The tour operator industry has faced a number of challenges over the past five years.
NB: This is an analysis by Ashish Sahasrabuddhe, co-founder of FlexiTech Solutions.
As the global financial crisis continued to grip the world economy, the industry saw revenues fall and demand for holidays drop, as customers’ discretionary spending was squeezed.
The emergence of cheap online travel services has also created viable alternatives to traditional tour operators and eaten into sales revenue.
But does the future success of tour operating lie in the humble smartphone?
The smartphone wars of the last decade have given rise to the incredible app revolution. As of June 2014, 75 billion apps had been downloaded from the Apple App store alone.
We use apps for convenience, we use apps for pleasure and we use apps simply as part of our daily routine.
Most consumer-driven businesses have embraced the app revolution and utilised the power of having the brand in the hand of the customer at all times as a way to evolve and grow their business.
As one of the largest consumer-driven industries, tour operators have not, at least not to the extent that they should have, embraced app technology to drive their businesses forward.
Reliant on customer sales alone, the industry has seen revenues slide on the back of the financial crisis and the emergence of cheap DIY online travel sites.
There is an increasing need to adapt and seek supplementary forms of income and improved value-added offerings in order to remain relevant.
Identifying areas in which the industry can generate secondary streams of income is the challenge, however, the change in consumer behaviour and the rapid pace at which mobile technology has been embraced over the last few years offers valuable insights on how to move forward.
If you break down the customer journey for a tour operator into three distinct parts you have: the search, the selection and the holiday.
The first two parts of that journey – search and select – are reasonably well catered for, technologically speaking.
Businesses have embraced technology and provide online services that allow customers to research and then book their ideal trips.
But part three – the holiday and pre-holiday experience - is where technology is significantly under-utilised by tour operators and substantial change is required to take advantage of the opportunities that exist.
Trip Barometer estimates that 87% of global travellers now use mobile devices, creating a compelling story for tour operators to provide well-made apps for their customers to use on holiday.
An enormous opportunity
Many of today’s customers are savvy smartphone users who want to have all the relevant information available to them on their phones at the touch of a button.
A tour operator app would significantly improve the customer experience, providing assistance with functional aspects of the holiday, but would also act as a powerful digital marketing platform from which companies can actively promote relevant goods and services to create new opportunities for revenue growth.
Various studies in the UK show that, on average, people spend 30-32 hours researching, booking, getting excited about and then reminiscing about their holidays.
From this research we can deduce that, in the build up to a holiday, travellers will be more amenable to being marketed products and services that they feel will enhance their overall holiday experience.
By providing an app that sits in the traveller’s hand from the moment a trip is booked and contains useful tools and key information that will engage customers, tour operators would have the perfect platform from which to generate additional income from previously untapped revenue streams and attract new customers at the same time.
Apps can create new opportunities for revenue growth
In analysing the current customer journey, travellers use review sites, search engines and social media to make their booking decisions.
Trip Barometer suggests that 93% of people are influenced by online reviews before making a booking.
However, once travellers have chosen a holiday and made their booking, the customer largely returns to the Internet and other 3rd parties to continue the planning and holiday research, rather than using the tour operator as a source of additional information.
Because tour operators often don’t provide sufficient content and resource to retain their customers’ business post sale.
Tour operators are in a uniquely powerful position of being a trusted source from the moment a holiday is booked.
So, if tour operators were able to provide a range of relevant travel information, news, reviews and handy travel tools that cater for the customer’s travel needs; they would be more likely to engage their client base throughout the duration of the holiday lifecycle and beyond.
With an estimated 33% of travellers using their mobile devices on holiday to find things to do and source additional information, according to Tourism Research Australia, a travel app filled with useful features such as maps, weather reports, destination guides etc, would allow tour operators to create a platform from which to generate additional revenue streams.
A well-designed mobile app with relevant content that adds value to the holiday experience can create new opportunities for revenue growth in a variety of ways, including:
1. Mobile Ad Revenue
With mobile apps dominating the vast majority of time that users spend online on mobile devices (86% according to Flurry Analytics), the opportunity to generate significant revenue from in-app advertising is enormous. The more specific the purpose for using an app, the more attractive the advertising proposition becomes.
Providing an app filled with relevant content that engages travellers throughout the duration of the holiday lifecycle, offers the perfect digital platform from which to attract significant advertising revenue to supplement holiday sales and ensure the future growth of their businesses.
