We usually associate new technologies with new tools and – obviously – savings. However, we far less frequently notice that they cause gigantic market changes that may transform the distribution system of competition and even sweep us off the market. It is not only about the new competition which will turn out to be better than our business (that would be only be a periodic business cycle change). It is about a profound structural change that could render the entire industry unnecessary.
Why, for example, did taxi drivers think they were threatened by Uber, which does not own a single taxi? The answer is simple: the value that Uber customers (as well as customers of taxi companies) are looking for is not a taxi, but a transport service. Someone came up with an idea of how to connect those who are looking for transport and those who can provide it. This almost trivial idea destroyed the existing market structure: an entity from outside the industry, a typical ‘digital-born company’, came and hit the jackpot. Short-term apartment rental platforms represent a similar example in the market for accommodation services.
Market boundaries are blurring under the influence of new actors and new tools (technologies). Therefore, let us not get attached to the concept of a market or an industry, because it is an anachronism. Instead, let us consider what the sale of tourist packages may look like in the upcoming years and what are the chances that it will be handled by the same entities as today.
Do we need intermediaries in the tourism market?
Tour operators and travel agents (commonly perceived to be thrown together under the name of travel agencies) are in fact very young institutions. They began to appear on a large scale only in the post-war period, but since they have conquered the world, we consider them indispensable.
Kind of right. If people traveled without intermediaries for centuries, and then turned to them so eagerly, this is the best proof that there is some value behind their existence. At first, the value was represented by simple access to information. Intermediaries knew where to go, where to spend the night and eat, and how to do it safely. They were able to overcome all obstacles on our behalf despite the geographical, time and cultural distance. With time, it turned out that one entity was better at organizing (tour operator), and another at distributing information and acquiring customers (travel agent). The specialization and separation of these two functions for several decades allowed them to coexist perfectly on the market.
And suddenly the Internet appeared!
The best source of information! A brilliant broker with no commission! Everyone who simply could, set up their own website and waited for crowds of tourists from all over the world to arrive. Hoteliers were rubbing their hands in anticipation of profits that would never be diminished by any commission. Everyone could organize a trip by themselves!
The organizers somehow managed to defend themselves, because they had two great advantages: prices negotiated in ‘wholesale purchases’ and the inalienable value offered to the customer, i.e. convenience. Agents, on the other hand, were quickly seen as a redundant link in the value chain (both the organizers and potential tourists saw them that way). In order to save their position, they moved to the Internet, unfortunately not changing the essence of their activities at all.
However, they gained time. It turned out that the rapidly increasing number of websites, and the inability to easily search online resources and transparently compare offers make it difficult for customers to choose a tourist package on their own. There were also problems with verifying the reliability of the information, ensuring the security of transfers, the lack of legibility of websites, and above all, a gigantic information overload. In B2B relations, the problem was solved by Global Distribution Systems (GDS). In relations with tourists, for a while it seemed that search engines based on the analysis of the network topology would solve the problem.
But they did not.
What’s wrong with the internet?
To this day, many agents believe and argue that information is the highest value they provide to their customers. In fact, however, information is just a commodity available free of charge on the Internet. So where is the advantage that can justify the presence of agents on the tourism market?
Well, the internet offers far too much. Ploughing through thousands of offers and comparing all the nuances is associated with a load of stress, which tourism researchers constantly write about, in particular when analyzing the so-called ‘customer journey’. In addition, the ‘smart shopping’ trend has given rise to a constant fear that we have been scammed somewhere… “Have we not missed a better opportunity?” “Maybe the prices should be checked a month later?” “Maybe we should compare a trip to Ceylon with holidays in Rhodes?” “Is it better to choose a modest package with optional excursions, or to buy more super premium all-inclusive right away?”
The information itself does not yet contain the answer. There was an urgent need for assistance. And this assistance is just a service worth paying for.
What are tourists looking for?
The flood of digital content, information overload and the limited possibilities of its selection and verification mean that the problems related to searching and booking a tourist offer have remained unchanged for years: 23% of the US population, 16% – France, 10% – Germany and 18% – Great Britain believe that planning travel online is frustrating (Phocuswright, The Perfect Path: What Travelers Want and Don’t Want in Their Digital Journey, 2017).
The basic problems that travelers face are:
- excess of non-personalized information
- price changes
- lack of useful visuals
- no search that is based on preferences
- no search for multiple destinations at the same time.
The above problems cause the purchasing process to be tedious and complex, which results in discouragement and frustration. Those who can solve them will actually meet the customers’ demands, and provide a real value (savings time and nerves, eliminating uncertainty and doubts, and reducing the nuisance of the selection process) for which the customer will be willing to pay. They will also gain customer loyalty as they will be able to provide satisfaction at the moment of purchasing, and strengthen their market position, because no one – either the customer nor the tour operator – will dare eliminate an entity that can keep loyal customers.
Are OTAs not a sufficient answer to the needs of tourists?
Online travel agencies (OTAs) have actually responded to many user problems. But have they grasped the whole problem?
