A frequently discussed topic at the Phocuswright Conference in November 2019 was the emergence of the Inter-Connected trip, a.k.a. the Seamless or the Frictionless trip. No doubt that the idea of stitching together the various pieces of the traveler’s journey in the digital era has been floating around for a while. But several industry leaders believe that the time of the inter-connected trip is finally upon us.
Below are some of my observations why the idea of the Inter-Connected trip has come to be, and the obstacles still in its path:
Cross- and Up-Selling is the New Black: Let’s be honest, with the exception the offline travel agencies and low-cost carriers, the travel industry has done a dismal job of cross-selling and up-selling in the online environment. The two decades of online travel distribution were primarily fixated on flights and hotel bookings, with an emphasis on deals and the best price.
Overall, travel industry-specific cross- and up-selling insights are hard to come by. A 2017 analysis by Pegasus stated that just 3% of hotel guests purchased add-on while booking hotel rooms. In the case of airlines, ancillary sales will account for 12% of worldwide airline revenue in 2019. In contrast, online travel intermediaries have often expressed their desire to improve cross- and up-selling. After all, many have labelled themselves as a “one-stop shop” for years (see image below).
Most OTAs are an One-Stop Shop
There are mixed perspectives as to why most OTAs haven’t cross-sold successfully. These range from limitations in technology, understanding user preferences, ad-hoc merchandising strategies, lack of data portability across services, etc. Still, companies are betting on brand trust and reliability in travelers booking all aspects of their trip with a single brand. Lloyd Walmsley, Director, Deutsche Bank Securities Inc. also points the emerging trend towards industry growth slowing down, resulting in online travel intermediaries integrating a variety of products.
Mixed industry standing about the Inter-Connected Trip (0:49-1:23)
Leading Wall Street analysts are still bearish about the concept. (14:58-16:35)
Data Harvesting Gets Better: The explosion of Internet of Things (IoT) has transcended how people consume data across devices. It is estimated that by more than 44 zettabyte (1,000⁷ bytes) of data will be accumulated by 2020, and roughly 463 exabyte (1,000⁶ bytes) of data will be created every day by 2025! There is already a plethora of data analytics platforms which aggregate, harvest and eventually unearth insights pertaining to digital user behavior and their preferences from this magnitude of data. With machine learning and artificial intelligence (AI) technologies only getting better – and smarter – expect travel companies to be at the forefront of deploying solutions to gain deeper insights about their users.
Hear Booking Holdings’ CEO Glenn Fogel take on the Connected Trip (17:25-19:00)
The Invisible Hand of Personalization: Data can enable companies to deliver delightful user experiences. Take Amazon as an example, where up to 35% of its revenue comes via cross-selling through “Frequently Bought Together” or “Customers Who Bought This Item Also Bought”. Imagine the potential of delivering similar personalized recommendations by online travel intermediaries, by intelligently tapping into data of millions of user sessions, known travel dates, times and itinerary. That is an enormous opportunity for online travel intermediaries, who fundamentally regard themselves as technology companies first (and travel retailers second) are aiming to tap into.
Kara Swisher on how Travel Brands will use “Rundle” (Recurring Revenue Bundle) to Sell Multiple Products (6:15-7:24)
There’s Always a Wild Card: An overwhelming degree of commentary on the Inter-Connected Trip has been dominated by online travel intermediaries. However, a contrarian view is that the corporate travel management companies and lodging suppliers will have an edge over the digital intermediaries. Fundamentally, online travel intermediaries target leisure travelers, who take up to 2-3 trips a year. In contrast, TMCs and hotels cater to road warriors, for whom tying together a variety of travel and related components into a seamless experience may be more relevant.
TMCs and Hotels have the Most Incentive to Define the Inter-Connected Trip, according to Miriam Moscovici Senior Director, Research & Innovation, BCD Travel and Chris Hemmeter, Managing Director, Thayer Ventures (17:14-18:13)