Call it a funnel or a sieve or whatever, let’s face it, things are changing in online travel, lines are blurring even faster than you can say “revolution” and everyone, it seems, wants to be all things to all people.
Has specialisation died at the altar of growth – imagine, Airbnb getting into trips and later, hotels and flights? How do the middle guys survive the tidal wave of consolidation to come? Do they just hope they get bought out before the money runs out?
One thing’s for sure, online travel is on a growth trajectory for everyone – it’s just a question of who gets the biggest, best bites.
Here’s a list of key takeaways from Phocuswright last week in Los Angeles.
- Go, go, go – giants rule
Brad Gertsner: “The cycle time of innovation has never been shorter.”
At the Street Talk session, investors were bullish on the two giants, Expedia and Priceline, saying not much could derail these two with teams that know how to execute well. Both Expedia and Booking.com are 20 years old, and both are expanding horizontally, vertically and globally, with scale and resources to dominate.
As big as they are, they continue to test. Expedia is testing the meetings market, a huge sector yet to be disrupted. It was a small bet made by the European engineering team, said Expedia’s leader Dara Khosrowshahi and now they are testing the product with Best Western in Germany.
Gillian Tans: Customers remain our focus
HomeAway, under new CEO John Kim, formerly product chief for Expedia, is focused on building a transactional platform which will make it a front runner in this US$100b market.
More than half of Booking.com’s inventory is vacation rentals and it’s scaling horizontally, from experiences to its B2B product, Booking Suite. And you need not fear this accommodations giant will lose its focus – CEO Gillian Tans said they remain focused on customers. “We’ve always done a lot,” she said. “We’re just talking about it more.”
Brad Gertsner from Altimeter Capital, showing off his Snapchat spectacles, said it was an exciting time to be an entrepreneur. “The cycle time of innovation has never been shorter.”
- The Airbnb Phenomenon
Chip Conley: Spend as much on brand innovation as standards enforcement.
Airbnb, the investors said, is not a disruptor, it will just open up new markets. I am not so sure about that. From an independent hotel perspective, and now inbound operators specialising in local tours, Airbnb (3m listings) and Airbnb Trips (launched last week) could eat their already small breakfast, lunch and dinner.
Chip Conley, Airbnb’s head of global hospitality and strategy, tried to reassure hoteliers that 30-40% of its travellers would not book hotels but what if they didn’t have Airbnb, where would they stay? Don’t forget, it has 100 million customers – that is its natural fountain of wealth.
As someone who frequents Airbnb and know first-hand how engaging and proactive hosts can be in taking care of your every need, independent hotels are up against a monster community made up of local, caring hosts offering authentic experiences.
A former hotelier, Conley had tips for hoteliers. Think outside the four walls of the building, optimize for mobile, fix the feedback loop – up to 80% of Airbnb customers give comments, the hotel industry average is 10%. “That’s the difference between a community and a transaction,” he said.
He added, “Customise experience based on data – data scientists are the revenue managers of the future. Have as many people focused on brand innovation as standards enforcements.”
- Chat may be the new black but is it the holy grail of trip planning?
AI and chat bots were big topics. It’s interesting to see the number of startups who believe this new technology will solve the travel planning problem. Having tried a couple of travel messaging services to plan travel, I am not convinced. Perhaps the technology is still early. If you’ve ever been part of a family chat group, you’ll also know it can be endless often with no resolution.
And in the first place, is trip planning broken? Does it need to be fixed? Rod Cuthbert, CEO of Rome2rio, and one of the “dragons” at the Innovation Summit, believes not. People, he said, get pleasure out of planning trips, more pleasure than on the actual trip itself.
One woman CEO told me, “I don’t know why they want to fix it. I actually enjoy planning and dreaming, and coming back to it, and discussing options with friends or family.”
Chat however could be a big thing for customer service, said Expedia’s Khosrowshahi, while Skyscanner’s Shane Corstophine said “bot is a good stepping stone for travel companies to get data before we put AI on top”.
- Voice to become the new swipe but when?
Voice is only at its first generation and like with all new technology, it will take a generational change to move the needle. Expect voice to become the new swipe as kids become comfortable with speaking to devices as Amazon Echo makes its way into more homes.
