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The Amateur-Expert TravellerThree important trends in travel which are being accelerated by the recession

Content

Foreword, by Ian Wheeler 1

The Amateur-Expert Traveller 2

> New destinations 4

> The rise of the BRIC economies 5

Building the brand in the online world 6

The Responsive Journey 8

> Technology and the total trip experience 9

> Waiting for mobile 12

> Looking further into the future 14

> but its so much nicer to [stay] home? 15

The consumer booking experience 16

All Niches Great and Small 18

Appendix 22

The Amateur-Expert Traveller

Foreword, by Ian Wheeler

In the summer of 2007, as the first cracks in Wall Streets mighty financial edifice began to appear, a natural disaster was already well under way on the other side of the United States. Millions of acres of the American West were ablaze in what would turn out to be the

second most destructive summer of forest fires since records began in 1960 1. On the other side of the Atlantic, the European Forest Fire

Information System called July 2007 the worst on record.

Forest fires, like recessions, are both painful and tragic. In this report, we have tried to look beyond the immediate devastation of the

credit crisis and ensuing global recession, to the future. We have

tried to look at the trends and innovations which might flourish in the post-recessionary environment.

Recessions and even depressions do not always smother

innovation as much as we are sometimes told. Hewlett-Packard,

Geophysical Service (now Texas Instruments), Polaroid and Revlon all

started during the Great Depression; Microsoft and The Gap Limited were founded during more recent recessions. Indeed, in some ways,

recessions make starting new businesses easier there is a larger

number of talented people looking for work, suppliers are more

open to negotiation and customers may be more open to trying a

new product or service that promises cost savings.

Niall Ferguson, a financial historian at Harvard University, draws a similar parallel between biological and business evolution: often,

the real drivers [of financial history] are the process of speciation - when new types of company are created - and the equally recurrent

process of creative destruction - whereby weaker companies die

out or, more commonly, get eaten. 2

In this paper, we describe three broad trends influencing the travel industry today increasingly expert customers, the ever more

technological trip experience and the growth of niche travel

that we believe are being accelerated by the current downturn.

To reach these findings, we interviewed thirty leading executives and thought-leaders in the travel industry and polled 2,719 travel

professionals worldwide about a series of key trends in the travel

industry. We then conducted extensive desk research to understand

how these trends might be affected by the recession.

The amateur-expert traveller: the Internet has put much more information at the fingertips of the average traveller whether from professionally produced content or user reviews and other social

media. With business and personal budgets squeezed, the incentive

to put all that knowledge to good use has never been greater.

The responsive journey: technology has improved the booking experience immeasurably but the trip itself remains ripe for

technological innovation. Such innovation may be provided by talented executives using the recession as an opportunity for a

change in direction.

All niches great and small: travel companies will increasingly look at opportunities in travel niches or selling niche travel services or

additional offer opportunities for additional revenue as well as

higher margins for in-depth expert advice.

Just as forest fires form an important part of the regeneration process, we believe that the current recession will clear the way for a

fresh burst of innovation in the travel industry.

Ian Wheeler

Group Vice President, Marketing & Distribution, Amadeuswww.amadeus.com


The Amateur-Expert Traveller The Amateur-Expert Traveller





This is the result of two factors: as people live longer, more

suffer from long-term illness meaning that people live with their

condition for years whereas doctors have merely studied it. The

medical industry has dubbed these the Expert Patient. Second, the Internet has given patients more access to information and

helped them to diagnose their condition. This has given rise to

participatory medicine, in which the rational relationship between

an all-knowing doctor and a dutifully passive patient is replaced

by a team which includes a knowledgeable and actively engaged

patient, specialized social networks, and clinical researchers in a

collaborative relationship of mutual respect4 .

Something similar is happening in the travel industry. The current recession notwithstanding, travel has increased enormously over

the past 10 to 15 years. Similar to someone with a long-term illness though, one hopes, not suffering quite as much the frequent

traveller will often know more about their destination and how best

to get there than a travel agent. This applies as much to business as

it does to leisure travel.

Just as the Internet has empowered patients with knowledge, social networks, user-reviews and other Internet resources have, and will

continue to, devolve to travellers the power of knowledge. Over

the next ten years, half of the experts in our panel expect to see a

major change in travellers level of knowledge about their travel

options (see chart).

The corollary to this is that half of our experts expect a similarly

significant change in the level of service which travellers will demand over the next ten years. This is partly a function of a

customer service arms race in which travel companies compete to

give better customer service, which in turn sets a higher expectation

among customers. The challenge there is, the more you give the

customers the more they demand, as Paul Ellerby of easyCruise

puts it. A smaller but still significant proportion of our experts expect travellers to become less likely to seek professional advice in

the future.

Looking to the future, to what extent do you think consumer behaviour will change over the next 10 years in each of the following ways?

(Expert interviews: Base: all responding: 28)

Towards the late 1990s doctors began to notice a curious trend: increasingly, patients knew almost as much about their illnesses as their doctors did3 , who, after all, have the benefit of years of university study.

More knowledgeable about options

More demanding in terms of service

Less likely to seek professional offline advice

Major change Reasonable change Slight change No change Don`t know

14%50%25% 11%

7%43%50%

14%36%50%


The Amateur-Expert Traveller The Amateur-Expert Traveller

Organisation, the current top three travel destinations globally

are France, Spain and the United States. Although our panel do not expect a major shift, they do anticipate that China is likely to

become a major travel destination. Asked what they think the top

three destinations will be in 2020, most popular choices were the

USA (76%), France (66%) and China (52%). Spain was relegated to fourth position (28%).

