At the annual Global Tourism & Travel Summit (organized by the World Travel & Tourism Council), much attention was paid to the importance of technology in overcoming barriers to growth in travel.
The WTTC technology panel was entertaining and enlightening but notably US-centric after a long day where the rising importance of BRIC (Brazil, Russia, India and China) in tourism was recognized over and over again.
As a result, the conference created the awareness of the global center of gravity moving away from the advanced economies, but generated a discussion about travel technology that was mostly relevant to advanced economies with a focus on the United States.
Context: BRIC, especially China, is where the action is at...
Earlier in the day, Anna Stupnytska, an economist at Goldman Sachs focusing on developing countries, highlighted the macro-economic growth trends of BRIC that increasingly forces global technology and travel players to understand these emerging markets.
BRIC has rebounded from the financial crisis of 2008 more rapidly than the advanced countries In 2009, domestic demand grew 7.0% as compared to -3.4% in advanced countries, and BRIC demand is projected to grow 9.2% vs advanced countries' 2.2% in 2010.
The size of China tourism is already massive. According to National Tourism Administration of the People's Republic of China (CNTA), over 2 billion trips are taken annually by domestic travelers in China, generating about $160 billion USD of annualized revenue. Jones Lang LaSalle, a real estate investment manager, also reported that China currently has 1.59 million hotel rooms vs 4.63 million in the United States. In my opinion, this shows that the "party is just getting started" in the hospitality business in China.
...but Travel Technology panel focused on the advanced economies
However when the summit turned its attention to Travel Technology (Session 5) and its importance to the growth of the tourism industry, the discussion seemed primarily focused on trends and insights from companies focused on serving the more advanced countries. Panelists included:
While each of the American panelists added value to the panel, together as a group they provided a very American flavor to the conversation. Zheng Nanyan was the only representative of the entire developing world! Even within China, I can think of several important companies that are more central to travel technology than 7 Days Inn: Ctrip
come to mind. As a result, I felt the panel fell into two tracks: one about emerging technology trends in the US (which are probably relevant to Europe and maybe Japan) and a case study of 7 Days Inn which really did not uncover for the audience what is really going on in that business to generate 80% repeat stays.
Here are some of the trends discussed:
Increased volume of airfare search on the Global Distribution Systems (GDS) is driven by consumer demand. People's wallets are tight, says Clarke, but they want to travel. Increased price elasticity of this travel demand means that the GDS needs to provide a cost effective way to do searches like "lowest price in the next 100 days." Scaling search in a cost-effective way is critical to matching price-sensitive shoppers with "content"--lowest logical fare for their desired trip. Clarke shared some of the high volumes involved: 75 mm searches per day, against a database of 4 billion "purchasable items" updated hourly, and likely to increase to 10 billion purchasable items. Klein, of Sabre, also agreed that consumer behavior is driving the development and search intensity is indeed increasing.
2. Social media
Weissman, of Travel Weekly, highlighted the convergence of technology and marketing, mostly in the form of social media. Destination Management Organizations (DMOs) have used social media to build awareness and interest among potential visitors. The Netherlands launched a "trade your way to Amsterdam" campaign to see what online viewers would create to trade for a free trip to Amsterdam. Switzerland created a "Howdy Heidi" themed campaigned to relate Switzerland to the US. Finally, for those who are geographically challenged, two often confused countries Slovenia and Slovakia joined forces to create a "Slovenia vs. Slovakia" quiz that pokes fun at the low knowledge of both countries by viewers, and also prominent people like George W. Bush and Silvio Berlusconi. Israel sponsored 4 bloggers that generated over 15.5 mm impressions. Greenburg also shared that TV shows have started to measure social media following as well as traditional measures of viewership. This has saved shows like LOST who have a passionate following but less reach.
3. Internet Direct Marketing in China
The only panel not from the United States was Zheng Nanyan, CEO of economy hotel chain 7 Days Inn (NYSE: SVN). He shared some of his perspective on how technology can change the hospitality industry in China. 7 Days Inn is significant because they were the first economy hotel chain to announce the intent to close down indirect channels. On April 22, Netease (in Chinese) reported that 7 Days Inn will close all partnership with online or offline distribution channels by the end of this year. In that article, Zheng said the partnership with some online or offline distribution channels were not "healthy", and that some distribution channels are becoming more and more powerful.
Netease also reported that other well-known economy hotels such as Home Inns, Hanting, and Green Tree Inn said they will not follow 7 Days Inn in closing off distribution channels. According to Jian Sun, CEO of Home Inns, distribution channels bring almost 8 percent of total number of consumers who book the hotel for Home Inns.
On the Technology panel at WTTC, Zheng alluded to some of their strengths that might enable the company to make this bold move. Zheng claimed that over 80% of their customers are repeat customers. According to Zheng, "through the internet customers can have a good experience with us…[using the internet] for customer service holds the key to success." He also explained that a good mobile experience is necessary in China, and he set up a special department to focus on mobile applications development. Finally, his customers engage with each other via the 7 Days Inn social network, and they can enjoy interacting when they see other members on the social network in person. Zheng also employs a loyalty program as an incentive for repeat stays.
By the end of last year, 7 Day Inns has more than 9.75 million members, 57.3% increase from the previous year. According to 7 Days Inn's Q1 2010 earnings release, as of 3/31 membership had grown to 11 million and room nights from repeat customers during the last 12 months was 88%. iResearch estimates that the total online travel related ecommerce services users in China is only about 27.8 million, so relative to this total 7 Day Inns has a huge user base. It's clear from the 88% repeat customer rate, and the fact that Zheng is shutting down all indirect channels by the end of the year, that 7 Days Inn is doing something unique in the economy space.
The 7 Days Inn case study suggests there are case studies out there of technology and marketing innovation outside of the United States. With the rapid growth of BRIC and China in particular, I hope that organizations like WTTC will continue to search out for those companies and truly globalize the discussion about technology trends in travel.
VentureSprout associate Kai Liu contributed to this story.