Managing the full travel chain

Managing the full travel chain To gain greater insight into changes and innovations that could usher in a new era for travellers, the Economist Intelligence Unit EIU conducted parallel s

Managing the full travel chain

To gain greater insight into changes and innovations that could usher in

a new era for travellers, the Economist Intelligence Unit (EIU) conducted parallel surveys of 100 airline executives and 810 air-travel customers in August and September of 2013 Augmented by interviews with 16 industry leaders and in-depth analysis, research into this topic culminated with the

whitepaper, The Future of Air Travel: Improved Personalisation and Profits through the Integrated Use of Customer Data This is one of a series of five

articles elaborating on some of the most salient points that emerged from the findings

Travel providers are at a technological and economic

inflection point, many of them grappling with just what it is

that they should be — or need to be — selling For airlines,

the question is: Can they afford to continue selling just the

flight? Advances in technology and analytics have opened

a window of opportunity for “information-rich,

technolo-gy-savvy and analytics-driven companies to serve

custom-ers by knowing them better and to retail tailored products

and services,” notes the chairman and chief executive

offi-cer of Air France-KLM, Alexandre de Juniac, in his foreword

to Designing Future-Oriented Airline Businesses by Nawal

K Taneja “Should airlines become such companies and

offer, for example, seamless door-to-door travel?” he asks

The alternative would be to cede control of the full

trav-el chain — from planning and booking to transport and

beyond — to other entities As John Slosar, chief executive

officer of Cathay Pacific Airways, points out in his

fore-word to the same book, “There are increasing signs that

many high-tech companies focusing on enabling flexible

group contact and activity (think Facebook, WhatsApp,

Google and Groupon) have their sights set on

intermediat-ing airlines, travel agents and passengers, thereby layintermediat-ing

claim to a share of the always-under-pressure airline value

chain.” Either way, Mr Slosar warns, “[T]he status quo going

forwards is not an option.”

Airlines have made previous attempts to expand their reach across the traveller’s journey Early success was stymied

— asset and infrastructure costs proved too high, while coordinating technologies proved too difficult Information and communication technologies, however, have since rewritten the rules of commerce The power and ubiquity of portable computing have surged as costs have

plummet-ed Today, airlines don’t have to buy other major elements

of the travel chain; they just have to help the passenger access them, creating a better, simpler and cheaper journey

Flying a mile in their shoes

The Ramos family has booked a trip from their home in New England to Florida, mid-March, the last week of winter The night before their flight, they stay in a hotel near the airport At 6 a.m they begin receiving multiple notifications regarding their flight: automated phone calls, texts and emails: storm cancellation They are instructed to modify trip arrangements either by calling the airline’s customer- service number or logging on to its website

They spend the next six hours trying to get in touch with the airline, via phone, website, email and Facebook They cannot get through; the volume of calls and emails from passengers affected by the storm has swamped the ca-pacity of the airline to respond Eventually, they drive out

to the airport to talk to an agent and, after several hours of waiting, are re-booked for the following day

Facilitating solutions to travel problems

The plight of the Ramos family highlights two important

issues First, the airline’s customer-service apparatus

essen-tially collapsed at exactly the time that it was most needed

because of routine underinvestment in reserve capacity

Second, an airline that made things better in this situation —

acknowledging, if not taking control of, the full trip — would

engender a great deal of loyalty As things stand, the airline

becomes a focus for resentment

What is the middle ground? What could have been done

at relatively low cost and with off-the-shelf technology to

ameliorate the situation for the Ramos family and other

travellers and to avoid a predictable wave of anger aimed

at the airline?

The first robo-call that the Ramos family received, at 6 a.m.,

should have included, at bare minimum, the following

menu of options: “If you wish to be re-booked on the same

flight tomorrow, press one If you require accommodation

assistance for this evening, press two If you have a rental

car, hotel reservation or any other connecting travel

ar-rangement that requires adjustment, press three.”

With no further investment, airline representatives

answer-ing choices 2 and 3 could connect the caller to the other

travel providers involved Just acting as a conduit to the

oth-er adjustments needed would be expoth-erienced by customoth-ers

as a tremendous added value

Leveraging technology and data to own the chain

But airlines can do much more without incurring too much expense The technology to provide an even more com-prehensive level of support, a kind of 24/7 “virtual travel concierge”, is already in place Online access to calendars, reservations systems and loyalty programmes — whether via Wi-Fi or mobile data networks, on the ground and in the sky — continues to expand The degree to which these sys-tems are able, or willing, to “talk to one another,” however,

is an ongoing issue

Valyn Perini, former senior vice president of Kalibri Labs, which conducts revenue-performance analysis for the hospitality industry, previously served as CEO of the Open Travel Alliance, which works toward information-distribution standards

“There’s a lot of siloed data,” she says, “both for hotels and for airlines.” She can tick off a long list of systems within organisations, “operational systems customer service points of sale financial time and attendance equipment management affiliate management that generally don’t have built-in communication with the other applications that are in use to run an airline or a hotel group.”