Travellers are expected to become more adventurous in the future

too. This makes sense: if fore-warned is fore-armed, then more

knowledgeable travellers will feel more confident about travelling to places about which, previously, there was little information.

According to the UN World Tourism Organisation 5 growing demand

for new and unusual destinations continues despite the broader

recessionary trend of falling global visitor numbers. Globally,

international tourism declined by 8% between the first four months of 2008 and the first four months of 2009; but tourism to Africa increased by 3% over the same period, driven by North Africa (+6%) and the return of tourism to Kenya following unrest in 2008.

Indeed, according to Gerard Bellino, a vice president at Carlson

Wagonlits leisure division, quoted in Business Week, the recession

may even be accelerating the growth in travel to non-traditional

destinations: People are taking advantage of a down market for

things they may have had to save more and longer for in the past. 6

Perhaps unsurprisingly, China also looks set to benefit from changing patterns of tourism. According to the World Tourism

New destinationsDescription

Major change Reasonable change Slight change No change Don`t know

More adventurous

More cost-conscious

More short-term booking ahead 11%43%11% 29%

14%29%25%

4%21%25%

More travel abroad 7%43%29% 7%14%

29% 4%

29% 21%

7%

Looking to the future, to what extent do you think consumer behaviour will change over the next 10 years in each of the following ways?





The rise of the BRIC economies

Not only will the traveller of the future be more knowledgeable

and more willing to try new destinations, they will increasingly

arrive from different countries too, as the growing middle classes of

developing economies such as Brazil, Russia, India and China (BRIC), lead to an increase in tourism from those countries.

Developing countries are playing a growing role as a source of

tourists and business travellers. Tourism from China grew by an

average of 27% a year between 2002 and 2008 7 . Each year, the world receives 45 million tourists from China that is more than the

entire population of Spain, the worlds second most popular tourist destination 8 . Between 2000 and 2007, Russian outbound tourist

numbers increased by 9.4% a year and the money spent in foreign countries by Russian tourists increased by 14% each year over the same period. In 2007, Russia was the 9th largest outbound tourism

market 9 .

Eye-popping statistics about growth and opportunity in emerging

markets especially Brazil, China, India and Russia have been a

staple of management consultants and journalists for much of the

21st century. So far, though, this has been a pre-recessionary story. Will the growth in developing economies continue through and

beyond the recession?

The story is mixed, but overall the recession may well accelerate

the global economys shift Eastwards. While the current recession

is undoubtedly global, its effect is not equal. Generally-speaking,

Western economies have been pushed into reverse whereas the

BRIC countries have merely had hitherto spectacular growth rates

clipped. The International Monetary Fund 10 expects the economies of the United States and Europe to contract by 1.6% and 2.0%

respectively in 2009. The economies of China and India, by contrast,

are expected to grow by only 6.7% and 5.1% in 2009.

As Western households rein in spending and rediscover the

virtue of living within their means, Chinese consumers are taking

full advantage of their higher savings rates and an enormous

government stimulus package. Consequently, excluding Sports Utility Vehicles, almost as many cars have been sold in China as in

America in 2009 11 . In 2006 Americans bought twice as many. In the

airline sector, Air China, China Eastern and China Southern posted 16%, 25% and 6% growth in revenue per passenger kilometre on domestic Chinese routes for the first four months of 2009 12 .

The growing importance of non-Western cultures in the make-up

of the worlds travellers has very real consequences for the travel

industry. An Amadeus-sponsored Economist Intelligence Unit survey

published in early 2009 found Asian business travellers to be more

influenced by the respectability of a hotels brand than Europeans or North Americans.

With more travellers taking more, longer and more adventurous

trips, increasing numbers of travellers from the emerging economies

and the all-pervasive impact of the Internet on the travel experience,

it will become an increasingly global marketplace, breaking down

geographical boundaries. In this context, customers will need to

be segmented across new lines. An 18-year-old male from China

may have more in common with an 18-year-old male from the US than with a 40-year-old male from his own country. Over 80% of our expert panel accept this proposition, most of them strongly

agreeing.

> The Amateur-Expert Traveller is much more knowledgable about his or her destination and what to expect when they get there. Their expectations of service have diverged: they either expect a totally touchless online experience or they expect a very high level of personalised service.

> The Amateur-Expert Traveller is more adventurous about trying new destinations. Africa and Asia are more accessible and popular than ever.

> The North Americans and Northern Europeans who have traditionally dominated the travel industry will increasingly make way for Brazilian, Russian, Indian and Chinese tourists and business travellers.

Key findings


As more business goes online and online brands take a larger

and larger share of the travel market, the relationship of travel

companies with their customers becomes more fragile.

Most of our expert panel acknowledge that it is harder to

build brand loyalty online than it was offline. Marilu Ngo, of

Griffin Sierra Travel in the Philippines sums it up thus, In the

proliferation of user-generated content, customer loyalty is

inadvertently lost in the online environment because now, it is

mostly price-driven.

Compared to the offline world, would you say that

building brand loyalty in todays online world is

easier or harder?

Building the brand in the online world

They cite the increased fragmentation of the market, the

wide number of options readily accessible to the customer,

the loss of personal relationships, the volume of user-

generated comment and greater price competitiveness.

According to Henry Harteveldt, at Forrester Research,

It is so much easier for people to discover options that

they may not be aware of. It is much easier for them to

share their opinions and to read others opinions and be

swayed by them, and then to use the Internet to find new

options.

