A review of 2018, a preview for what's next: Travel marketing

Throughout 2018, PhocusWire brought you in-depth coverage of some of the critical topics impacting travel, organized by a different theme each month.

As we prepare for 2018 to end and a new year to begin, we are revisiting each of these themes.

We’ll look back on key developments of the past 12 months and look ahead, with additional perspective from the topical experts we interviewed throughout the year.

In June, we examined digital marketing for the travel industry, with analysis of SEO, social media, email and paid search strategies.

As we look ahead to 2019, we asked MMGY Global CEO Clayton Reid to share thoughts on the future of travel and what lies ahead for marketing and advertising strategies, the growing influence of Google and Amazon and the impact of mobile, personalization and voice technology.

Digital marketing - Clayton Reid, MMGY Global

No global industry has experienced a rate of change in digital more than that of travel, from how corporate and leisure travel is managed and booked to how suppliers use technology to streamline operations. Travel is now leading innovation in business.

The MMGY Global team sees five major changes ahead for 2019.

Softening leisure demand and higher commercial rates will change digital influence

Until late 2017, we enjoyed 20 straight quarters of significant travel demand growth, but the acceleration that peaked in 2017 has since moderated and reversed in 2018. Slowing RevPAR growth in 2019 (from 3.2% to 2.6%) and projected airline domestic enplanements plateauing at just above 75 million per month are worrisome.

So, for 2019, we believe a slackening demand curve will be a true test of whether online travel agencies and other intermediaries continue to hold a dominant place in the market. Of course, all down markets present opportunities for disruptors, but we believe it is the suppliers who are in a better position today and can now own more of the low- and mid-funnel travel decisions.

Look for airline, hotel, rental car and attraction brands to use data-led special retail offers that connect with leisure travelers directly while they also work more closely with corporate travel platforms such as Concur, Deem and TripActions to yield more direct revenue.

Other important trends:

• Further supplier consolidation should improve digital marketing efficiency and lower distribution cost at the expense of online travel agencies and other third parties.
• Ultra-low-cost carriers (ULCCs), such as Allegiant, Frontier, Spirit and Norwegian Air, will go heavily rate retail through digital channels such as Google Flights search, metasearch and a renewed focus on travel agents.
• A clear demarcation will emerge between economy and luxury travel that forces suppliers to offer either a commodity at the lowest price or a completely customized experience that carries premium pricing.
• We expect a plateau in demand for shared accommodations and shared rides as inventory and regulation become more of a headwind.

Amazon enters the travel channel in a big way

Not unlike Alibaba - which has built a dominant travel platform in China with Fliggy plus programmatic marketing and its own payment and packaging engine - Amazon is in position to immediately take a big share of the travel pie.

Just as he has done in other industries, Jeff Bezos can lever data, loyal Prime customers and a lower-cost distribution channel to move the market overnight. Maybe Amazon will even build its own “future hotel,” as has Alibaba with its Flyzoo Hotel in Hangzhou, China, which relies on robots, artificial intelligence and facial-recognition tools to operate.

Consider that today Amazon already accounts for more than 4% of all digital ad spending (and is growing rapidly), and we see their ad rate conversion is twice as effective as Google’s ad network. Maybe this is why Google Hotel Ads continue to be more aggressive, which tells you Google sees a path forward to connect this to a booking proposition that includes value-add tools around trip management and experience.

How else could Amazon affect the digital travel landscape?

• The possible acquisition of an OTA such as Expedia
• Forcing Google to move more aggressively into booking
• A forced shift in how paid search and meta models function as well as the potential death knell for OTAs as we know them
• The continued push up funnel by third parties (away from retail conversion) to create early customer engagement and thus justify more “brand marketing investments”
• A new era of AI-driven, curated travel placed on virtual shelves for travelers to buy easily, based on a more personalized set of needs

Data, GDPR and the continued path to personalization

If 2018 was the year of data privacy and the elevation of questions around Facebook and other online data collection, then 2019 will be more about how these platforms prove that consumers receive real value for sharing this data. As marketers place a premium on collecting first-party data that is permission-based, tied to location purchase behavior and connected to real-time decision-making, the travel industry stands at the doorstep of real travel curation.

