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July 24, 2012

Innovate or Die in Times of Flux

IntroArticle_BlogAnalyst Insight By Caroline Bremner, Global Head of Travel and Tourism Research at Euromonitor International

Travel and tourism is a highly fragmented and complex industry, with a multitude of ways to innovate and lure consumers to spend money in challenging times. Consumer priorities have changed post-recession, and the desire for experiences is paramount, with travel companies needing to remain ahead of lifestyle trends to gain competitive advantage.

Global hotel chains have identified some key means to differentiate their product offer from the competition including design, food and beverages (f&b), and service among others, all alloyed with the constant need to move with technology. Hotels are reinventing the lobby to make them more social and appeal to local communities and Generation Y, with Courtyard by Marriott claiming that food and beverage sales per occupied room doubled after rolling out its new lobby format. Hilton announced that it is testing out two new room types, Yoga Room and Cardio Room, to see if guests are willing to spend US$30 more a night to work out in their rooms.  

Like destinations around the world, hotels are also keenly trying to diversify their target markets, away from traditional sources like the US and Europe, to new markets like China. To this end, companies have adopted various China-led initiatives, like the customised Chinese service of Hilton’s Huanying Welcome scheme, to China only brands like IHG’s Hualuxe.

F&B itself is also a key area of activity: from refreshing restaurants and mini-bar concepts to integrating F&B with loyalty programmes. Euromonitor International’s survey illustrates the national differences in eating and drinking which hotels are keen to exploit in order to customise their F&B offers and appeal to different markets.

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All the while, consumers have increasing knowledge to inform their purchasing decisions, thanks to travel networking, social media and price comparison websites, shining a spotlight not just on price transparency but also on the quality of service. In the online travel sphere, new business models are challenging existing online travel agent models, benefiting from the so-lo-mo trend (social, local, mobile), shaking up the status quo in travel search, travel services and pricing. Mobile has also helped to revolutionise travel, offering check-ins and targeted local offers thanks to geo-localisation services. Social media also allows the service aspect of travel companies to be updated, offering a 24-7 real time online travel concierge service.

Airlines are also getting in on the act, finding innovative ways of generating ancillary revenues, and changing the flying experience from paperless check-in to social media campaigns such as Air Baltic’s Facebook social seating programme and KLM’s Surprise. Car rental companies introduced new types of vehicles into their fleet including electric cars, and have embraced the car share model as well as ancillary revenues.

To keep ahead of the lifestyle curve, travel companies are partnering with technology players like Google, Facebook and Apple to ensure their products and services remain relevant. With these players innovating in travel such as Apple’s Passbook, there will be future implications for how travel companies relate to their customers, with the ever-increasing presence of third party technology providers.

Start-ups like LevelUp, which makes customer loyalty the focus in its mobile payment application, are increasingly at the forefront of innovation. The battle lines are being drawn for future control of consumer payment and loyalty as greater convergence occurs between mobile, m-commerce, local, loyalty and social. Travel will be at the heart of this fight. With players like Google already active in the field with Google Wallet, the competition can only intensify

Numerous travel start-ups are rewriting the rules regarding pricing, with flash sales and opaque pricing already widely used, and new models such as bidding against existing bookings to offer more competitive pricing such as Backbid. The question is whether the focus on beating an existing price will lead to a declining spiral to the bottom? That’s where the social media angle helps brands to establish their online community and work to increase loyalty and defend value.


 


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