According to our panel, the two most important factors

in building an effective brand, whether online or offline,

are consistency between brand promise and delivery and

the quality of the user experience. Word of mouth and

effective promotion are both considered to be marginally

more important online, whereas building an emotional

connection with the brand is thought to be more

important offline.

How important would you say each of the

following is in building an effective brand in

todays travel industry for both online and

offline?

Much easier

A bit easier

The same

A bit harder

Much harder

10%3%

7%

40%

40%


Online Offline

Quality of user experience

Peer-to-peer word of mouth

Emotional connection with the brand

Consistency between brand

promise and product delivery

Effective brand and product promotion

1 2 3 4 5


Average score based on

scale 5 = vital, 4 = very important,

3 = fairly important, 2 = not very

important, 1 = not important at all


I think that the travel providers are going to get into the

review business as well. I think theyre going to let their

customers read a review and share the demographic data on

the reviews with their other customers.

Brian Harniman, Kayak, USA

I think that hoteliers will have even more pressure to

upgrade their experiences and to ensure that a customer still

comes to them, when a customer has that much more of an

ability to understand the experience in advance.

Alan Josephs, formerly ebookers, UK

We explored in our interviews the question of whether user-rev

iews actually reduce the control a company has over its

own brand. According to Dhruv Shringi at Yatra.com in India, The ot

her parts of the brand in terms of the service and product

are still very much within the companys control. The user generated

content just reflects these factors. For Mr Shringi, user

reviews are a symptom, not a cause, so if the company can co

ntrol the others, the user generated content is just an outcome

and wont really have too much of an impact.

Most of our expert panel believe that user-generated reviews are a

positive force, driving up quality and expectations of brands

(73%), rather than a threat to brand reputation (13%). Those taking p

art in the online survey generally reflect this view. Most

positive are the car rental companies (42% see it as very positive vs

. 27% overall) and online travel agencies (39%). Fewer than

one in five regard it as a threat, although the offline travel agencies

are more likely to do so (25%).

How do you see user-generated content with respect

to your brand?

(Online survey: Base: all responding: 2,646)

Very positive 27%

Moderately positive 55%

Moderate threat 16%

Severe threat 3%

3%

16%

55%

27%


The Responsive Journey The Responsive Journey

The Responsive Journey




The 1987 film, Planes, Trains and Automobiles, tells the story of Neal Page, an uptight advertising executive, trying to get home to see his family in Chicago for Thanksgiving after a business trip in New York. Among the many absurd misfortunes which turn a 1 hour 45 minute flight into a three day epic, he suffers a downgrade from business to economy, a diverted then cancelled flight, an awful motel room, an abortive train journey and an irritating travel companion. Despite the considerable impact of technology on the travel experience, the story

is no less plausible today.

To what extent do you agree or disagree with the elements included in the statement?


Technologys impact has largely been concentrated around searching for, and booking, the journey, not the journey itself. That, according to our panel, is about to change.

Technology offers significant immediate opportunities to improve the customer experience before, during and after a trip. The travel professionals on our expert panel acknowledge that this will generate additional revenue and 79% agree that it will solve the problem of online customer loyalty.

Technology and the total trip experience

To what extent would you agree or disagree with the following statements from your own perspective?


Totally agree Partially agree Neither Partially disagree Totally disagree

Technology hasnt changed what the consumer experiences on a journey

That`s about to change 34%41% 3%

14%45%17%

14%

24%

7%

Completely agree Agree to some extent Neither Disagree to some extent Completely disagree

Services beyond the booking stage willgenerate further revenue

Services beyond the booking stage willsolve the problem of online customer loyalty

3%28%69%

3%45%34% 7% 10%

0 The Amateur-Expert Traveller


Sensory airport / airline systems

7%Digital identities

Digital concierge

Social computing

Tailored loyalty programmes

Geo-localisation technologies

Virtual reality

7%

14%

17%

17%

21%

28%

41%

55%

Intuitive interfaces

Personalised destination information

Major opportunity Reasonable opportunity Slight opportunity None / D.K.

Acitivities upon return

3%38%41%Comparing price information

Choosing destination

Researching / choosing hotel

Booking a trip

Finding price / availability information

Researching the trip

31%41%21% 7%

17%

7%38%45% 10%

3%52%45%

7%38%48% 7%

14%34%52%

7%17%66% 10%

Technology and the total trip experience Description

Looking ahead, to what extent would you say each of the following elements offers an opportunity for technology to improve the customer experience before, during and after a trip in the immediate future?


Which of the following will have the biggest impact on humanising the travel experience? (Expert interviews: Base: all responding: 29)

According to our panel, the opportunities

are most evident in researching the trip,

finding price and availability information and booking the trip.

If the industry is to make the most of

these opportunities, then it will have to

embrace new technology solutions that will

help to make the travel experience more

comfortable, secure and personalised for the

traveller the humanisation of technology.

With the pace of technological change

accelerating, our expert panel feel that

the impact will be greatest for those tools

which particularly address the issues around

poor user experience, making the online

experience more personalised and easier to

use.

Foremost among these are likely to be more

sophisticated customer information systems

which select destination information based

on customer preferences, and intuitive

interfaces, which will provide new ways to

interact with computing devices, such as

next-generation touch-screens and voice

interaction. Nearly one-third also anticipate

the role that virtual reality may play in

humanising the travel experience.

But the Internet is a continually evolving

phenomenon, and, even in mature markets,

the likes of Web 2.0, social networking and

mobile technology continue to be drivers of

growth. Our expert panel predict that, by

2020, technology will have brought about

significant improvements in capabilities for travel providers, sellers and consumers in all

areas of the travel industry in particular,

the ability of travel sellers to make more

travel options available to the public and the

ability for consumers to share information

about travel providers with other consumers

both themes picked up in other places

throughout this research.




