Over 55 pages, it first warns of a “consumer revolution”. As consumer expectations grow in the wider retail sector to include easy purchasing, inspirational shopping and personalised services, these expectations will “spill over into the travel market… likely to lead to major disruptions in the travel distribution industry”.
Then there is the rise of the “gatekeepers” – Google, Amazon, Facebook and others – which over the next 10 years could continue to grow their power, acquiring billions of consumers.
Facebook, for example, is the biggest smartphone app with 126 million users each month. Google Search, Play, Maps and Gmail have meanwhile combined 348 million users each month – so they can direct consumers to particular players, such as airlines, hotels or travel agents – for a fee.
According to Emmanuelle Gailland, vice-president distribution at Air France, “Google’s negotiating power will continue to grow in the longer term”.
"Facebook is the biggest smartphone app with 126 million users each month. Google Search, Play, Maps and Gmail have meanwhile combined 348 million users each month"
Payment systems, such as Android Pay or Apple Pay, are set to influence the rise of gatekeepers, while the gatekeepers’ virtual assistants (Siri, Alexa) and chat bots that harness artificial intelligence and big data are set to strengthen their position, pushing consumers away from using multiple websites towards a single point of contact.
So what are the implications? Step forward report author Dr Graham Floater. A fellow at the London School of Economics and Political Science, he was previously deputy director in the prime minister’s strategy unit for energy and climate change, where he oversaw the Stern Review team. He was also head of European economic negotiations at HM Treasury.
With this background, he is perhaps well placed to offer guidance urging more collaboration. But travel is a fractious industry. I point out the recent spat between hotels and OTAs, with chains now spending big marketing bucks to ask customers to book direct; Iata’s New Distribution Capability versus the GDSs, with the likes of Lufthansa charging a GDS booking fee; travel agents seeking operator price parity online; and, of course, the rise of the sharing economy.
“Previously, I looked at the technological revolution in terms of climate change, looking at green technology,” says Floater.
“Back then we couldn’t have imagined the technology that was to arrive in 10 years – we often underestimate the speed of things.
“There is conflict,” he says, “[but] we’re talking creative destruction – new business models do emerge, and you shouldn’t shy away. More time needs to be spent on bilateral agreements. The consumer revolution is spilling over into travel retail, creating a lot of competition. You need multi-collaboration.”
While there can be dangers of collusion with too much collaboration, Holger Taubmann, senior vice-president distribution, Amadeus, points out: “It’s differentiation, not collusion. We help airlines work better with airports. It’s an exchange of data. Hotels [would gain] huge benefit knowing, for example, arrival data. We’re looking at the entire chain.”
Meanwhile, Floater says these “multi-collaborations” between travel companies will be essential to compete with gatekeepers. “Markets perform best when there’s competition – regulators are aware of that. The industry collaborates so it can deliver for consumers.
“Regulation can destroy and shape markets. Travel is different – big drivers are consumer expectations spilling over and technology must be tailored to them.” Time to benchmark Regulators are governments – for example, the Department of Travel in the US and the European Commission in the EU. “With GDS fares, there is display neutrality, but advertising is not neutral,” he adds.
Proving the case for more joined-up thinking, Taubmann insists that the report is also intended to help mid-size companies to “benchmark” themselves within the industry.
“We try to pick themes, to structure, to give people help and to determine where they are against other parts [of travel]. We’re trying to give people information so they know where to invest.” It may be obvious that travel sellers need to invest in technology, but the report excels in demonstrating the urgency with which they must do so, and spells out the consequences of failing to collaborate.
It’s not the end of the world quite yet, but as the report concludes: “Whether the imminent consumer revolution is perceived as a threat or an opportunity by the industry may well determine the winners and losers of the future.”