UK travel sector spending on technology saw a spectacular 12% leap in 2015 as travel agencies and tour operators ramped up their investment in software.
The key finding in this year’s Travolution Innovation Report, which analyses government data on IT spend in travel, came as a surprise after just 5% growth was predicted last year.
However, observers say the sudden spike is explained by the rapidly growing influence of new Service as a Software (SaaS) technologies, particularly those associated with mobile.
The rise meant travel’s spending growth on IT last year outstripped the UK average threefold, taking overall spending to £1.3 billion, or 1.17% of total UK technology expenditure by businesses.
Software expenditure growth in travel was almost 50% in 2015, whereas among all UK businesses there was no increase.
This was down to mid to large-sized agencies and operators, according to the data, and a continuation of a trend of increased software spend in travel first seen in aviation in 2013.
While all five travel sub-sectors analysed saw IT spending rise in 2015 and are forecast to rise again in 2016, spending on hardware last year saw a decline of 21%.
US-based travel technology consultant Norm Rose picked out four key factors, including mobile, OTA competition, distribution changes and the need to update legacy systems.
He said: “Growth from the two largest global OTAs – Expedia and Priceline – is causing the traditional players to spend more on technology to remain competitive. And with mobile now mainstream, travel companies must, as a minimum, ensure their website is built using responsive design and many need to invest in app development as well.
“With traditional distribution under pressure, as illustrated by Lufthansa’s €16 GDS [global distribution system] fee, agents and operators need to invest in systems that include direct booking sources,” Rose added. “And tour operators need to update their platforms as many are based on old technology.”
Ian Richardson, chief executive of technology consultancy ICE ICT, agreed, saying mobile and outdated legacy systems were the key drivers of change.
“For the last 10 years the travel industry has spent its efforts concentrating on the pre-booking process,” he said. “With the advent of mobile smartphones and apps, and the customer always online, there has been a shift to interacting with the customer throughout the booking lifecycle.
“Another consideration could be that a lot of companies have probably limited investment in technology since the crash in 2008.
“The jump in the last year could be because the need for investment has become critical or unavoidable due to platforms becoming unsupported without further investment.”