Representatives from the Travolution advisory board met last month to discuss the latest developments in the industry and to cast their eye over highlights from our State of the Nation reports.
These quarterly meetings are supported by Gail Kenny Executive Search
Andrew Botterill, managing director, Global Travel Group
Ian Brooks, associate, Gail Kenny Executive Search
Matthew Crummack, vice president, air, tour operating and car, Expedia
Graham Donoghue, new media director, TUI
Nick Gassman, usability and standards manager, BA.com
Simon Ferguson, publishing director, Travolution
Tim Frankcom, general manager, Yahoo! Travel Europe
Gail Kenny, managing director, Gail Kenny Executive Search
Ciaran Lally, group managing director, Ebookers UK & Ireland
Kevin May, editor, Travolution [chair]
BOTTERILL: I think online gives the consumer far more choice than they’ve ever had; far more information than they’ve ever had. The consumer is a lot more discerning nowadays and they like to become their own travel agent. We’re seeing the growth of LCCs and accommodation-only, giving the consumer the ability to do that.
In the past there was a perception that travel agents have been order-takers and some of the stuff that you will have seen in the research would probably agree with.
The threats that TA face, instead of taking on the new challenges in the new world, they blame tour operators for selling direct, which is just a fact of life – tour operators are going to sell direct, the web environment makes it easier for them to do that.
What we are trying to do is change the traditional travel agent sector to become relevant for the consumer, to try and change that perception of what a travel agent does.
Increasingly that travel agent is going to be a travel provider – and instead of blaming a direct-sell tour operator or blaming the web, they going to embrace those elements and use them to become relevant again in every channel.
The great thing a travel agent has is the ability to be multi-channel – to have that relationship 24 hours a day, seven days week, with the consumer. But they have been very slow at embracing technology, change and competition. The consumer has probably moved far more quicker than the travel agent has.
They are changing. But there are people in that space that can’t catch up and won’t catch up, because they can’t change and they do not want to change. But equally there are some fabulous online travel agency businesses that in the last 5 years that done phenomenally well, without their own product supply, which is absolutely key for selling online product – if you won the product; if you don’t own the product you’ve got to be far more sophisticated about how you mask the booking procedure, which comes with all sorts of problems. But there are lot of businesses that are doing it very well.
The key going forward for travel agents and groups like ourselves is not necessarily the rich content and technology that a lot of the online guys talk about – it’s getting access to product. And then using technology, as another channel, for the consumer to be touched.
It’s an interesting time for travel agents.
BROOKS: Isn’t it interesting the juxtaposition there between the worst and the best – the worst being the lack of personal contact. Isn’t that the opportunity for travel agents?
BOTTERILL: It is. But I think what the consumer is saying now is that they don’t necessarily want to walk down the High Street to have that personal contact. It can come in many ways, shapes and forms, the customer relationship management that travel agents should offer should be every channel, 24 hours a day – and they should be able to pick up that booking. A lot of the big tour operators in the UK, like TUI and First Choice, picked that up very early on and in many ways had a head start because they owned product. The catching up that those guys did with likes of Expedia and Lastminute.com, who were maybe five years ago streets ahead with technology and some of the concepts, but you are now seeing that marketplace beginning to balance out.
But without a shadow of a doubt the travel agent, who is effectively a distributor of travel, is now understanding that they cannot just be a distributor of third party product. They have own some of the supply chain and they have to be able to provide information, help and advice in every single channel, whether that’s High Street shop, call centre, or web.
DONOGHUE: We shouldn’t forget that there are still around 7,000 travel agents in the UK and it is not declining as much as people expected. The role has to change quite significantly. The role of our travel agents has changed. We have actually only closed about 6% of our retail estate in the last 12 months, but our business is growing massively online, purely because there is still demand out there. It varies by the type of product and the type of destination where the customer wants to go to.
The days of going into a travel agency to book a city break or a long weekend have gone. But when it comes to a round-the-world or very long haul destination, where consumer are a little bit more apprehensive, we find still that customers will research online but they still want to interact with the travel consultant. They may not necessarily book with the consultant, they might go back online, but they like that element of talking to Claire on the High Street, who can reassure them.