2. In-app purchases
In the build up to any holiday, customers are looking to make holiday purchases for related items that are required for their trip.
Things such as travel insurance, city guides, clothing and equipment could all be promoted and sold through via the app, from strategic partnerships with specialist suppliers.
As 33% of travellers go online to find things to do whilst on holiday, in-app sales of holiday activities, such as attraction tickets or restaurant bookings, could provide a lucrative stream of additional income, whilst also being a convenient service for travellers.
Finally, many customers may decide to change their itinerary whilst on holiday and may want to add flights, hotels, upgrades, additional tours or other activities.
Providing a quick and convenient way to do that from an app allows companies to better service their customers and ensures revenue from any additional sales.
Get social – build awareness and trust
By having an app with social capabilities, tour operators can create their very own army of social media marketers and grow the trust in their brand and products.
Research conducted by Webbed Feet indicates that 92% of consumers trust earned media, such as social media, word of mouth or recommendations from friends, above all other forms of advertising.
Apps these days come with in-built social media tools and allow people to share digital content that is always attributed to the source.
EyeforTravel estimates that 52% of travellers use social media to plan their travel and, of those under the age of 34, 87% use Facebook to solicit advice before making a booking, says Stikky Media).
Whether it is a tweet, status update, photo or blog, every piece of social content that travellers share from the tour app will link back, resulting in maximum brand exposure amongst the peer group of its target audience.
The power of social media will enable tour operators to increase brand awareness, brand trust and reach previously untouched customers, to help evolve their business and drive revenue from future sales.
Engage customers and improve client experience
Before and during a holiday, many travellers use their smartphones to read reviews, research activities and learn more about their holiday destination.
A study in the UK in 2014 showed that the most used apps by travellers on holiday were maps (61%) and weather (54%).
Things such as social media (49%) and destination guides (31%) also rated highly for usage, claims Statista 2015.
By providing an app filled with relevant holiday information and handy travel tools such as itineraries, maps, destination guides, weather, social media, translators etc, tour operators can provide their customers with the ultimate digital travel companion, addressing all the little things required to make a good holiday great and generate some real added value for the customer to increase the likelihood of repeat and referral business.
Furthermore, providing an immersive app that customers will continually defer to throughout the holiday lifecycle, allows companies to take full advantage of the sales and marketing opportunities presented to them as a result of the increased usage and customer engagement and helping to drive growth in sales and secondary income streams.
Better customer insights
Eliciting quality customer insight has become integral to the ongoing success and evolution of the industry.
With the ever-growing influence of online review sites, such as trip advisor, playing such a vital role in customers’ decision making process, it is imperative that tour operators take ownership of customer feedback in order to ensure they understand exactly what the customer wants, how they feel about the product and how they rate the overall holiday experience.
An app can provide the mechanism from which to gain a higher quality of insight and response rate through questionnaires, in-app ratings and social media led feedback.
Access to better customer insights will enable companies to improve and adapt travel services to keep pace with changes in customer demand and ensure they maintain an edge over competitors.
Quality feedback can identify new trends, new markets or unanticipated demand for new products and services.
Furthermore, if there is any negative feedback about any aspect of the holiday, real-time feedback will enable businesses to intervene in a timely manner, to minimise any reputational damage and rectify the issue promptly.
In apps we trust
Given the tough economic climate of the past five years, it’s important to find new ways to overcome the operational and competitive challenges the industry faces, in order to drive sales and create new opportunities for revenue growth.
To ensure that tour operators remain a relevant and viable travel service provider, the industry and its constituents must begin to evolve and adapt to the changes in technology and consumer behaviour.
We have already seen what app technology has done for many consumer and service-driven industries over the last few years and, should the tour operator industry embrace the future of app technology, it could become financially stronger and more sustainable, as well as providing more value to the customers it serves and competing more intensely with the cheap online alternatives that threaten its very existence.
NB: This is an analysis by Ashish Sahasrabuddhe, co-founder of FlexiTech Solutions.
NB2: FlexiTech Solutions will exhibit at Travel Technology Europe, the largest specialist event of its kind in Europe, which takes place on 25 and 26 February 2015 at the Olympia Exhibition Centre in London. REGISTER for FREE here.
NB3: Smartphone travel image via Shutterstock.