Nearly all of our expert panel agree that Web 2.0 improves

information transparency a lot (69%) or a little (28%), although one disagrees, believing that it actually makes information less

transparent. Around 80% of them have already added or are considering adding social computing or user review functionality to

their own websites. Airlines are perhaps a little behind others, but

they too are generally considering taking this step.

Without exception, our experts agree that Web 2.0 will improve

the customers travel experience between now and 2020, whether

beyond recognition (17%), a lot (59%) or a little (24%). In particular, they see Web 2.0 as an answer to user experience issues

which may be hindering the growth of online travel services.

Primarily, it will give the user more and better information that will

be better organised, easier and faster to access and more interactive,

leading to greater satisfaction with the whole online experience.

There will be a dramatic change in the way the content is searched

and organised. It is still extremely hard for customers to find content, define content easily and to actually use it. Going forward, all these factors will change tremendously and it will be very

easily accessible. The technology will add a lot of value in terms of

how data gets collated and presented to the end consumer. (Dhruv Shringi, Yatra.com, India)

Some also point to the increased opportunities to personalise and select the information that is most relevant to the users own

circumstances and to share experiences. According to Timir Bhose

and Pia Viljaniemi of Finnair, reading user reviews, supports better

pre-planning so that the customer will be able to plan better ahead

and get more knowledge about other customers opinions.

Thinking ahead to 2020, what would you say the further impact of technology will be on the following


Improve beyond all recognition Improve a lot Improve a little Hardly / not at all

79%7% 14%

Ability for independent travel providersand sellers to increase market share

7%79%7%Ability of travel providers to manage the

logistics of travel better

Ability for consumers to find informationabout the quality of travel providers products

Ability for travel providers and sellers to make pricingand availability information available to the public

Ability for consumers to share informationabout travel providers with other consumers

Ability of travel sellers to make moretravel options available to the public

38%41%14% 7%

7%

10%76%10%

66%28% 3%

10%59%31%

3%

3%

As with many of the changes associated with the Internet, it is not

so much the technology itself but the way that technology enables

behaviour which is important. Kerry Cannon Jr., at iM@, captures the essence of this when he says: Theres always been user-

generated content; it was called word of mouth. Technology has

just empowered that word of mouth technology has absolutely

changed the game in terms of how many other mouths you can

hear from. Or, in the words of media consultant and author, Clay

Shirky, [social media] tools dont get socially interesting until they get technologically boring. 13

Looking forward to how user-generated content itself will evolve,

Nikos Goulis, of E Travel SA, in Greece, sees the proliferation of UGC continuing unabated, User generated content will have more data,

both in text and picture, video and music. I believe we will have

content for destinations that are not very popular right now and

there isnt much and, for the popular destinations, we will have

a plurality of the content which might be missing today. (Nikos Goulis, E Travel SA, Greece)

Joe Bous, at US travel agency, Wholesale Travel Center, thinks the challenge is not so much to get more content, but to find meaning in the content you have, there might be 4000 reviews what are

you going to do with 4000 reviews? And it all, of course, comes

down to 3.5 stars. Its sort of worthless. Part of the answer is

knowing who wrote a given review, as Brian Harniman, Kayak,

points out, I can look for people that seem to be like me and really

trust their judgement more than the rest of the great unwashed

reviews. If someone is travelling for a different reason from me, a

hotel may be good for them but by the same token horrible for me.



Totally agree Partially agree Neither Partially disagree Totally disagree

User-generated content has yet to improvethe business travel experience

User-generated content would be beneficial to the businesstraveller in much the same way that it is to the leisure customer 21%41% 3%

7%34%31%

31%

7%

3%

21%

Technology and the total trip experience Description

Nearly a third of respondents to our online survey felt that mobile devices will have a greater impact on the way the next generation

researches and books travel than social networking, user reviews, video sharing or visualisation tools. According to the International

Telecommunications Union, the number of mobile phone subscriptions exceeded 50% of the worlds population in 2008. Once again, the BRIC countries are responsible for a large share of this: over 1/3 of the worlds mobile phone subscriptions are accounted for by these four

countries .14

Which of the following do you think will have the greatest impact on the way the next generation researches and books travel?

(online survey: Base: 2719)

For Mr Bous, there is an opportunity for smart technology to pluck meaning from the mass of content already available, the

next generation of technology will look at something that can do

semantic analysis and come up with some sort of metric or analytic

that can make sense of all that drivel that people write.

A final word on business travel. Until now, leisure travel has benefitted most from user-generated content, but two thirds of our

panel see potential as yet unfulfilled for user-generated content to add value to the business travel experience.

With corporations under more pressure than ever to keep costs to a

minimum, a mechanism which allows employees to share cost-

saving tips and for travel managers to aggregate feedback from

travellers which can be used in supplier negotiations, becomes all

the more attractive.

Waiting for mobileription

To what extent do you agree with the following statements? (Expert interviews: Base: all responding: 29)

10% N/A

Visualisation tools (ie Second life)

Users reviews

Mobile devices

Social networking

Video-sharing (eg YouTube)

2%8%

22%

32%

26%




In a March 2009 report, PhoCusWright calls mobile, The Next Platform for Travel 15 and Samsung, the electronics group, expects the market for smart phones which combine voice calling with email and Internet access to grow from 170 million in 2009 to 500 million in

2012 16.

