How to challenge assumptions in travel?

I read a new white paper created by the management consultancy A.T. Kearney and sponsored by travel technology giant Amadeus. The consultants quizzed external industry experts about how 70 trends — from nationalism to the rise of new programming standards — might change the distribution of airline and hotel inventory.

The white paper is compelling because it crystallizes and challenges some common assumptions.

One widespread idea that the report implicitly critiques is this: To deal with technological disruption, many executives think you have to “go big or go home.” In other words, there has been a recent mania for mergers and achieving scale among airlines, hotel groups, online travel companies, travel management companies, cruise lines, wholesalers, and tour operators.

The report argues that the merger mania has been driven by many travel executives believing that they must consolidate and do more vertical integration to combat the growing power of “digital gatekeepers” that are heavily visited by consumers, such as Alibaba, Airbnb, Amazon, Expedia, Facebook, Google, LinkedIn, and WeChat.

But history suggests that the passion for consolidation is cyclical. The current push for achieving scale may also sputter out, predicts one of the experts spotlighted by the white paper — Martin Cowley, a one-time CEO of the Asia Pacific division of Amadeus’s rival Sabre and currently a consultant.

Cowley argues that two factors that have halted consolidation in the past may rear their heads again soon: the complexity of merged operations (which often become unmanageable for executives), and a lack of consumer appeal (given that consumers have not historically fallen in love with one-stop shopping).

So what is a travel executive to do? If merging one’s way to greater negotiating power with digital platform giants isn’t the best choice, what is?

One option is to focus on understanding the needs of your customers and how to solve their unmet needs, according to one of the paper’s authors, Yelena Ageyeva-Furman, senior principal from A.T. Kearney.

The white paper cautions travel executives that the business case for gatekeepers like Google to try to intervene and take market share in travel is vulnerable to geopolitical events, such the threat of increased regulation and a closure of physical and virtual borders for both people and data.

The authors predict that, if the world opts for more openness, interconnectivity, and growth, companies like Google are more likely to invest in trying to take a larger share of the travel distribution pie because the potential rewards will be bigger.

Yet regardless of how geopolitical events play out, the report argues that executives should focus more on how to gain or maintain competitive advantage in specific niches and segments of their business and be willing to cooperate selectively with tech “gatekeeper” platforms like Google and Alibaba to the extent those partnerships can improve one’s market position via one’s other immediate rivals. But their size shouldn’t scare travel suppliers. There is more to gain by seeking partnerships with them.

Luzarraga thinks travel companies can thrive if they look for ways to complement the tools that technology platform giants (Google, Alibaba, etc.) provide consumers with their solutions. Examples he gives include providing richer travel content to enhance the data those platforms already have, or by marrying data sets to provide more personalized service to customers during the booking process.

Amadeus advocates that travel companies do similar scenario-planning exercises for stress-testing their company strategy. Your company could come up with a handful of industry outlooks and assess how those trends — from regulations to demographic shifts to new consumer behaviors — may affect your company’s strategy. Once you’ve described the scenarios, you can monitor trends. When one scenario of the bunch appears to be materializing, you can act accordingly by implementing a plan rather than reacting in an uncoordinated way.

So think of the possibilities and what could make them happen or not happen. It’s easy to get drawn into the heat of the moment and follow the crowd. Do you dare to do something different? Could we work with partners to deliver the plan and collaborate? Can we adjust as conditions change? If your answer is yes then you are all set.

Interesting reads:


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