While all possibilities are equally likely and dependent on the circumstances that surround the industry in the future, this could perhaps be the best way forward in being able to give consumers more ability to choose what exactly they need for themselves and what they want in the future, all while making sure other members of the ecosystem – especially the airlines – do not suffer.

Written By Pytheas Admin Published 9th May, 2018

Reference source:

Lufthansa to add surcharge to every booking made via the GDS

Jury sides with US Airways against Sabre in GDS antitrust trial of the century

American Airlines NDC Program

Channel Shock: The Future of Travel Distribution

Has the GDS finally moved into the 21st century?

What do travel agents really need from a global distribution system today?

New Distribution Capability

Facts about Google’s acquisition of ITA Software

ITA Innovations

Airlines Weigh Up Lufthansa Ticket Charge

Do Business Travelers Pick by Price?

Millennials: The Money-Conscious Generation?

Net profit and loss of airlines worldwide from 2004 to 2018 (in billion U.S. dollars) [PAYWALL]

Airlines to lose US$5.2 billion in 2008 - Slowing Demand and High Oil to Blame

The case for a new airline distribution model [INFOGRAPHIC]