Long anticipated, mobile internet really does seem about to take off. As PhoCusWright has pointed out, the more compelling opportunity

[than simply shifting reservations from fixed Internet to mobile] will be to create mobile-specific applications that go beyond shifting share to a new channel, and thus generate ancillary revenue that was not previously available. 17

This is certainly not lost on application developers. Today, Apples website lists over 3,700 travel-specific applications for its iPhone, for

Waiting for mobileription

everything from checking flight delays to finding the cheapest petrol station to a mobile travel map of China specifically for fans of kung fu.

Henry Harteveldt of Forrester Research points out that the nexus

between mobile Internet and user-generated content will be

increasingly important. Travel is one of the businesses that lends

itself to user generated content and the sharing of ideas, opinions

and suggestions. A big factor behind this increase will be the

growth and evolution of mobile internet devices that are geared

more for data than voice. These will allow person-to-person or

group messaging that might be written word or voice, SMS text or other data, and along with this will be the emergence of new types

of internet sites.

Indeed, some of the most interesting iPhone applications combine

mobile with user-generated content. Roadtrippr is like a wiki of

interesting destinations for people to visit while on a road trip.

Users contribute information about interesting attractions in their

home town and, in turn, use it as a resource when they are on the

road. When used from an iPhone, the application is aware of the

users location and tailors (user-generated) content accordingly.



Looking further into the future

The futurologist Ray Kurzweil (The Age of Spiritual Machines: Timeline) predicts that, in ten years time, computers will be largely invisible and embedded in walls, furniture, clothing and even bodies.

Mr Kurzweil accurately predicted the emergence of the Internet and the fall of the Soviet Union, so he is worth listening to.

What is more, his vision of embedded computing is already

becoming a reality. Cars are a case in point: the 1978 Cadillac Seville was the first car to include a single microprocessor, to power its trip computer18 . Thirty years later, even the worlds cheapest new

car the Tata Nano carries twelve microprocessors. Car rental

companies already offer optional GPS devices which not only show you the way to your hotel but can also suggest nearby tourist

attractions.

As with personal computers in the nineties, treating cars as nodes

in a network is revealing valuable new applications 19 . Inrix is

a start-up which aggregates information on traffic flows from GPS systems installed in vehicles, fixed traffic sensors and other sources. This is then delivered to in-car GPS systems used either

by private individuals or delivery fleets 20 . Such applications are even changing the way we think about cars: Zipcar is a car-sharing

service billed as an alternative to car ownership or rental. Members of the service are given an electronic card which they can use to

access any one of 6,000 cars in North America and London 21 . The

cars themselves report their positions back to head office so agents can tell customers where their nearest car is. Customers rent the

cars by the hour or for days at a time, picking them up from where

the previous customer left them. Such a model potentially releases car rental companies from the necessity of renting out large car

parks; the problem is, in effect, crowd-sourced. Similarly, a car rental company could aggregate historical location data of all the cars

in its rental network, combine this with the real-time locations of

the cars in its network and put such data to commercial use. They

could recommend services not just on the basis of their geographic

proximity but also on the basis of how popular such services have

been with other drivers in the network: drivers who stayed at this

motel ate at Chez Gerards Bar and Grill.




but its so much nicer to [stay] home?

The ultimate travel technology would enable all the benefits of travel without leaving the comfort of your home or office. Mr Kurzweil predicts that within a few short years, three-dimensional

virtual reality displays embedded in glasses and contact lenses

will be used routinely as primary communication interfaces,

and that high resolution virtual reality and all-encompassing

tactile environments will enable people to do virtually anything

with anybody, regardless of physical proximity. And the rise in

visualisation tools and virtual reality may change the whole concept

of travel. Travellers can experience the travel sensation while

making their choices, whilst virtual travel (video conferencing, hologram meeting, etc.) may completely change travel patterns.

The technology of the moment, in this respect, is TelePresence.

Launched by Cisco three years ago, TelePresence is basically a high-

quality video conference system. It is still used mostly by larger

companies because the technology is still expensive. Of course,

this is no reason to write it off; as adoption increases the cost will

fall. The question is, will it replace business travel? Starwood and Marriott think not: both have announced TelePresence services at their hotels . The target market is smaller companies or local

branches which cant afford their own dedicated TelePresence

set-ups but would still like the virtual face-to-face experience.

At 500USD an hour the service still isnt cheap, but it is a lot cheaper than flying from New York to London, for example.

It remains unlikely that TelePresence will completely replace the

business trip; much less the holiday abroad. Since the invention of the telegraph, advancing communications technologies have

tended to go hand-in-hand with a global growth in travel, driven

by among other things advancing transport technology, the

internationalisation followed by the globalisation of business and,

simply, the desire to get away from it all. After all, its still nice to go

travelling.

> We are about to see a significant amount of technological innovation to streamline the experience of travellers during their trip.

> Mobile internet will combine with social networking to offer new opportunities for travel companies to offer an improved trip experience for business and leisure travellers.

> TelePresence technologies will complement, but not replace, business travel.

Key findings


In this sub-section, we look at how travel companies can

achieve excellent customer experience in the online world. This

must increasingly include:

> A smooth online experience, speed and ease of access

through multiple channels, and freedom from technical

hitches;

In the words of Jasmeet Singh of MakeMyTrip, India: The

moment of truth for every organisation is the time when a

customer interacts with the business, irrespective of the channel.

In the case of online businesses, it is imperative to provide a top

class user experience. This experience is not only important at

the latter part of the funnel (at payment) but it must begin with

the word Go.

> Comprehensive information delivery, making it easy to find

the right product at the right price, transparency, and the

ability to access all of the information required in one place.

