Managing the full travel chain

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, technology-savvy and analytics-driven companies to serve customers by knowing them better and to retail tailored products and services,” notes the chairman and chief executive officer 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 travel 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 foreword 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 intermediating airlines, travel agents and passengers, thereby laying 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 plummeted. 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.

Erik Blachford, venture partner at Technology Crossover Ventures:Managing the full travel chain

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 capacity 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.

They pay for another night in the hotel. The car rental agency in Florida charges them an extra US$100 for subtracting a day, as this represents a change in the original reservation. After some negotiation, the hotel in Florida agrees to hold their rooms and “charge no penalty” for the reduction in the length of their stay.

Facilitating solutions to travel problems

The plight of the Ramos family highlights two important issues. First, the airline’s customer-service apparatus essentially 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 arrangement that requires adjustment, press three.”

With no further investment, airline representatives answering choices 2 and 3 could connect the caller to the other travel providers involved. Just acting as a conduit to the other adjustments needed would be experienced by customers 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 comprehensive 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 systems 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 becoming 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 vocabulary. It will also require leadership, Mr de Juniac notes. “Transforming the focus from seats to (guest) solutions . . . requires not only dissolving borders between sales, services, 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 coordination; 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.

“All the major airlines have begun to add important revenue streams by integrating hotel, car, tour and attraction booking into their own websites, usually through low-overhead partnerships with the online travel agents [OTAs] or with private-label suppliers,” according to Erik Blachford, a venture partner at Technology Crossover Ventures.

Rising demand for personalised service

Consumers are demanding more comprehensive and personal 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 customer 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 connect 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 itinerary changes cascade.

The marginal cost of such digital services is very low. Constantly 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 booking 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 developing, 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 — airport transportation, car rental, lodging, restaurants and beyond — 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 airlines. . . . [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 aggregated 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.”