Important trends we are watching:

• There is no evidence at all that people, as a condition of use, are rebuffing apps and web content when sharing their data. And by the way, 80% of app downloads carry a default agreement for data-sharing permission.
• A reform of ad tech will force more data visibility and define which programmatic networks provide real value. Expect a culling of ad platform middlemen in favor of data-direct connections to served impressions.
• Longer-term advancement in AI tech will only exacerbate ad tech reform.
• Disintermediation of the ad click path means costs should lower while ROI increases through more intelligent targeting.
• Expect the continued dominance of Facebook and LinkedIn in effective ad targeting in the travel space, both at the top and bottom of the funnel.
• Brands will begin to accept personal data as a payment alternative, for example free onboard Wi-Fi in exchange for detailed profile information and personally identifiable information.

A return to traditional advertising channels

We are seeing clients actually move ad budgets from digital into areas such as out-of-home, broadcast, PR and events and, yes, even print and direct mail. Continued compression being created by the massive investments in search and digital units has driven costs up, ROIs down and ad inventory down (especially in mobile).

Just as he has done in other industries, Jeff Bezos can lever data, loyal Prime customers and a lower-cost distribution channel to move the market overnight.

Clayton Reid - MMGY Global

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Even Booking Holdings and Expedia have moved more money into traditional media as their margins have eroded. For MMGY’s European clients, digital is growing but still represents just over half of marketing investments being made in both trade and consumer channels.

More facts:

• Both national radio (up 6.5%) and national TV (up 2%) will grow in 2019, and all TV and radio revenues, including over-the-top (OTT), should increase 10%.
• While digital continues to grow across all consumer categories, MMGY research shows print, TV and out-of-home continue to score highly with travelers on “influence to book.”
• 64% of travelers say brand perception is a major factor in travel decision-making, suggesting brand vehicles are vital in the marketing mix.
• But, more cord-cutting and OTT niche content will hurt traditional networks and content hubs in favor of narrowly targeted channels.

The next horizon in mobile, voice and AI is coming

Consumers check mobile devices over 200 times per day and spend 20 hours per week inside mobile browsing, so we are well past wholesale adoption in the marketplace.

A more important recent trend has been in the rapid adoption of web-enabled, interconnected devices that now exist in 12% of U.S. homes.

By 2020, it’s predicted that 50% of all search activity will be voice searching, which means that will represent another major shift in how we use our devices.

Although only 1% of voice activity represents a purchase today, 76 million households will have a smart speaker by 2020, which will surely connect voice more closely to the Internet of Things.

This represents a major growth for voice-prompted shopping and transactions. Companies such as Carnival, Marriott and Lufthansa are now investing heavily in AI-based customer service programs that enable more sophisticated interaction across a variety of customer needs.

• KLM’s smart assistant, BB, has now handled hundreds of millions of interactions from planning to booking.
• As part of this natural evolution in bot-controlled online interactions, we expect organic social, including the influencer universe, to face a culling out. Transparency about the value of the influence (through better viewability and conversion metrics) as well as the authenticity of content will speed ahead in 2019.
• Facial recognition for airport access, security and boarding is just around the corner and should begin broad testing in 2019, easing airport delays.

While augmented and virtual reality are still at relatively low adoption rates in travel, Statista projects the entire industry will be worth $207 billion inside four years. And, according to this Business Insider article, 51% of marketers currently use AI to glean, amongst other things, consumer preference around automation and workflow.

In what might be more of a longer-term and dramatic shift, the same article suggests that AI will leapfrog traditional data collection to instead rely on human senses such as sight and hearing to dictate customer interaction. Related thoughts include:

• Retailers such as Samsung are now aggressively marketing low-cost headsets, which creates new awareness of VR technologies.
• Suppliers such as Best Western, Berlin Tourism and Alaska Airlines have embraced new consumer-facing technologies.
• Harvard Business Review suggested in a June article that reliance on brands will shift over time to reliance on trusted bot assistants.
• Chinese virtual assistant Xiaoice already has 40 million users.

Travel is now an innovation leader, not a follower of others

As digital travel ecosystems continue evolving to merge better data with online UX, connected to curated transactions and an improved travel experience, our industry is now a petri dish for broader global commerce. Companies such as Uber, Airbnb, Ctrip and many others are seen as global innovators, not followers, and our entire industry has lifted itself in meaningful and exciting ways that serve as an example for other areas of the economy.

There is still a lot to play out with intermediaries, data privacy and best practices throughout the next decade, but as with each of the last several years, we expect 2019 to bring more surprises, great ideas and lightning-fast change.