Travel and Leisure:IT As a Competitive Tool

Peter Bubb16 October 2001

The IT Industry• I don’t mean Information Technology• I mean Inclusive Tour

– Otherwise known as Package Tours

• An Information Intensive Industry– Sells by exchange of information– Fulfils by providing information– Satisfies customers through information

provision– Competes by processing information

Structure of the Industry

• 10,000,000 holidays

• 7,000 travel agents

• 700 tour operators

• 100,000 hotels• 100 airlines

CUSTOMERTRAVELAGENT

TOUROPERATOR

HOTEL

AIRLINE

BUS

How Can You Sell by Exchanging Information?

• 700 tour operators print 100M brochures• Send them to 7,000 travel agents• Customers call in and take brochures• Customers talk to 50,000 travel agent staff• Staff connect to tour operator computers• Search for available packages• More searches: find a product• Purchase transaction• Agent acts as banker for tour operator

How is IT being used to Compete?

• Avoiding the cost of brochures– Cds; Teletext; Internet

• Reduce other operating costs– Target information– Substitute staff costs– Complaints etc– Communications within distribution

channel• Closing the sale faster

Seligo brochures• Seligo (based in Birmingham) is the

market leader in selling accommodation to travel agents

• Used to produce 200,000 brochures• Many brochures per sale• Now distribute accommodation photos

and details from database with tickets• 8,000 brochures go to travel agents;

moving towards cds• Savings funded database

How is IT being used to Compete? (2)

• Speed up the transactions– Capacity and performance of tour

operators’ computers– Travel agent terminals/PCs– Data broadcast

• Monitoring competitors• Tilt

Horizon Holidays• Year 1– 3% market share– slow network– poorly viewed selling application– unreliable system– still handled 40% of sales in Jan and Feb (ie

peak 2.2 times average)

• Year 2– network quadrupled in size – applications rewritten– system capacity up 5 times

Horizon continued• Year 2 (continued)

– 24 hour availability– awareness campaign– 6% market share– peak 5 times average

• Year 3– new booking system– new processors– additional capacity– peak now 150 times average (0.9% sales in 30 mins)– 11.5% market share– becomes favourite system for travel agents

Data BroadcastBROAD-

CASTER

TRAVELAGENT

TERMINAL

TOUROPERATORCOMPUTER

BOOKINGCONNECTION

DECODER+SLAVE

DATABASE

Data broadcast pilot• 200 selected travel agents• Search transaction reduces from 4 sec to

0.03 sec• 5 minute inventory updates for broadcast• 5% extra load on reservations system for

inventory updates• Equivalent to 40% reduction in load from

searches downloaded• 40% increase in sales• Net reduction in load: 31%

Horizon: Monitoring System Performance

• Typical transaction thread: search-option-confirm

• More searches than other transactions• Searches are processing hungry• System resources are monitored and

tuned, for resource balancing etc• Showed sub second response times• However, travel agents still

complained

Horizon: Monitoring System Performance

• Visits showed Horizon system slow and variable• Horizon built a system to simulate travel agent

searching on its system, to monitor performance including both network and processing

• Showed search response times varying from 9 to 300 seconds

• Led to completely different programme of work to modify and tune the booking system

• This enabled reduction of search times to 3.6 seconds with little variation

Horizon: monitoring system performance -

more• As it owned a chain of travel agents, it had

access to other ABTA tour operator systems• It pointed the monitor at its competitors• This showed the two main competitors took

8 and 30-50 secs for the same transaction• The variability of this measure also gave

clues to pressure points in their systems• These were used daily by Horizon for

marketing

Horizon: Monitoring System Performance -

More Still• Horizon sequentially numbered options• Used the option number as prime

tracking identifier• It realised belatedly that this told the

world how much business it was doing• It immediately encrypted these

sequential numbers

Horizon: Monitoring System Performance –

Even More• It then examined what its competitors were doing

• They had different schemes, but it was possible to deduce the algorithms used

• Modified the performance monitor to place an option, and record the serial number daily

• It then had a daily assessment of how much business its competitors were doing

How is IT being used to Compete? (3)

• New types of travel agents– Internet eg lastminute.com– Public Access Machines eg Holidays

Now – Replace travel agent staff by public

systems eg Thomas Cook – Preference elicitation/profiling

Holidays Now• Network of Flight Points• Stations/Motorway

services/Hypermarkets• Screen/Keyboard/Ticket

printer/Card reader• Robust packaging• Holidays Now Ltd is

ABTA travel agent

Holidays Now• Pilot Network of public access machines

selling holidays and flight tickets• Artificial intelligence used to establish

customer requirements• Machines shared knowledge of where to find

product• Better hit rate than travel agent staff• Public resistance to high value purchases• Company purchased so that technology could

be used for selling car insurance

How is IT being used to Compete? (4)

