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Travel Drives Technology

Advances in technology are spurring innovation, growth and globalisation in the tourism industry and redefining notions of travel altogether.

Digitalization has left no segment of the travel ecosystem untouched.

If you wanted to book a flight back in the 1950s, it would have taken 90 minutes to manually to process the reservation, and the ticket would have cost more than today in real terms. Once on the plane, beyond the inflight magazine, there was a lack of in-flight entertainment.

In today’s digital age where bookings are confirmed in a split second and an entire trip can be planned with a few taps of the finger, it’s hard to imagine life back in the “golden age of travel”. Thanks to technology, travelling today is more affordable, accessible and convenient than ever before.

Travel drives technology

The travel industry has been at the forefront of digital innovation and continues to be transformed at an exponential rate across the globe. According to the World Economic Forum’s Digital Transformation Initiative (DTI), from 2016 to 2025, digitalisation in aviation, travel and tourism is expected to create up to US$305 billion of value for the industry through increased profitability, migrate US$100 billion of value from traditional players to new competitors, and generate benefits valued at US$700 billion for customers and the wider society.

Digitalisation has left no segment of the travel ecosystem untouched. “Technology pervades every area of tourism and must be given the highest priority when developing the workforce for the industry,” said a 2016 report from the United Nations World Travel Organization. The report cites that fifty-two per cent of smartphones in the world are owned in Asia Pacific, and social media is becoming a customer service improvement tool for hospitality groups.

In 2016, for the sixth consecutive year, the travel and tourism sector’s contribution to world GDP outpaced the global economy, rising to a total of 10.2 per cent of world GDP (US$7.6 trillion), according to the World Travel & Tourism Council. The UN World Tourism Organisation projects that international tourist arrivals worldwide will grow at a rate of 3-4 per cent this year, up from 1,235 million in 2016.
With such steep demand for travel, further digitalisation will be vital if the expectations of tomorrow’s consumers are to be met.

Shifting from bricks to bits: the rise of online travel shopping

The days of stepping into a brick-and-mortar travel agency or thumbing through travel guidebooks are dwindling fast. Caroline Bremner, head of travel and tourism research at Euromonitor International, said that online sales now account for 40 per cent of total travel product sales, up from 28 per cent in 2012. Mobile travel sales have seen phenomenal growth, rising from 2 per cent share of total travel sales in 2012 to 12 per cent currently.

Data from TripAdvisor’s TripBarometer survey showed that four per cent of respondents booked trips using a mobile app in 2014, with that figure doubling to eight per cent in 2015, and at 11 per cent among travelers who use smartphones to plan and book trips. Consequently, this means people are increasingly interested in booking hotel rooms, renting cars or buying tickets, tours and other products via their phones.

Worldwide, digital travel sales will rise by 11.7 per cent this year to nearly US$613 billion, and to an estimated US$855 billion through 2021, according to a recent report by market research firm eMarketer.

Established popularity of digital bookings in Asia-Pacific accounts for nearly 35 per cent of global sales, with China alone contributing 18.5 per cent globally. Chinese online travel agent (OTA) Ctrip reported that Chinese tourists spent over RMB600 billion (US$87 billion) in 2016 on OTA platforms, up 34 per cent year on year. The majority of orders on Ctrip’s platform were made on mobile devices, rather than computers as well.

A catalyst for the explosion of the sharing economy

Travel is essentially about connecting people and places. Leveraging technology such as near-universal high-speed internet connectivity, search and geolocation technologies, mobile payments and social platforms, these connections have evolved and one industry-changing development has been the explosion of the sharing economy.

Tourists worldwide now have a bounty of localised and personalised options for where to stay, what to do and how to get around. Looking for accommodation? There’s Airbnb, Tujia, HomeAway, 9Flats, Wimdu or FlipKey. Transport? Share a ride through Uber, Grab, Didi or Lyft, share a car through iCarsClub or ZipCar, or share a bike through MoBike or Ofo. Crave local experiences? Discover a unique tour on Vayable or ToursByLocals or find a home-cooked meal on EatWith or VizEat. If you’re in Europe, you could even fly by private plane at surprisingly cheap prices through Wingly.

This list is hardly exhaustive and continues to expand rapidly. The sharing economy’s revenue is forecast to rise from US$15 billion in 2013 to US$335 billion by 2025, according to PriceWaterhouseCoopers, with the travel and tourism sector experiencing much of this growth. The UNWTO-GTERC Asia Tourism Trends report in 2016 noted that “technological developments in transportation and accommodation (sharing economy) infrastructure will also impact on the investment requirements to 2030.”

The sharing economy has also forced tourism industry stakeholders to rethink their definition of tourism and reconsider the travel experience of the future.
“A closer look suggests several deeper unmet customer needs that sharing economy leaders have identified and built their businesses around solving,” said Alex Dichter and Nathan Seitzman of McKinsey & Company.

These unmet needs, they say, include a desire for authenticity, active discovery and being connected; distrust of many large institutions and brands; expectation of transparency and flexibility; appreciation for feedback loops; and eagerness for simplified interactions and payments.

Zooming in on hyper-personalization

One big advantage of digitalisation is the ability to harvest data and analytics. Consumers want to feel special and expect personalisation of service and experience. By capturing personal data from customers and learning more about their behavioural patterns, companies are increasingly optimising services across the customer journey.

For example, Australian airline Qantas, in partnership with unified customer data platform Umbel, has created a data hub centred on customer preferences and behaviours to improve customer experience and loyalty. In-flight entertainment and services, as well as real-time ticket booking and check-in processes, are personalised. A smartphone app acts as a full-service travel companion that anticipates customers’ needs.

According to Song Yu, secretary-general of the World Tourism Cities Federation, diversified, personalised and customised tourism is gradually replacing traditional group tourism. Among outbound tourists from China in 2014 and 2015, for example, 66 per cent chose free travel, semi-free travel, self-help travel or customised travel; the remainder opted for group tourism.

Breaking boundaries and establishing bridges.

In previous decades, North America and Europe have dominated the travel markets, but this may not be the case for much longer. By 2030, most of the growth in international travel will come from Africa, Asia and the Middle East, according to the World Economic Forum.

China in particular is a major driver of growth in global tourism- a powerful factor in shifting usage of technology as the Chinese middle class travels farther to unexplored destinations. “The rise of Chinese travellers as well as travellers from other emerging Asian markets like India should be considered another disruptive force driving transformation,” said Pansy Ho, Chairman of Global Tourism Economy Research Centre, which organized the annual Global Tourism Economy Forum, coordinated by GTERC.

“As these hundreds of millions of travellers have travelled out of their regions, yearning to see and experience cultures they now know from social media and internet, the question therefore is how to anticipate and prepare for their needs and interests,” Ms. Ho said during the World Travel and Tourism Council Global Summit 2017 in Bangkok.

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