Their greatest merit was the standardization of the offer description. It sounds trivial today, but in times of information chaos, when every carrier or hotelier designed their websites in their own peculiar way, when each of them put the price list and the accommodation description under different tabs, when each offer’s layout was kept to a different standard, and the websites were hardly updated – the appearance of an entity that was ready to put it all in order was a real breakthrough. OTAs allow the comparison of hundreds of offers in one place, making reservations and prepayments without leaving the selected website/application. Users quickly appreciated their usability.
But that is not all.
Firstly, OTAs allow you to compose only very modest packages on the basis of different tourism service providers, but they do not analyze information about the offer of tourist packages available from hundreds of operators.
Secondly, the ‘algorithmic dictate’ has made the person using the booking platform adapt to the machine – and not the other way around. In a sense, the customer must fit in with the forms. The platform imposes a certain sequence of actions: from indicating the dates, time of visit and number of accompanying persons (including children) to the selection of details (availability of breakfast, parking lots, the possibility of taking a dog, etc.). So what should I do if I start looking for my dream vacation in February, because it is raining cats and dogs and I have nothing else to do, when I really have no idea whether I will take my vacation in June or October, whether I am going with or without children, with my husband or with a lover, looking for extreme experiences, contact with ancient culture, or just a lazy SPA? What should I do if I have not yet made my dreams ‘algorithmic’?
Maybe look for hints on social media?
According to my research, 88% of students do it now (a group of 386 respondents):
- most of them follow their friends and copy their ‘proven places’ and ideas (56% of those who make decisions by following social media)
- also a fair number of them look at pictures on Instagram and whenever something catches their eye, they check how to get there (53%)
- a large number of them have quite precisely defined hobbies (cycling, outdoor photography, horse riding, yoga, etc.) and follow thematic groups and favorite instructors who make suggestions to their followers or even organize trips (46%)
- almost the same number of people post simple questions looking for inspiration (“Do you know any nice beaches?” “Where to go with your dog in Switzerland?” “Give me an idea for a romantic weekend at the Polish seaside?”) – and wait for a response from friends or strangers (44%)
- a significant part (41%) follow the fanpages of airlines / organizers looking for ‘bargains’ and adjust all other parameters of the trip to it
- some are guided by the influencers’ opinion (famous travelers, but also celebrities who post their travel pictures) and observe their travelling style and destinations (27%).
- the question: who starts planning a holiday trip by setting a date? – was answered in the affirmative by 4% of the respondents
- only 11% start by determining the composition and size of the group
- on the other hand, as many as 61% start by finding a “cool, exciting idea for a trip” (according to one of the respondents) and look for companions for the trip only after making a choice.
It is clear that students are a unique group – they do not care about the date of holiday, they rarely have families, they have to go wild, etc. (in future articles, we will definitely publish the results of other studies outside this group). But let us take into account a significant trend that we have also been observing in Poland for 6 years: young adults with preschool children increasingly more often (24% in 2015, 36% in 2017 and as many as 54% in 2019) are planning at least one trip a year without their children. On the flip side, 57% of respondents in the same group finance at least one trip a year for their children accompanied by grandparents.
Note that in both cases the problem of school holidays disappears, and thus there is freedom in choosing the date of the holiday. This means that ‘algorithmizing customers’ makes less and less sense. The future tourists don’t want to be asked about dates, time of visit and social plans – they want inspiration, ideas, surprise, and experiences.
What changes are urgently needed in the field of travel dreams?
Moving the activities of travel agents to the virtual world has not solved the problem of their future existence. Digitization entails various possibilities of shaping a business model, often more attractive to buyers and better corresponding to trends (customization, prosumerism) than an ordinary ‘travel shop’. OTAs have also failed to find all the answers, since they try to shut travelers down in test forms mode before spitting out a possibly matching proposal.
The specific value that we have to provide to potential tourists is the possibility of seeking inspiration in a mode that is as close as possible to their natural way of planning a trip. Social media are proving to be an important clue. People don’t want to be interrogated – they are the ones who want to ask questions (as they do in a traditional agency or in a conversation with friends). When asked “Where can I go on holiday with bikes and whale watching at the same time?” (a genuine question from one of the respondents presented to the real agent) – the traditional agent immediately found a proposal as he understands the natural language – its complexity and nuances. An online tool must be as good, and also offer an advantage. It must:
- be able to refer to a much larger pool of offers than the pool owned by a single agent or tour operator
- be available 24/7, as it suits the habits of a modern consumer/internet user
- make it possible to modify the inquiry as the details of the offer appear, without involving the employee (efficiency)
- be able to provide details of related proposals after the first search results (it increases the chance to close a sale)
- use visuals that strongly affect the user’s imagination (and are much more suggestive than a conversation in a traditional travel agency)
Such a solution requires a new, innovative system of searching and presenting tourist offers based on the algorithms of understanding natural language, a system in which the customer will not be examined, but will be able to ask questions as he does when talking to friends.