• Disintermediation ie leapfrog the travel agent and tour operator– Internet booking of components– Direct sell brands

• Service improvement through data mining

• Many other retailers now selling holidays

• Tour operators going direct

Current Trends

• IT enabling DIY packaging• Stagnant demand• IT changes product to a commodity• Internet provides low cost of entry• More difficult to tilt• Vertical integration• Strong shift towards Internet for

business to business (e-)trading

Building Tilt• Tilt is about stacking the odds in your

favour• How a travel agent connects to a tour

operator– Viewdata terminal autodials / PCs default

diallers– Shared networks such as AT&T Istel– Make it easier and quicker– Get counter staff to prefer you

Building Tilt (2)

• Once connected– Never say no– Mimic competitors commands– Ignore the customer’s requirement– Keep the customer in your system– Display things in your order of

preference– Breadth of product

What Has Happened Since September 11?

• Air travel is less attractive– Immediate 60% drop in US trips– Many airlines cutting capacity or prices– Budget European airlines predicting growth

• IT prices heavily reduced– Cruise prices discounted 30%– Late offers down by up to 78%

• Expected to recover, but might take some time– Business reduced some 20% after the Gulf War, but

recovered after a year or so

• Enhanced dependence on IT

Tourist Attractions

• Theme parks– Alton Towers– Chessington World of Adventures– Port Aventura

• Visitor Attractions– Warwick Castle– Flagship Portsmouth– Madame Tussauds

How do they compete?

– Marketing– Repeat visits– Visitor experience– In visit spend– Dwell time

What about their IT?• Ticketing

– Distribution– Speed

• Marketing– Databases– Loyalty

• Operations• Retail• All the usual ledgers etc

Ticketing at Alton Towers

• Key requirements– Guest’s perception of quality of

experience– Speed of transactions– Reliability– Flexibility for pricing and promotions– Financial controls– Capture of marketing information– Capable of handling trainloads

Ticketing at Alton Towers (2)

• System acquired– Supplied by Tor Systems– Tor systems developed a high speed

ticket printer– Guest displays, souvenir tickets– High speed local network– Cash transaction in little more than 3

seconds– 15 minutes downtime in 2 years

Ticketing at Portsmouth

• Flagship Portsmouth is the largest attraction on the South Coast– Complex ticket types– Ticketing Hall– Initially purchased bespoke system

with touch screens - became unreliable – Replaced with industry standard

package

Ticketing at Portsmouth (2)

• The Renaissance of Portsmouth Harbour - £46M Lottery funding– Consortium of varied independent

partners– Joint ticketing mandated– Choice of open access or tokens– Choice of networking harbour or smart

card technology or low-tech low function– Technology choice dependent on political

decisions

Marketing at Tussauds Group

• The Tussauds Group operates Madame Tussauds in UK, US, Australia and Holland, Alton Towers, Chessington World of Adventures, Thorpe Park, Warwick Castle, Rock Circus and the London Eye

• Development of marketing database– customer details– visit details

Tussauds Marketing Database

• Became 2nd largest club database in UK

• Helped to increase entries to record levels

• Target promotions for groups, coach operators, cross sales etc etc

• Showed how critical data quality was• Enabled strong growth of volumes

Style of IT in Tourist Attractions

• Most smaller attractions build up from retail systems– integrate ticket sales with shop– eg Isle of Arran Distillery, Merseyside

Maritime Museum– Low costs but limited functionality

Style of IT in Tourist Attractions

• Middle sized and large operations often combine several separate applications– retail + ticketing + financial package– eg Warwick Castle– enables best of breed decisions– Low costs high functionality– but integration sometimes complex

Style of IT in Tourist Attractions

• Some of the larger players specify fully integrated applications– eg Port Aventura uses SAP– High costs high functionality– Costs sometimes limit possibilities

Operations at Port Aventura

• SAP used for all kernel applications– Finance– Human Resources– Scheduling– etc

• Specialised fringe applications tightly integrated– Ticketing– Point of Sale– Time booking

• Costs per visitor about 4 times Alton Towers cost

What Has Happened Since September 11?

• Overseas visitors spend in UK down 20%

• Hotel bookings down 15%• Visitor attractions suffering more if

they depend on overseas customers– Tower of London down 30%

• Security increasing• Opportunities for IT to contribute more

IT in Tourism and Leisure

• Very competitive industries• IT is particularly relevant because of

their dependence on information• IT is often used as a competitive

weapon• Some examples of IT being used

very aggressively• Competitive use of IT will probably

increase

Travel and Leisure:IT as a Competitive Tool

Peter Bubb