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What's next for TravelTech?

TravelTech retains its potential to disrupt and enhance traditional travel, hospitality and leisure businesses and we see a number of tends which will define the months ahead.

March 2020

Here are some of the things we expect to see this year in TravelTech, which is set to go from strength to strength:

  • TravelTech will continue to boom for B2B and SaaS businesses as well as consumer-centric offerings. Those with a clear and easy to use mobile app capable of bringing together fragmented components such as trips and excursions will be particularly successful. The ultimate Holy Grail is providing curated and relevant content – TravelTech businesses which find a solution to data overload and "The Netflix Effect" (see below) will really thrive.
  • Regulation of TravelTech will increase, especially for platforms covered by the EU's Online Platforms Regulation and incoming EU consumer protection legislation. Digital taxes which are being introduced in the UK, France, and potentially more widely, may also hit revenues.
  • Disruption is ongoing: TravelTech will continue to disrupt the Hotel industry – just look at OYO. OYO is a Hotel company you may not have heard of, or at best may be only vaguely familiar with, but it is now the world's third largest hotel group by rooms and has achieved this within six years. This unprecedented growth, funded by SoftBank among others, has been achieved by utilising tech to scale quickly and having thousands of small, unbranded hotel owners around the world (initially in India, then China, but now the USA, UK and Europe) sign up to OYO's pricing and revenue management systems and be part of the OYO brand. Change happens fast, although a little too fast in OYO's case, as it has just announced a "rightsizing" of its model and a move to "sustainable growth" rather than the turbo-charged pace of growth to-date.
  • Success metrics will change – to be successful, businesses will need to have a clear sense of purpose. Capitalism is moving away from the shareholder model and the obsession with profit irrespective of impact, and towards stakeholder capitalism where businesses are judged on their wider impact on employees, society and the environment. Consumers expect businesses and brands to have a sense of purpose and align with these values. Businesses that don't will get left behind.
  • Sustainability – last year, businesses got rid of plastic straws and stopped using plastic bottles for shower gel, but consumers will expect more…much more. And ESG (Environmental, Social and Governance) are three initials you are going to hear a lot of in 2020, along with the United Nations 17 Sustainable Development Goals and the Principles for Responsible Investments (PRI). Over 2,250 investors representing over US$80 trillion of assets under management have signed up to the PRI. ESG and the need for investors to demonstrate PRI compliance is going to bring profound change. As travel, in particular, air travel, becomes more environmentally contentious, people may start to (or even be forced to) travel abroad less frequently or change habits and use the growing number of sleeper trains in Europe, but businesses able to offer sustainable travel options and solutions will reap the rewards.
  • Google Maps to take over the world? The opportunity to monetise your desire to know where you are in a new city by providing the ability to alert you to that nearby hipster coffee house, "must see" tourist sight or local experience to post on Instagram, will see Google really start to be the 'go to' portal for the hospitality and travel space.
  • The Netflix Effect – this is the so-called "paradox of choice" where consumers have so much choice they scroll through all the options and either give up or watch a film they have seen before. Anyone booking a trip will know that the problem is not getting information; it's sifting through the mountains of available data. Artificial Intelligence is seen as the answer to this, but effective solutions are elusive. In the interim, savvy online businesses will start to filter the information they provide – in part based on consumers sharing more information about themselves at the outset so the search results are relevant. In the EU at least, exchanging data (rather than cash) in return for services, is about to bring with it full-on consumer protection rights.
  • The data challenge – we keep saying it but the GDPR is here to stay (even after Brexit). As the Marriott Group and BA have discovered, the consequences of getting data privacy wrong are damaging both to reputation and profit margins. Whether processing booking data or marketing data, travel tech businesses need to take compliance obligations seriously. This is not just a box ticking exercise.
  • Brexit has not gone away. Expect a lot of noise in the late Spring/early Summer when the EU and UK's divergent views on regulatory alignment become very apparent and the cliff edge of 31 December 2020 looms large. The skirmishes have already started, with each side laying out their opposing visions. The industry is also waiting to see how new immigration rules will impact travel tech businesses located in the UK, not to mention the industry they service. History suggests a deal on the future relationship of the EU and UK will be agreed, but only after a lot of brinkmanship.
  • Consolidation – the hospitality and travel industry is still very fragmented. We would not be surprised to see a mega merger of a hotel group (product consolidation) and online retail/ distributors joining forces (retail consolidation). The latter, in particular, will be driven as a response to WeWork and venture capitalists wanting to mitigate the cash burn of many fast growth businesses in the race for market share, as well as lower margins due to the declining commission levels paid to retailers.
  • Human experience – while the word "experience" is completely over used, everyone wants great memories from their travels and holidays. And while technology saves you time (which makes you happy), it's very hard to deliver a memorable "experience" through an app. The importance of people interacting positively with you to deliver hospitality will grow and grow even if chatbots become more sophisticated. Robots can't serve with a genuine smile…yet.

If you have any questions on this article please contact us.

citylights
Richard Bursby


Richard predicts growth areas and trends for TravelTech.

"TravelTech will continue to boom for B2B and SaaS businesses as well as consumer-centric offerings."