As our
PhocusWire team reflects on the year that is coming to a close, we think about
the wide range of our coverage, across sectors such as online travel agencies,
hotels, airlines, ground transportation
and tours and activities and topics including distribution, marketing, revenue management
and, of course, artificial
intelligence and innovation
such as our popular annual Hot 25 Travel Startups lists.
But in 2023,
as in most years, there are a small number of topics or themes that are
regularly in the news across the travel industry. This year many of them are
reflected in the articles that were our most popular news
and opinion
pieces of the year.
Based on
those rankings, as well as our own – very subjective – analysis, here are our selections for six “hot topics” for travel in 2023, and likely for the year ahead.
Generative AI
Generative
artificial intelligence has been the indisputable top technology topic of
2023. What was unknown to most of us just 12 months ago burst onto the
scene in January as the buzz around OpenAI’s ChatGPT had people across every
sector of travel and in every corner of the globe trying to figure out both
what it is and how
it could be used in travel.
Microsoft’s
confirmation at the end of January of a multibillion dollar investment in OpenAI
(rumored to be $10 billion) and an extension of the partnership between the two
companies added credence to what had been a relatively unknown startup and to
the notion that generative AI could have a transformative impact on par with
the creation of personal computers, the internet and mobile devices. Google’s
decision just two weeks later to unveil Bard, its conversational AI chatbot
and a direct competitor to ChatGPT, only furthered the hype around the
technology.
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Initially, reaction across the travel industry was mixed. Companies
such as Trip.com,
Expedia
and Kayak
and a slew
of smaller companies jumped in early to integrate and experiment with the
technology, while others took a more wait-and-see approach.
But despite some early skepticism, as the year progressed it
became clear that generative AI
can be used in multiple ways across travel – both to add speed and
efficiency to internal operations, for example for marketing, staff training,
sentiment analysis and coding applications, and to enhance the traveler
experience, such as for personalized itineraries, translations and much more
sophisticated customer service.
Updates to the technology continue at a rapid pace, such as
the recent launch of GPTs
and Assistants from OpenAI and Google’s launch of
Gemini. In 2024 we expect some of the biggest news will be around
autonomous agents – generative AI-powered assistants that can operate a browser
on our behalf, for example to conduct searches, fill in forms and, in the case
of travel, complete a booking. We’ll also hear more about the return on investment travel brands
are seeing from integration of the technology, such as Tripadvisor’s
early results from its generative AI-powered Trip Planner and destination
content.
As the travel industry enters year two of using generative AI,
expect to see more sophisticated use cases and more concrete data about when
and how consumers are using these solutions for their trips and what, if any,
lift in revenue that’s bringing to suppliers. Stay tuned!
NDC
New distribution capability has been debated around the airline industry for so long, travel agents could be forgiven for thinking it might never come to pass. That was before 2023, and now efforts to modernize distribution through direct connections with customers, distributors and travel agencies may be ready to soar into 2024.
As far back as last December American Airlines warned travel agencies they needed to be connected to its NDC technology by April. At that time the airline had agreements in place with Amadeus, Sabre and Travelport to distribute the NDC content.
The carrier followed through on April 3, informing travel agents beforehand that it would begin on that date to “offer our best available third-party public channel content only through NDC connections.”
A few days later, Air Canada and Amadeus signed a multi-year agreement to provide access to the airline’s NDC-sourced content. Others such as Air France-KLM and Lufthansa have followed suit. The shift has come over objections from travel agencies and advisors, including a complaint to the U.S. Department of Transportation that American dismissed as “frivolous.”
It may be too late to turn back. American reported that three-quarters of its bookings came from its website, mobile app and NDC-enabled channels in the third quarter this year, up from two-thirds the previous year.
And industry experts expect the transition will only get smoother. During a discussion about NDC at The Phocuswright Conference last month, moderator Norm Rose, senior technology and corporate market analyst at Phocuswright, summed up the panel’s views when he said, “There have been some adversarial relationships. … We’re somewhat past that. I think everyone would agree: This is reality, so how do we move forward.”
Experiences
The concept of experiences as a driver of travel decision-making isn’t new, but it reached a new level in 2023 - and we anticipate that will continue in 2024.
Travelers have been increasingly focused on what activities and phenomena they can experience while they travel - often choosing trips based on that factor as opposed to starting with selecting the destination. Big names, including major hotel brands, have taken note of the demand, which has been fueled by social media.
Perhaps the largest indicator of the strength of the experiences sector comes in the form of what feels like a constant stream of financial news. In June GetYourGuide received funding of $194 million to power its work with artificial intelligence and to support its global expansion. After achieving profitability earlier this year, Klook landed $210 million in a Series E+ round of funding earlier this month. And after a huge jump in its revenue in 2022 – up 168% compared to 2021 – Viator continued its growth trajectory this year, with its figures from the third quarter showing revenue up sharply again and accounting for nearly half of Tripadvisor’s total revenue of $533 million.