Alan Josephs, formerly of ebookers, says, It should be 100%

focused on user experience. Speed and the ability to easily

find the right product.

The consumer booking experience

> Customisation and personalisation, using customer

intelligence to address personal needs, offer relevant

information and make intelligent suggestions.

This is neatly summed up by Andy Bateman of Interbrand,

USA: Provide a great service that reflects the needs of

customers rather than push content that gets in the way of

what customers are trying to do.

One of the clearest messages we have heard throughout this research is

that providers must work hard to improve

the user experience. Indeed, our panel of experts felt that the user exper

ience is the most important element in

creating brand loyalty online.

Incorporate user-generated content

30%Support multiple platforms, e.g. mobile

Segment products to target niche interests

Offer better value for money

Personalised web content

Improved user experience

30%

40%

40%

43%

73%

Which of the following will have the most impact on brand l

oyalty in the online world?



Below we outline some more specific actions companies can take

to improve customer loyalty online.

> Especially in Asia-Pacific, build consumer confidence, trust and

comfort with security around credit card payments and persona

l

details: Make the customer comfortable about giving credit card

details over the Internet. It will not happen all of a sudden, it w

ill

be gradual. (Jasmeet Singh, MakeMyTrip, India)

> Creating urgency and offering incentives, such as financial

incentives, discounts and added value, to do the deal: If the

customer has had a very good user experience first time, there is a

lot of possibility for positive referral and for the customer comin

g

back. I think user experience is the most important thing. (Helen

Demetriou, Wotif Group, Australia)

Offer an incentive to book immediately the old tried and teste

d

method. (Abdulla Abikhamseen, Kanoo Travel, Saudi Arabia)

> Reassurance on pricing not just transparency but, where

possible, lowest price guarantees and promises: Customers, eve

n

if they are getting the lowest price, still tend to ask from differe

nt

sources, are there any lower prices available?. Have a Lowest

Fare Guarantee and explain your products well.

(Timir Bhose & Pia Viljaniemi, Finnair, Finland)

> Providing a one-stop shop, aggregating products from differe

nt

providers, including competitive product, allowing the customer

to build their own tailored package without having to visit

multiple sites: More far-reaching content. Travel suppliers

need to aggregate different products into their site to generate

customer interest. These suppliers need to have metasearch

properties in their site that can show real time seat inventories

or

room availabilities. (Marilu Ngo, Griffin Sierra Travel, Philippines)

Make it a one-stop shop, not only for travel but also for ancillary

processes. It needs to be a supermarket where the customer c

an

go in with a list of things he wants.

(Ratan Ratnaker, Kingfisher Airlines, India)

> Quality of products offering niche products and

differentiation, not just commodity mass market

offerings: Offer niche and honest products. Many new

online travel agencies and tour operators which have

a lot of mass products dont know what they sell and,

while they may get one booking, the year after the clien

t

does not return to them. Our statement is class instead

of mass.

(Pascal Zahn, Olimar Reisen, Germany)

> Helping customers through the process step-by-step,

making it clear what stage has been reached, providing

reassurance where required and perhaps allowing for

offline support if needed.


All Niches Great and Small All Niches Great and Small

All Niches Great and Small




Reports of the death of the travel agency have, by and large, been

exaggerated. According to PhoCusWright, The dramatic shift in

online share towards supplier Web sites that took place in the earlier

part of the decade has slowed or stopped. 22 Indeed, PhoCusWright

expects share to shift from supplier websites back to online travel

agencies as the economic downturn puts a premium on finding deals and comparing different suppliers.

Moreover, there is still a significant proportion of travel booked offline. PhoCusWright estimates that in 2007, 49% (by value) of travel booked in the US the most advanced in terms of Internet penetration in travel was booked offline. Will the shift to online level off or will we carry on all the way to 100% online booking?

Three-quarters of respondents to our global online survey think

100% penetration will never be reached.

Indeed, one in ten suggest that it has already peaked or will

even start to fall. This view is most likely to be held by those in

traditional travel agencies and nearly one in five of those in North America believe that the peak has been reached. Kerry Cannon Jr., at iM@ thinks, There is and there will always be a cross-section of the public that just wont ever use [the Internet to book travel].

Regardless of how much you humanise it, there will always be a

cross-section of people that will hire people to do that stuff for

them. There are certain things that the Internet has definitely changed, but human nature, no.

However, the majority 65% of respondents think the proportion of travel booked offline will only be small.

Marilu Ngo of Griffin Sierra Travel in the Philippines suggests that cultural differences may lead to asymmetric penetration of Internet

travel around the world: In South East Asia, clients prefer person-to-person communication or a personalised service it is this

preference that inhibits growth of online travel services to a larger

extent. Even if the products will become a humanised experience

when they surf the web, the customers will still feel they need

something extra by talking to someone you cannot take that

away.

Regardless of where the online / offline equilibrium eventually rests, our panel expect to increase the proportion of their IT spend which

is allocated to supporting their online strategy.

The Internet has enabled other industries to increase the length of

the distribution curve i.e. sell more of the small-volume products

a phenomenon made popular by Wired editor Chris Anderson in

his book, The Long Tail: Why the Future of Business Is Selling Less of More. For example, Amazon.com makes 30% of its revenue selling books which are not cost-effective for the worlds largest offline bookseller, Walmart, to stock.

In our online survey, less than a third of respondents follow the

traditional retail model, deriving 80% of their revenue from only the top 20% of their product portfolio. However, for nearly 4 out of 10 of respondents, 80% of revenue is spread across 60% or more of their product portfolio, which is much closer to the long-tail model.