The reason is frequently technical, but with technology

be-coming more affordable, enabling those systems to speak

to one another internally as well as to points of sale is, she

believes, merely a function of putting enough software

programmers on the job of developing a common

vocab-ulary It will also require leadership, Mr de Juniac notes

“Transforming the focus from seats to (guest) solutions

requires not only dissolving borders between sales,

ser-vices, marketing and operations, but changing the culture

and skillset of the company,” he says

Such inability to communicate can also be intentional, Ms

Perini observes, particularly when it comes to competitors

Airlines and hotels resist cooperation They worry about

accusations of collusion, for example, and about product

differentiation “Some companies believe that any working

together to make their offerings comparable leads down

the road to the commoditisation of that product.”

New entrants in the online travel space — whether large

companies like Google or small start-ups — have fewer

such concerns Their primary product is information

coordi-nation; legacy systems and costs are not an issue for them;

leased “cloud processing” means that they need not even

make the capital investment in computing equipment

Airlines have taken some incremental steps in the direction

of leveraging such technologies and managing the full trip

Rising demand for personalised service

Consumers are demanding more comprehensive and per-sonal service from the travel and airline industries Digital technologies have driven successive waves of what might

be called automated personalisation in other industries and services: Google Maps, adjusting on the fly to changes in circumstances, providing updated information and advice; commercial websites personalising product menus; music, books and movies curated by media websites via

custom-er analytics As Mr Slosar notes in his foreword, “Future consumers will make no allowances for aviation being a

‘legacy’ business; they will expect all companies to con-nect with them and to respond to their needs in the same brilliant and innovative way that the companies of the ‘new’ economy have done.”

The data that airlines already possess give them a strong head start in providing customised, virtual assistance — navigating the information thicket of travel options online, along with offering help when things go wrong and itiner-ary changes cascade

The marginal cost of such digital services is very low Con-stantly updated information on matters like deals, weather and traffic enables providers, should they so choose, to offer 24/7 personal assistance at all price points

Costs are low, but time is short

Airlines won’t have an advantage for long Hotels, thanks

to expanding loyalty programmes and their expertise in

personalisation, present one type of rival Meanwhile, “the

combination of information depth and interface innovation

has made the online travel agencies’ searching and

book-ing experience far superior to that available in any other

channel, leading to market-share gains that persist today,”

explains Mr Blachford, who formerly headed Expedia.com

And search providers like Google, which is buying up useful

links — such as Room 77, a connectivity platform for hotels

— that could be forged into a fuller chain, are also beginning

the piecemeal assembly of end-to-end trip management

capabilities

These players are all attempting to create their own virtual

travel concierges What remains to be seen is whether or

when players in one or more of these sectors — or Amazon,

Facebook or some small tech start-up as yet unknown —

will put all the pieces together

Customers’ response to this level of travel management will

hinge on cost, efficacy and their own needs and intentions

But, given the speed at which these options are

develop-ing, if airlines hesitate too long to move in this direction,

they will soon find themselves to be just one commoditised

link in a chain over which another entity has control

If, however, airlines become the go-to concierge, then all

data and interaction will flow through them, lifting from the

customer the burden of juggling multiple reservations — air-port transair-portation, car rental, lodging, restaurants and be-yond — and allowing airlines to address issues before they become problems Each individual traveller’s journey will be optimised, earning the airlines their customers’ loyalty and

an improved bottom line

The expansion of tech-driven personalisation capability, Mr Slosar notes, “represents a severe challenge to today’s air-lines [T]he successful airlines of the future need to start measuring themselves not against other airlines but against the best of today’s high-tech, online, mass-customisation consumer businesses.”

As Ms Perini notes, the “idea of moving toward an aggre-gated trip and away from the various components of the trip is a compelling one It hasn’t been put into practice yet — because it’s hard.” While the path ahead is far from clear, as Mr Slosar points out, “there are large, untapped opportunities for value creation that passengers are more than willing to pay for.” These exciting developments and possibilities “should,” he suggests, “inspire passionate airline executives, planners, marketers and IT heads to do some serious thinking.”