Technology will be one of the key drivers of this, particularly in regards to some of the third party travel agents. If they can get the technology right and they can work with various different players and they become more like manufacturers, as opposed to pure retailers, there is still scope in the marketplace. But it’s getting tough. The barriers for entry are very tough. We made some decision last year about changing our dynamics. We will continue to have the right size of retail estate but we will continue to close them.
We currently have 760 and it’s too many. Over time you will probably see that shrinking to maybe 300, 400 or 500, but it’s a balancing act.
CRUMMACK: It’s no surprise that low price is top of the list, in terms of what people find best about online travel experiences. In this day and age where there is a huge pressure on people making choices on their household income as to what they spend their money on, it’s always going to be a huge pressure. If going offline doesn’t necessarily deliver that for you and going online enables you to very quickly make comparisons between all the choices available, where online travel has been able to deliver on that is in a greater experience but also being elements together and bundle them up. That experience, going back 5 or 10 years ago, was a real revolution for people to do that.
DONOGHUE: I’m not convinced that it is low price and bargains, but if you give people a survey and that option they always tend to pick that. It is more the value and the empowerment, being in control, smart shopping and beating the system.
CRUMMACK: If you ask people what they are always interested in, they will say it is low prices. But what they are after is value and experience. What we always focus on is getting the right experience and the right value. One thing that is different from shopping for coffee or rice, it’s not necessarily a great experience. People don’t enjoy it… but selecting a weekend away in Madrid or a summer holiday is actually a lot more enjoyable. If you can add to that experience and make it more pleasurable in the whole process, from starting to think about it to delivering at the end, that’s what creates the value around it.
That’s the great thing about travel, coming in from outside, it is a fun place to be a people actually like shopping for it.
GASSMAN: I would disagree with you [Donoghue] in putting technology up front as the main thing that will make a difference as I see it as the enabler – what is going to make a difference is how you use it. During the customer research that we do, when we show them the products we are developing, one of the key changes that I’ve seen over time is fewer people are talking about picking up the phone to make a booking or ask questions about what they can do.
Over time people are going to be more comfortable about doing things online. There is no surprise that what is happening, for the more complex products, the online experience still can’t do well enough – you still have to go and talk to somebody.
BOTTERILL: That’s a good point because where we are seeing massive growth, but not online bookability, is in the Caribbean, Far East and Middle East, where the actual call gets generated by fully bookable websites but they are clearly there is a desire for the consumer with certain products in certain areas to prefer to pick the phone.
GASSMAN: It is like scientists standing on the shoulders of giants. Generations build on what was standing their before and what will happen is we will between us all become more and more sophisticated at selling complex products online and that then is where the technology will step in.
Some hotel websites that we’ve looked at recently have flash technology on the front end, but they have been absolutely dreadful.
DONOGHUE: You’ve got to have good foundations and good underlying technology, and it is then about how you build on top of that. It is a challenge as it takes a lot of money and investment. It is getting a lot harder and I get frightened at how fast the technology is changing as well.
I go to some of my more traditional IT departments and say “are we using Ajax?”, and they say “what!”.
HOBERMAN: I think agility is more and more important than it ever was and courage to take risks is more important. That’s the only way to differentiate. There are innovators that are now rising up with interesting models, like Skyscanner. Farecast in the US is a lovely model. It’s great to see that happening, although the key thing is what the industry gets to is quite a derivative thing where dynamic packaging is the big thing but if that is only where you are at then how are you going to cut that differently and cut your costs differently.
All the airlines are doing it now and all the tour operators doing it so, well, too many people are happy to play catch-up and not think what is the next disruptive trend that one needs to get into. It also about Web 2.0. We are all legacy companies here and that is quite fascinating. Lastminute.com is actually a legacy company now with some of its technology.
FERGUSON: But how will see Web 2.0 manifest itself in existing travel brands and how they work?