Currently In 2020

91% - 100%

81% - 90%

71% - 80%

61% - 70%

51% - 60%

41% - 50%

Up to 40%

Yes, soon

10%Yes, but a long, long time in the future

No, there will always be a smallproportion of travel booked offline

No, the proportion is as high as it will get

15%

65%

10%

Do you think the proportion of travel booked online will ever reach 100%?


What percentage of your companys IT spend would you estimate is allocated to technology to support your online strategy?

0 The Amateur-Expert Traveller

All Niches Great and Small All Niches Great and Small

Online travel agencies are more likely to be at the long-tail end of

the spectrum, with 30% saying that the top 80% of products account for 80% of their revenue.

Our expert panel generally agreed with the view that the future of

the travel business is in the millions of niche markets at the shallow

end of the distribution curve (illustrated in the PhoCusWright diagram right). Two thirds agree with the statement, and only one in four disagree (airlines in particular).

Although most of our panel still see big-selling products as their

greatest opportunity, around half see significant opportunity in selling more niche content and selling to niche customers.

What might those niches be? Although family-friendly travel is still

reckoned to offer the greatest opportunity and is not exactly niche

our panel did see opportunity in, among other things, adventure

travel (83%), religious travel (55%) and weddings (45%).

Selling niche content has two obvious challenges: low volume and finding enough customers. By definition, a company will not sell a high volume of a niche product. To become large, a business

must work out how to standardise across a number of niches

to gain sufficient economies of scale to make low volumes on a number of niches add up to a large and profitable business. Low-cost carriers operating a network of routes to secondary cities are

a good example of this in the travel industry: the absolute volume

of passengers on each route may be small but so long as they are

profitable, the carriers total volume may be large.


Top 20% products = 80% revenue




23%

15%

34%

28%

Greatest opportunity Second Third Least opportunity

Selling more niche content

Selling to niche customers

Selling more to existing biggest customers 21%48%7% 24%

14%21%31%

24%24%

Selling more of existing big-selling products 17%41% 14%28%

34%

17% 34%

Which of the following best describes your business?


Which of the following do you think offers the greatest financial opportunity for your own business?

(Expert interviews. Base: all responding, 29)

Adventure ToursVacation Homes Spas

Tours and Activities

ProductsPo

pu

lari

ty

Long Tail

Head

Scheduled Airlines

Travel 1975

The Old Marketplace

Cars, Hotels

Products

Pop

ula

rity

Long Tail

Head

Scheduled Airlines, Cars,Hotels, Cruises

Travel 2009

Low-cost Carriers

The New Marketplace

Source: PhoCusWright, Inc.




Specialisation is another strategy. Companies like Trailfinders, which specialises in adventure travel, or Griffin Marine, which specialises in marine travel and participated in this study, can offer

specialised knowledge of a specific sector which elevates the decision process beyond

price.

It also builds loyalty. Outside the travel

industry, the carmaker Subaru has successfully operated in a niche; the

company specialises in vehicles for outdoors

enthusiasts and experience-seekers. An

article in the Financial Times quotes Tim

Mahoney, US chief marketing officer at Subaru, Were a niche brand but that has nothing to do with size, its more about

finding a relatively safe place where we can exist comfortably. 23

The same article quotes John Wolkonowicz, an analyst at financial analysis and market intelligence consultancy, IHS Global Insight, explaining, I dont think you could find a more fiercely loyal body of customers [than Subarus], except perhaps for BMW.

In an increasingly online world, where

loyalty is hard to earn and easy to lose,

and barriers to entry are low, scale or

specialisation or a combination of the two

are rare routes to profitable growth.

Major opportunity Some opportunity Limited opportunity No opportunity Don`t know

Travel goods

11%33%39%Dining reservations

Weddings

Ground transportation

Religious travel

Eco / green travel

Aircraft charter

17%44%28% 11%

17%

6%28%17% 39%

28%44%17%

11%33%22% 33%

22%50%22%

6%28%33% 22%

11%

6%

6%

11%

Adventure travel 44%39% 11% 6%

Groups and meetings 28%50% 17% 6%

Lifestyle travel 39%50% 6%

Family friendly travel 39%56% 6%

6%

6%

> The shift to online will continue but will most likely plateau before 100%: some travel will always be booked offline.

> The millions of niche markets at the shallow end of the distribution curve represent a significant opportunity for travel companies to increase revenue and loyalty.

Key findings

How would you rate the business opportunity in each of the following areas?

(Expert interviews. Base: all travel agencies: 18)


Technical Appendix

Amadeus commissioned independent research consultancy, David Burton Associates (DBA), to undertake a programme of research within the global travel industry in autumn 2008.

30 in-depth interviews were conducted with key senior opinion-leaders in travel and travel-related companies

worldwide our expert panel offering a broad-based and informed insight into trends in the travel business.

Interviews were conducted between September 2008 and January 2009. These were principally conducted by telephone by senior DBA executives and associates, with one or two interviews being completed by correspondence.

