Hospitality is a global business worth in excess of $500 billion a year.
It is also a business model that has evolved slowly over the past hundred years, from hotel owner-operators to hotel management companies operating on behalf of real estate investors, to fractional ownership and real estate development alongside hotels and resorts.
Now that traditional business models have been turned on their heads by the likes of Uber, Airbnb, Amazon and Google there is a tendency for many traditional brands to believe they need to roll up their sleeves and face travel tech in battle.
The smarter move might be to identify what their brand currently stands for, re-define how to reposition it in a changing market and identify their unique value proposition.
Only then will they be able to design a strategy that enables them to ditch the outmoded elements of their model and focus on things disruptors can’t compete with.
What is a disruptive brand?
There’s a lot of talk about "disruptive brands" but I think it’s important not to confuse disruptive products with better ones, because better products aren’t necessarily disruptive.
Disruptive brands are often not better than incumbents, they either address a need that has been uneconomic for incumbent brands to serve until now (which is called low-end disruption), or a need that has not previously been identified before (new market disruption).
Incumbents find it almost impossible to respond to truly disruptive products.
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For low-end disruptor models, incumbents often ignore the threat because it’s uneconomic for them to serve this need, but this might lead to their downfall once the disruptor grows its customer base and improves its offer.
For new market disruptors, the customer need is under-served because incumbents’ business models can’t adapt to serve the need profitably.
Good examples of low-end disruption is Google Adwords, which brought online advertising to small businesses that couldn’t afford Yahoo’s display advertising model.
Salesforce is a good example of new market disruption for business that couldn’t afford Siebel’s six or seven figure licences.
It has fewer features but enabled smaller companies to compete in the digital world. Airbnb is the obvious example in the travel industry.
So, it’s the business model that is disruptive, not necessarily the technology.
It was Adwords’ business model of serving ads for less than a $1 that disrupted the advertising market, not Google’s search algorithm.
So who might be in the next wave of travel disruptors?
Like many disruptors before them, Car & Away took a clunky element of the travel sector, namely what to do with your car when flying off on a trip and started a mini revolution - in this case in the car ownership sector.
By reverse engineering every element involved in the travel experience, a travel brand can identify scalable and often unique platforms. Car & Away unlocked peer-to-peer car sharing and centred it on airports.
It probably won’t be too long before this spreads to other travel hubs either.
For low-end disruptor models, incumbents often ignore the threat because it’s uneconomic for them to serve this need, but this might lead to their downfall once the disruptor grows its customer base and improves its offer.
Peter Matthews - Nucleus
Forget those days of getting a travel agent to book the entire trip. More often than not travel is being designed based on a combination of separate modules, each of which are made up of separate elements.
For example: the destination, the hotel room and the means of transport.
These modules can be inter-connected to form a new and highly personalized experience for the traveler and in many cases the customer hand crafts each module to ensure a unique and cost-effective experience.
This is something Hopper grasped when they created an app that monitors prices to offer travelers the opportunity to find the most advantageous rates up to a year ahead of their trip and then book these in just a few taps.
Mesh this with the capacity to explore any part of the world before even booking the flight and we start to see why Cynapse is so popular.
Having a virtual assistant to guide the traveler through unknown streets like a local and who won’t hang around for a tip is bound to appeal to many.
Of course, tech plays a vital role - without connectivity none of these disruptors would have seen the light of day - but this should not put the traditional brands off, the tech is available to everyone it is the creative thinking behind the tech that is really revolutionary.
Many travel disruptors are clearly tuned into the millennial traveler who is quite different to their baby boomer parents.
Traditional brands have a wealth of assets a millennial traveler might relish, it is a matter of identifying and highlighting them.
Taking a traditional model and flipping on its head is what inspired the world’s first travel subscription company - BeRightBack.
Its customers add all their favourite travel ingredients and then wait to see where they will be sent. Traveling to the unknown takes on a whole new meaning now.
Summit and Launch sessions
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Changing customer expectations is one of the driving forces shaping the shape of the travel industry, so let’s take a closer look.
Creating a virtual experience ahead of a trip would go a long way towards ensuring a traveler knows what to expect.
Harnessing spatial photography offers travelers a very realistic view of where they are going and Realities has nailed this with amazing accuracy.
And what of safety? Travelers consider an endless number of issues when picking a destination, such as the rise in terrorism or the spikes in tourism-phobia perceived in certain capital cities.
This opens up new opportunities for destinations to be redefined and for brands to become destination management companies, finding a way to ensure trust, and attract and retain travelers.
The very act of measuring destinations, known as the Traveler Risk Tolerance Index has been addressed by International Location Safety who use AI to offer latest contextual information relating to safety issues anywhere in the world.
All of these new disruptors have one thing in common, they have taken the old travel model and rewired it for tomorrow’s travelers, today.
Customer data is a common denominator amongst these disruptors, as it enables many of these models to offer a more dynamic and interactive customer experience, but this then asks how personalized the data is and how secure the data is.
Like many startups, travel tech companies may underestimate the need to protect customer data and be compliant with international regulations and, if they go too far, they risk transforming customers into numbers and even dehumanising the whole experience.
If they get it wrong, they could lose trust and be subject to eye-watering fines.
With this in mind the first thing incumbent travel brands need to do is make sure they have the skills to collect and manage customer data and then use it to inform their future strategies.
This process should include taking a look outside their "box" to identify threats and opportunities and then inside to see what strengths they have in terms of assets, processes and operating expertise.
Only then can they develop a culture to embrace the relevant technologies that will allow them to deliver new customer propositions that combine tech with soul.