For the first time in history, the number of international tourist arrivals has exceeded one billion, a 50 percent rise from that achieved in the late 20th century. International travelers from China, Germany and the United States are among the biggest travel and hospitality spenders worldwide.
This increase has sparked a new wave of innovation across the entire travel and hospitality sector. While some ideas improve efficiency, others signal game-changing implementations that are leading to new ways of operating in a connected economy. In this piece from Razorfish we highlight several emerging trends that will impact travel and hospitality for years to come:
New opportunities in high-growth travel markets
Innovation and disruption in the hospitality sector growing impact from a connected economy
According to the World Travel and Tourism Council, several factors are fueling aggressive growth in the travel and hospitality sector. Together they are creating new patterns of travel demand in the West and new growth opportunities in the East:
In China, gross domestic product (GDP) doubled during 2010-2015 while personal and business travel grew over 70 percent.
India is on track to produce 50 million outbound tourists by 2020.
In the U.S. baby boomers will soon own 60 percent of the nation’s wealth and account for 40 percent of its spending.
By 2024, travel and tourism will add $600 billion to Latin America’s GDP.
Traveler looking out airplane window
New Opportunities in High-Growth Travel Markets
Demographic shifts point to new opportunities
In the U.S., the fastest growing segment (those aged 45 to 64) will plan for, and move into, full retirement, opening up opportunities to cater to a relatively affluent and time-rich segment of people. In China and India, emerging middle classes will travel first regionally, then internationally.
But, the current travel experience threatens growth
Recent travel forecasts certainly spell good news; yet there’s one issue that poses a real threat to the industry’s growth: making the connecting flight domestically (on one-stop flights…when you have only a few minutes to do so) may be the biggest worry. Such anxiety translates to costly pain points for both airlines and travel companies, as employees are distracted from their normal jobs to manage the stress of anxious travelers. If the travel experience isn’t innovated soon, the attractive growth forecasts we’re seeing will either flatten or fall.
Strategies for relieving travel stress
In the airline sector, travel stress reaches its height on the actual day of travel, which translates to big revenue losses. For example, in a study by Mobile Travel Technologies, 17 percent of surveyed travelers confirmed that they had put off trips due to substandard air travel services. 67 percent of those surveyed said they would travel more if the experience were improved.
17 percent of surveyed travelers confirmed that they had put off trips due to substandard air travel services.
67 percent of those surveyed said they would travel more if the experience were improved.
Real time notifications provide a simple solution. In the same study, 93 percent of surveyed travelers said they expect important notifications in nothing less than real time, especially news about delayed flight times. 84 percent expect to be updated regarding flight status; 79 percent want to be notified of wait times at security checkpoints.
New revenue opportunities from low-hanging fruit
There is clearly an opportunity to stimulate revenue through better use of mobile devices—aimed directly at relieving travel anxieties. But customers are increasingly expressing demand for ancillary service notifications as well, such as offers to upgrade, opportunities to use exclusive airline clubs and lounges, being notified of parking and shopping promotions, in-flight offers for meals, Wi-Fi and entertainment (as well as promotions at nearby hotels and car rental facilities).
Some airlines are partnering with a city’s local entertainment community, by offering tickets to its live theater and sports events, discounts at popular restaurants or river cruises. Others partner with local gyms and spas, offering guest passes to travelers right after they land. Many hotels are also partnering with companies such as Hotel Tonight, a simple app that offers same-day, deep discounts to stay at four-and five-star hotels motivated to fill unsold inventory.
Invest in simplicity
Travel and hospitality providers alike have a clear opportunity to enhance revenue with relevant and ancillary offers during the traveler’s journey, through mobile solutions. Providers should offer such advice, though in a way that reduces the stress of travel through simplicity. This means data from disparate systems must be elegantly integrated into a mobile interface to display relevant, real time information that eases and enhances the experience at every step. When travelers are under duress, they don’t think and act as clearly and rationally as they would under normal conditions. Hence, lack of smooth integration, and its resulting cluttered experience, will only confound the issue by adding to an already stressful situation.
Innovation in Hospitality
Continued disruption from mobile computing
When Airbnb disrupted the industry with its approach to help travelers “find a place to stay” versus “find a hotel room” it rocked the entire sector. Airbnb’s success also put pressure on traditional hotel and motel providers to compete on the mobile experience — with services that providers such as Airbnb are challenged to deliver. For example, traditional providers can leverage the mobile device to feature special services and upgrades for guests as they pre-check-in from their mobile devices, a low-risk opportunity since hoteliers can implement the service quickly and see results within minutes of deploying it to guests.
Of course, such an approach should also integrate into the hotelier’s existing property management systems to optimize inventory and manage ancillary services to identify products and services that can be reliably curated on demand. A challenge that must be addressed is striking the balance between communications that are welcome versus messaging viewed as spam.
When it comes to mobile computing, the travel and hospitality industry is moving quickly to embrace virtual reality, using headsets (equipped with generators) that replicate real travel experiences, such as the smell and sound of ocean waves. Thomas Cook, one of the first travel agents to adopt virtual reality experiences, does this and more, letting prospects fly over Manhattan, experience lounging in the sun by the pool at a premier hotel in Spain, or check out a restaurant in Cyprus, using Samsung-powered headsets. Marco Ryan, chief digital officer for Thomas Cook, says the technology is not only boosting package holiday sales but is also integral to the brand’s future strategy, adding, “Before travelers just had a brochure or information on the website to inform their choices. Virtual reality allows them to get a true sense of the hotel and the excursions they can go on — it’s been a real game changer for us.”