Our expert panel comprised:

> Saudi Arabia, Abdulla Abikhamseen, Executive General Manager, Kanoo Travel, Online travel agency

> USA, Andy Bateman, Chief Executive Officer, Interbrand, New York, Branding agency

> Finland, Timir Bhose, Director & Pia Viljaniemi, Development Manager e-commerce, Finnair, Airline

> USA, Joe Bous, Director, Wholesale Travel Center, Online travel agency

> USA, Kerry J. Cannon Jr., Chief Executive Officer, iM@ (interactive MOBILE @dvertising), Travel information

> Taiwan, Jeff Chu, Managing Director, Grand Travel Inc, Travel agency

> Australia, Helen Demetriou, Executive General Manager, Flights Business Unit, Wotif Group, Online travel

agency

> UK, Paul Ellerby, Sales & Marketing Director UK & USA, easyCruise, Cruise

> USA, Robert Gallagher, Chief Operating Officer, AIG Travel, Travel insurance

> Greece, Nikos Goulis, Managing Director, E Travel SA, Online travel agency

> USA, Brian Harniman, Executive Vice President, Marketing & Distribution, Kayak, Travel search engine

> USA, Henry Harteveldt, Vice President, Principal Analyst, Airline & Travel Industry Research, Forrester

Research INC., Travel research

> Colombia, Maria Claudia Isaza, Vice-President e-business, Aviatur Group, Travel agency

> UK, Alan Josephs, Managing Director, formerly ebookers, Online travel agency

> Malaysia, Shivanathan Kesavan, Travel Manager, Gem Travel, Travel agency

> Canada, Guylaine Lavoie, Director Marketing Innovations, Air Canada, Airline

> UK, Ignacio Martos, Chief Executive Officer, Opodo, Online travel agency

> Philippines, Marilu Ngo, Vice-President & General Manager, Griffin Sierra Travel Inc., Travel agency / marine

crew & corporate travel

> Qatar, Peter Pohlschmidt, Manager E-commerce, Qatar Airways, Airline


> USA, Alexander Pyhan, Director Global e-Commerce Channels, Marriott International Inc., Hotels

> Lithuania, Audrius Ramanauskas, Chairman, Interneto Partneris UAB, Online travel agency

> India, Ratan Ratnaker, Vice President Revenue Optimisation, Kingfisher Airlines, Airline

> India, Dhruv Shringi, Chief Executive Officer, Yatra.com, Online travel agency

> USA, Lorraine Sileo, Vice-President Research, PhoCusWright Inc., Travel research

> India, Jasmeet Singh, Manager International Air, MakeMyTrip, Online travel agency

> Japan, Mr Takano, H.I.S. Co, Travel agency / Online travel agency

> Chile, Gonzalo Undurruga, Vice-President e-commerce, LAN, Airline

> Poland, Janusz Wierbowski, Owner, Sonata Travel, Travel agency / Online travel agency

> Germany, Pascal Zahn, Executive Officer, Olimar Reisen GmbH, Tour operator

One additional panel expert asked to remain anonymous.

This was supported by an online survey, conducted in November 2008. Invitations were e-mailed to Amadeus

contacts throughout the worldwide travel industry, and a short questionnaire was completed by nearly 3,000

travel professionals, covering all regions of the world and a spread of business sectors.

The profile of the sample was as follows:

BY SECTOR: BY REGION:

Airline 19% Western Europe 34%

Car rental company 2% Eastern Europe 5%

Hotel 15% Southern Europe 4%

Travel agency 52% USA & Canada 25%

Online travel agency 3% Central America & Caribbean 3%

Cruise 1% Latin America 11%

Other 9% Middle East & North Africa 4%

Subsaharan Africa 2%

North Asia 1%

South Asia 1%

South East Asia 6%

Central Asia 1%

Pacific 4%


Appendix

1. http://www.nifc.gov/fire_info/fires_acres.htm

2. http://www.niallferguson.com/site/FERG/Templates/ArticleItem.aspx?pageid=56

3. http://www.dh.gov.uk/en/Publicationsandstatistics/Publications/PublicationsPolicyAndGuidance/ DH_4006801

4. http://en.wikipedia.org/wiki/Participatory_Medicine

5. http://www.unwto.org/media/news/en/press_det.php?id=4421

6. http://www.businessweek.com/bwdaily/dnflash/content/jul2009/db2009079_431299.htm

7. http://www.outbound-tourism.cn/english/intro.asp

8. http://en.wikipedia.org/wiki/World_Tourism_rankings

9. http://pub.unwto.org/epages/Store.sf/?ObjectPath=/Shops/Infoshop/Products/1482/SubProducts/1482-1

10. http://www.imf.org/external/pubs/ft/survey/so/2009/RES012809A.htm

11. http://www.economist.com/world/international/displaystory.cfm?story_id=13871969

12. http://www.flightglobal.com/articles/2009/06/17/328318/china-bucks-the-downturn-at-home.html

13. http://www.ted.com/talks/lang/eng/clay_shirky_how_cellphones_twitter_facebook_can_make_history.html

14. http://www.itu.int/newsroom/press_releases/2008/29.html

15. http://www.phocuswright.com

16. http://www.reuters.com/article/technologyNews/idUSTRE53I03V20090419

17. Mobile: The Next Platform for Travel, PhoCusWright, March 2009

18. http://www.embedded.com/columns/significantbits/13000166?_requestid=192742

19. http://www.economist.com/sciencetechnology/tq/displaystory.cfm?story_id=13725743

20. http://www.inrix.com/pdf/INRIX%20Corporate%20Overview.pdf

21. http://www.zipcar.com/how/technology

22. U.S. Online travel overview, Eighth Edition, PhoCusWright, November 2008

23. http://www.ft.com/cms/s/0/430b9fd8-721e-11de-ba94-00144feabdc0.html

PUBLISHED BY

Amadeus IT Group, SA

DESIGN & PRODUCTION

Amadeus IT Group, SA

PHOTOGRAPHY

Daniel Greaves

Alejandra Contreras

Amadeus Image Bank

RESEARCH

David Burton Associates

Acknowledgements


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