- In-destination has arrived but integration and discoverability remain a challenge
The in-destination panel featuring Open Table, Ticketmaster and Viator
Investors pointed to this sector as “being where the money is”. Unfortunately Priceline’s bet on Open Table hasn’t quite paid off – it had to take a $940 million write-down on the investment.
Christa Quarles of Open Table said the company underestimated the challenges of scaling and advised companies to focus on getting one geographical area right before moving on to others.
Ticketmaster, claiming to be the largest ticketer in the world, selling nearly 500m tickets worldwide (383m in North America), wants to become “the Sabre of ticketing” and is ready to expand overseas.
As a visitor to the US however, how do these companies reach me? At LAX airport, to connect to the wifi network, I was greeted with an invite from Lyft to download their app for a $50 voucher. At Santa Monica, there were people handing out pink Lyft $50 coupons, valid if you are a first-time user. This expensive customer acquisition exercise led Bobby Healy, CTO of Car Trawler, to ask David Baga, chief business offcer of Lyft, if it was a “one winner take all market for ride sharing” – whoever has the most cash to spend wins.
- The future is sharing and open (ish)
Baga: Customer ownership is legacy thinking.
The future though is bright for ride sharing, said Lyft’s Baga. With 30% of 16-24-year-olds in the US not having a driver’s licence, riding and sharing will be the new driving and he predicted that in in 10 years autonomous vehicles would be mainstream.
He also challenged Healy when the latter asked a question about customer ownership, saying it was legacy thinking to believe you can own a customer today.
Khosrowshahi echoed the opinion when he said Expedia was opening up a marketplace with its partnerships with Marriott Vacations and Red Lion Inn, and that it was not out to own a customer. “On the Internet you cannot own a customer.”
Yes, but you can have loyal customers and Expedia has 50 million on its loyalty programme. Compare that with Hilton, which has 60 million, and is pushing ahead with its “Stop Clicking Around” campaign to get more direct bookings. “Cost is not the driver of our strategy but preference,” said chief commercial officer, Chris Silcock. “We are focused on driving differentiated experiences across 13 brands to drive preference.”
Chis Silcock: Direct mix is growing.
He added that “the OTA-brand battle does not exist, they give us access to new customers” but having said that, he said the Hilton app was being downloaded every seven seconds, and its direct mix is growing.
So while the future may be more about sharing and open, it’s a different story when it comes to data – expect data to be the new land grab in a digital world.
- The future is also China
Jenny Wu’s got globalisation and funding on her mind.
Jenny Wu, chief strategy officer of Ctrip, called out by Booking’s Gillian Tans as a company she admires, took the opportunity to announce her new role as first managing partner of new fund, Baidu Capital. With a RMB20b (US$2.8b) war chest, it will focus on growth stage deals in the Internet sector. Wu will remain as advisor to Ctrip which will continue its expansion outside its home market, to go where Chinese outbound travellers are going.
It’s a similar strategy being adopted by Tuniu, China’s largest packaged tours company, which in the last two years has raised $1.25b. A key investor is the HNA Group which recently bought a 25% stake in Hilton Hotels shareholder in Hilton, is invested in Carlson Hotels Inc., owner of the Radisson and Country Inns & Suites chains, as well as Spain’s NH Hotel Group.
“This will help us get into flights and hotels,” said CEO Conor Yang. Its goal is to own 50% of the packaged tours market and it sees the future in self-guided and FIT travel.
With China leading the way in mobile innovation, it is not surprising that 70% of Ctrip’s business is on mobile and Tuniu’s is 80%. You can expect China to not only play a leading role in travel and technology in future but also as a global power with the turn in events in the US and a new President in the White House.
- But yes, what about the Trump thing?
Which brings me to the other T word. What I found most interesting was that while we were discussing how technology and travel would lead to a more open and diverse world, outside was a very different world. The media reports I read and watched during my 10 days in the US were disconcerting to say the least as to what Trump’s new policies could mean for the world in general and I felt like I was living in two parallel universes – on the streets in Los Angeles and San Diego, everything seemed normal but in the media, it’s all so frightening and scary.
And while I didn’t feel any different or less welcomed as a traveler in the US, I left with a sense of disquiet as to what would happen in this great country we’ve always looked up to for opportunity and diversity.