A Japanese hotel dramatically reduces costs, enhances the experience
“These robots will warm your heart,” says a happy traveler upon his stay at Japan’s Henn-na, the first hotel to address the rising cost of doing business in Nagasaki – with employees who never call in sick and won’t ever ask for a raise. In fact, these employees, once acquired, work for free. Henn-na, which translates to “Strange,” certainly lives up to its name, but in ways that delight its guests. Travelers who’ve experienced the hotel find the robots (especially the dinosaurs) absolutely charming and fun to be around.
Considering that most customer-facing hotel processes are routine and predictable, using robots for checkin, checkout and things like carrying luggage to rooms isn’t as far-fetched as one would imagine. Hideo Sawada, the hotel’s owner and general manager, aims to make Henn-na the most efficient hotel in the world by supplanting 90 percent of a typical hotel’s human staff with robots. Given that labor is typically a hotel’s highest line item in terms of cost, he might just get there. Sawade is careful not to sacrifice what people want in a hotel; Henn-na is designed to resemble the Netherlands (one guest calls it a Dutch Disneyland) with gardens, windmills and tea shops. In addition to its robot staff, the hotel’s thermostats adjust to the guests’ body temperature when they enter their room to create a perfect, stress-free atmosphere.
Facial recognition grants entry into one’s hotel room while a robotic concierge answers questions, explains breakfast times and locations, and orders taxis. Rooms start at just $75USD per night, but during peak times are auctioned to the highest bidder. While some say the novelty of the hotel will be short-lived, Henn-na promises to have a long head start since no hotel in Japan, or the world, has launched anything similar.
Japan’s Henn-na Hotel
Japan’s Henn-na Hotel
Growing Impact From a Connected Economy
Connected consumers flex their influence
While the real power of the connected economy is just getting underway, its short history is proving that empowered consumers can have big impact markets. For example, when many airports tried to ban Uber in their taxi lines, consumers rebelled so strongly that these policies were quickly overturned. These and other lessons (that date back to the music industry’s attempt to stop digitization of its product) continue to remind business leaders across the board that consumers won’t be denied their tool of choice. The new rule is not to fight, rather find ways to adapt. Marriot, for example, now offers cleaning and other ancillary services to Airbnb providers.
Know the difference between personification and personalization
You may think an offer delivered to a guest’s mobile device is personal when in fact it isn’t. That’s because many providers falsely label offers as personalized, when in fact they are personified, meaning they are offered to a guest based on his or her membership in the marketer’s neatly defined mass segment. While it may sound like a minor mistake, today’s tech-savvy customers quickly recognize offers that pose as personalized when in fact they are offered to hundreds, even thousands of other people. For example, research shows that customers are starting to distrust brands that say “this is just for you” when what they really mean is “this is for people just like you.”
A marketing experiment that illustrates this distinction in a very dramatic way is KLM Surprise, an initiative where flight attendants browsed Twitter and Foursquare, looking for individuals who were about to board a KLM flight. Using information customers provided about themselves on social media, the flight attendants purchased and presented personal gifts for 40 passengers as they arrived at their destination. KLM Surprise didn’t give generic gifts. Rather, employees researched customers to give them something from their public wish list or something they had admired. News of these surprises spread through mentions, tweets, retweets, and word of mouth (the KLM Twitter feed was viewed more than one million times over the next 30 days). Other airlines have been quick to imitate KLM’s experiment, for example WestJet in Canada.
Learn from Disney
Disney, one of the connected economy’s most prominent trailblazers, is noted for elegantly pairing digital services with its physical experience. Its MagicBand, a simple wristwatch that guides users through the park, shows which rides are free immediately and which have 15-minute lines. MagicBands also guide you to where to eat, shop and find nearby rest areas. Walk into a restaurant, and a host greets you by name. If you’ve preordered your food, it’s waiting for you at your table. A simple wave of the band automatically charges your credit card. Data from the MagicBand also advises you how to enjoy the park even more, based on your party’s behavior, ratings of various activities and consumption patterns. Given its success, cruise lines and amusement parks everywhere are adopting similar models.
Address the stress of the entire travel experience
Stress in travel is clearly on the rise, and it's proving to be the number one threat to growth. Those providers who objectively address the issues with creative solutions will be rewarded. Marketing, digital commerce, customer experience and digital executives in the travel and hospitality sector should take a hard look at how they can relieve traveler stress, especially the day of travel, across the entire end-to-end journey. Attention should also be paid to changing demographics; for example, the baby boomers will value features differently than millennials.
Dedicate budget to experimentation
Innovative proofs-of-concept continue throughout the industry: facial recognition at hotel check-in, early experiments to supplant hotel desk staff and butlers with robots, virtual reality tours of travel destinations or using a mobile device to unlock one’s hotel room. As emerging technologies in the connected economy continue to mature (and be introduced) business leaders in the travel and hospitality industry should dedicate a piece of their marketing budgets for experimentation. Bringing in unbiased external experts (with no agenda other than to help brainstorm ideas) can be valuable to organizations that are too close to the issues.
Don’t skimp on integration
The connected economy and rising incomes are bringing millions of potential travelers into this market. The tool of choice for new target segments is clearly mobile. Make sure your mobile strategy is tightly integrated with existing systems in ways that make the experience simple, intuitive and engaging. Unfortunately, there have been too many providers that, in their zeal to adopt mobile, have skimped on its elegant integration with existing systems, creating confusion and disappointment. The end result? More travel stress (already the number one inhibitor to growth).