Kei Shibata, CEO of Venture Republic and co-founder of WIT Japan & North Asia, shares his observations on trends in the online travel space and how they might play out in 2017.
Kei Shibata: Competition is not only occuring between existing players but is also bringing in new players.
Now that the WIT (Web In Travel) conference (Singapore) that’s well known in Japan and the world’s largest online travel conference, Phocuswright (Los Angeles), are over, I’m taking this opportunity to share my thoughts on the current state and future of the rapidly-changing global online travel market.
The theme of this year’s Phocuswright conference was “Funnel Revolution.” Put simply, a funnel is made up of the phases a user goes through for a trip – dream, search, plan, shop, buy, travel, and share. But now, players in the industry are going beyond the funnel to compete. One specific example is a metasearch (search/comparison) online travel site like our Travel.jp implementing reservation features to turn into a site like an online travel agency. TripAdvisor’s Instant Booking service is a good example of this.
Going beyond the funnel leads to changes in the business model. If we use our company as an example, Travel.jp has followed the metasearch business model to target the “shop” part of the funnel, but in recent years new content distribution services such as Travel.jp Tabinesss and Trip101 aimed at taking on other parts of the funnel such as “dream,” “plan,” and “travel” have led to expansion into new business models. This is undoubtedly part of the same idea.
Competition beyond business model borders is not only occurring between existing players in the travel industry, but is also bringing in new players from outside the industry. One major example is Google. In recent years, Google has entered the travel industry through flight search and hotel search services, clearly targeting the “shop” part of the funnel.
But this year, the introduction of the new Google Trips service indicates that Google has its sights set on the “plan” and “travel” parts of the funnel and is making an all-out advance into the travel industry. The newest and most remarkable example is Airbnb. By coincidence, Airbnb was holding a large event called Airbnb Open in Los Angeles, in the same city and on the same week as Phocuswright. (Gwyneth Paltrow and Ashton Kutcher spoke at the event. 6,000 Airbnb hosts gathered at last year’s event in Paris.) At the event, Airbnb announced that they would begin reservation services for overall travel rather than just short-term lodging.
Gillian Tans, CEO, Booking.com which has begun developing and testing chatbot services.
New technologies will intensify and accelerate this competition beyond the funnel. A leading example is AI (artificial intelligence) and machine learning. These were the prime topic of discussion at both Phocuswright and WIT. One specific application is the chatbot service used on messenger (LINE, Facebook messenger, etc.) platforms. Global players such as Booking.com have all begun development and testing, and many startups such as Lola are introducing new services that use this technology as leverage. These new services aim to take over the entire funnel of dream, search, plan, shop, buy, travel, and share, and their potential to disrupt sectors like travel agencies, hotel concierges, and travel guidebooks is another reason they warrant attention.
Competition beyond the funnel also becomes a competition beyond categories. The “travel” part of the funnel, or in-destination services, is a good example. Many of the major players such as Expedia and TripAdvisor are turning their attention to local tours and activities and restaurant reservation services through acquisitions, etc. Accommodation is another example, where Expedia acquired HomeAway. Moves by B2C service companies to enter the B2B space, such as Booking.com’s BookingSuite and Expedia providing services to the Marriott group, are also interesting.
In addition to the funnel and categories, competition across national borders is also gaining momentum. For both major players and startups, rolling out service to the entire world is quickly becoming the default. One recent example is Trivago, a metasearch service that began in Germany. They are running TV advertising in major cities all over the world in an aggressive global rollout that doesn’t seem to worry about operating losses.
Trivago recently filed for an IPO in the US, and the estimated business valuation is said to be ¥500 billion or more. In Asia, China and India are drawing attention. Through its merger with China’s top metasearch service Qunar, China’s Ctrip has acquired overwhelming market share in the enormous and growing Chinese market.
Not only that, this year it also acquired shares in India’s largest online travel agency, MakeMyTrip. Moving forward, they intend to expand outside of China and offer services to non-Chinese users as well. (Jenny Wu, Chief Strategy Office, Ctrip at Phocuswright) Our company has also made advances into the overseas market in South Korea (Allstay, a metasearch service for lodging) and Singapore (Trip101, online travel media), but cross-border competition is sure to intensify in Asia as well.
Finally, I would like to touch on recent moves by startups, an always interesting indicator of the future of the market. It seems the important keywords are “AI”, “sharing” and “B2B”. Among investors who know the travel market well, many advise against investing in travel planning. It is interesting to see multiple startups going after travel planning business despite this.
Perhaps ironically, this could be due to the possibility of innovation in the “plan” part of the funnel driven by AI technology. In the “sharing” phase, we are seeing services that focus on niches outside of major areas like lodging or cars, such as Airmule (a shipping service using air travelers’ unused luggage space), a company that received recognition in Phocuswright’s pitch content. In “B2B”, various models can be seen focusing on specific targets, such as services specializing in the local tour/activity field.
The global travel market is experiencing chaotic competition that crosses a variety of boundaries – phases of the funnel, business model, category, national borders, and corporate scale.
As a side note, after being on hand for Brexit, I was in the US for the presidential election. On the final day of the Phocuswright conference, Steve Hafner, CEO of the American metasearch service KAYAK, asked the audience of several hundred people if they had voted for Trump, and asked anyone who had to raise their hand. (Nobody raised their hand, but Hafner commented afterward that he was sure there were some who had voted for Trump but didn’t raise their hand.)
In chaotic times like these, the power to “Reimagine”—the theme of the WIT conference—becomes even more important. I am already looking forward to WIT Japan & North Asia in 2017. (Dates set for June 8 and 9.)
This article first appeared in Travel Voice Japan