Travel distribution entering period of ‘unprecedented change’

While it is “impossible” to tell how long it will take for things like artificial intelligence (AI), virtual reality and augmented reality to affect travel distributors, those technologies will inevitably change the landscape, according to a report released Tuesday.

The report, “Travel Distribution: The End of the World as We Know It?,” was conducted by the London School of Economics and commissioned by Amadeus IT Group.

“Now is an opportune time for the travel industry to reflect on alternative pathways and examine new approaches that are more innovative and collaborative,” the report states.

The report identified five major disruptive factors: consumer expectations, mobile, big data and AI, regulation and travel risk.

Consumers will increasingly want “more choice, frictionless purchasing, inspirational shopping and personalized services” in the retail sector, the report states, which will bleed into the travel industry. The use of mobile devices is increasing rapidly, as well.

As the technology behind AI becomes more mature, those who hold that technology will have greater power as artificial assistants and virtual reality change consumers’ behavior, according to the report.

Regulation was also pinpointed.

“A major disruptive factor over the next decade will be the extent to which regulators intervene to limit the power of larger players such as large airline carriers, mega meta-online travel agencies and travel management companies,” the report states. “In particular, the rise of gatekeepers such as Google and Facebook who thrive on the non-neutral advertising model will be determined largely by the level of regulation or deregulation in different regions.”

Finally, the report said travel risk — including incidents like terrorist attacks and natural disasters — will also likely alter consumer behavior “significantly.”

“The travel distribution industry is entering a period of unprecedented change — with rapidly changing consumer expectations, advances in data analysis technology and a blurring of the travel lines between the various players,” said Graham Floater, director of the London School of Economics and one of the report’s authors.

Based on the disruptive factors identified, the report pinpointed four areas where the most change is likely: “complexity and innovation in air travel distribution,” “the revolution of shared economy models in the hotel and car-hire sectors,” “innovation and hybridization in online travel retail,” and “the rise of gatekeepers such as Google and Facebook in traffic acquisition.”

The report also identified several potential “pathways to the future” for each area of distribution.

For airlines, the report suggests that carriers, especially large airlines, could grow their direct sales, but will likely face limits longer-term “as complexity leads to greater demand for content aggregators.” Airlines could also partner with GDSs, IT companies and other aggregators to grow innovation.

The hotel and car rental sectors will need to continue to adapt to the sharing economy, perhaps by increasing service expectations and incorporating their business content into sharing-economy platforms, according to the report. It also said continued consolidation among hotel chains is likely.

Going forward, travel retailers will need to adapt to new technologies that can enhance their clients’ travel experiences, according to the report. Consolidation in this sector, as well as the creation of hybrid agencies and metasearch companies, is also likely.

The report defines “gatekeepers” as “tech giants such as Google, Facebook, Microsoft, Amazon and Apple.” It notes their advertising models have already begun disruption in the travel sphere, and predicted their development of “virtual assistants” will make the consumer experience better by lessening search times and providing increasingly personalized purchases. Their control over searches will also grow, according to the report, enabling them to more precisely target consumers.

Additionally, “travel booking is likely to be integrated increasingly into social media and messaging, with advertising and referrals tailored to social network discussions and searching,” the report states. “The rise of virtual reality will lead to more inspirational marketing and traffic acquisition.”

Considering the disruptors identified, the report also identified some recommendations for the industry to focus on, like responding to consumer expectations and the rise of gatekeepers, harnessing new technologies, adapting to the shared economy and getting ready “for the rise of giant mega-OTA hybrids.”

As distribution changes, “to avoid consumer confusion and lost opportunities, industry collaborations need to go beyond bilateral partnerships and contractual relationships,” according to the report. “Distribution business models will need to evolve to encompass more shared innovation, a culture of experimentation and cross-industry alliances to grasp the opportunities fully.”

Sоurсe: travelweekly.com