Meanwhile many smaller players are also getting attention, including startups like Turneo, Dharma, Unravel and Jerne - all named PhocusWire Hot 25 Travel Startups for 2024 - alongside other experiences startups Beyonk, Way and others have continually popped up in headlines in recent years, receiving funding and recognition as the category grows.
Regulatory roller coaster
The decision by European regulators to veto Booking Holdings acquisition of Etraveli raised a number of questions for the travel industry. For example, how big is too big? Will other potential Booking acquisitions be subject to increased scrutiny? And more widely, should the industry itself expect to be increasingly scrutinized for its social, economic and environmental impact.
In many ways, it’s already happening. New short-term rental rules in New York hit Airbnb in September with thousands of hosts having to drop their listings. Other cities across the United States were expected to follow suit. And already in Europe many cities, including Amsterdam, Barcelona and Paris, have taken their own steps to curb short-term rentals. Meanwhile, the European Union has been moving ahead on implementing uniform
rules for STRs, agreeing earlier this year on how to collect data from platforms
including Booking.com, Airbnb and Vrbo.
European regulators are also extending the requirement for public companies to report on their environmental impact to companies of 500 employees. The EU Corporate Sustainability Reporting Directive means companies will have to monitor and report on the impact of travel on the environment and people. In addition, investors will need to assess financial risks and opportunities arising from climate change.
Very large companies will also be keeping an eye on the Digital Markets Act to ensure they do not meet the threshold to be called gatekeepers. Digital gatekeepers are large companies that are an access point for consumers and are able to use their market position and power in a way that impacts other markets.
And finally, a judgment is expected in the antitrust suit in the United States against Google in the first part of 2024. A decision against the search giant - which is accused of illegally maintaining a monopoly over search - could have wide-ranging implications for online travel sellers. Google has also been charged with breaching antitrust regulations in Europe for its advertising technology that the European Commission says gives it unfair dominance on both the buy and sell side. A ruling in Europe is also expected early next year.
Autonomous vehicles
Progress for autonomous vehicles has been a little stop and start in 2023. On the one hand, late in 2022 Waymo unveiled fully driverless vehicles for the public in San Francisco and Phoenix, with Los Angeles to be added soon. Alongside Alphabet-owned Waymo, General Motors-owned Cruise also received approval from California regulators to operate rides in San Francisco.
On the other hand, following a collision, Cruise’s permit was revoked and state regulators are being asked to halt the expansion of autonomous taxi services in L.A. and address safety concerns. Cruise has also hit the headlines for shedding 900 jobs in recent weeks.
In the east, meanwhile Pony.ai, which operates driverless vehicles in Beijing and Guangzhou, has landed $100 million in funding as part of a joint venture with Saudi Arabia’s Neom. In addition, in late August China’s Baidu launched a driverless airport service at Wuhan Tianhe International Airport. The service builds on Baidu’s robotaxi fleet operating in five cities, including Beijing and Shenzhen.
The bigger picture is how these services might impact the travel industry going forward. Alex Bainbridge, founder and CEO of Autoura, a PhocusWire Hot 25 Travel Startup for 2024, has laid out some of the ways the industry can take advantage of autonomous vehicles, especially in tours and activities. He also stressed that now is the time to get on board the trend. Small groups in driverless vehicles around resorts and parks might be an obvious example, but imagine being picked up from the airport and informed about what to do and see in the area. Autonomous vehicles also open up the potential for having a personalized tour on demand or a multi-day tour of a destination, again tailored to the individual or group.
Sustainable travel
Anyone hoping the challenge of sustainable travel would go away or diminish in 2023 got a blistering reality check over the summer with a relentless doomscroll of weather-related tragedies.
Wildfires in Hawaii, Canada, Greece. Hurricanes in Florida and California. Heatwaves. Droughts. Floods. They all helped make clear what scientists have been predicting for decades: rising global temperatures are already affecting travel — and the effects will only get worse.
A report published in February by the Travel Foundation charted a path the travel industry could take to achieve net zero on carbon emissions by 2050 while allowing for continued growth — but it wouldn’t be easy, and it would mean prioritizing net zero trips like rail and electric cars while reducing long-haul flights that pollute the most.
“This assessment should act both as wakeup call and motivation to act,” said Jeremy Sampson, CEO of the Travel Foundation.
Many businesses pushing sustainable options have cited surveys showing broad support for the concept among travelers. Yet the question of how much the sector can depend on consumers to help foot the bill for sustainability measures took a hit in a report released in November by Phocuswright. Its blinded survey found a large gap between travelers’ stated intentions and their behavior.
Offering hope for the new year, a survey released in December by Amadeus showed an overwhelming majority of travel companies believe the industry can reach United Nations’ goals for carbon emissions by 2050, while nearly half anticipate investing more in environmental, social and governance initiatives in 2024.
If next summer is anything like the last, the other half of those companies may need to rethink their investment strategies.