HOBERMAN: There was a lot of talk about CRM for a long time, but it’s really expensive and really hard to do well, particularly in travel. Amazon has done it very well with their set of products. The easy simple CRM is social networking, like TripAdvisor or ActiveHotels reviews. That sort of aspect of Web 2.0 you’ll see a lot of but how do you cut that differently because it is not new anymore as everybody is doing it now.
FRANKCOM: So is the relationship with the company or is it purely C2C [consumer-to-consumer]?
HOBERMAN: It is the same way that media companies are doing it. There is some professional video and a lot of consumer-generated video. You can have your own experts but supplementing with what do people like me think, which is more valuable.
DONOGHUE: Do you think there is anyone in travel who is doing mass customisation and mass personalisation particularly well?
HOBERMAN: Travelocity, genuinely, [general laughter] does it well. They do targeted emails and alerts. It works, but it’s still Web 1.0. I haven’t seen anybody yet and I’m surprised that Expedia hasn’t done it.
FERGUSON: Is it not something like where guys like Yahoo! come in with something like Yahoo! Answers and makes you better positioned to take that on rather some of the online travel sites.
FRANKCOM: The company is the enabler and the CRM strategy is between the consumer and the consumer. It is not between Yahoo! and the consumer. Yes, we are utilising our user-generated content similar to what TripAdvisor do but to actually enhance our product. We have licensed content, but also licensed images as well. If you put that next to user-generated content and photographs from Answers you actually have a very strong product and one that is better than just having licensed content.
If you only have licensed content a lot of consumers are quite nervous of that, but if you balance that with consumers are telling you and showing you with photos then you have a very strong proposition.
LALLY: I am surprised by the amount of loyalty. We asked some users what were the most important things to them in the online environment and when we went into detail three trends emerged: one was value, one was simplicity of the booking process and experience online; and thirdly they wanted knowledgeable and expert travel provider to have the answers available for them in an unobtrusive way when they needed them. Nobody likes to say no to anyone in any face-to-face meeting, so it is easier to backspace on a browser than it is to say no to a travel agent. It is less emotional response but it is where I think the Ebookers and the industry is struggling – we need to have the information there that’s available to satisfy a customer’s questions, they just don’t want it to be obtrusive during the booking process.
They tell us some of the mechanisms out there now, like FAQs, are just not useful. When we look at our destination mix and what is being booked on and offline – online tends to be short haul and reflective of your point earlier. When people are going long haul maybe there’s an increased level of nervousness that they are travelling further afield, maybe they just have more detailed questions, the insecurity levels rise, they like that interaction.
One of our biggest challenges is how do we give them that level of comfort and security in an unobtrusive way on the site, while having the potential to interact directly with customers.
Call centre support is certainly critical to us today – obviously we would wish everything was purely bookable in an online environment but that is not the reality today and I can’t see it getting there anywhere fast.
Sites like TripAdvisor do help build community feel and build security.
GASSMAN: There is a fundamental point here and that is for all the discussions about new technology and social models, for any given customer going to any site how easy is it for them to do what they want to do? How do they find out where to go on the site? One of the issues I raise at BA.com is that if you go into our homepage – or take any travel site – and there are links to cars and hotels and this and that package and special offers, but how does the customer know which one of these to go to? Do they have to go and try them all out and compare? You really need to understand the customer and there is a very different sort of understanding online ans to what they want to be able to do; how do they want to do it; what information do they need; and at what part of the process.
Too often we can focus on the bright new shiny toys and forget about the basics. Many people when they are travelling are looking at price but clearly you have the business travellers when the schedule and the network that is important.
DONOGHUE: We did a test recently where we were working on a landing page for our search engine optimisation and we just started to tailor all the pages depending on the type of keyword or the actual activity that was happening within the search – simple tests about tone of voice, imagery. We tried it just using one particular destination and we had a five times increase in conversion from our search marketing campaign by dropping them to the relevant page for individuals. There is not a huge amount of great technology out there can help you do that and we were doing things quite crudely with cookies, but if you can get it right it can be so powerful.
CRUMMACK: I think we’ve been very happy with some of the interaction we’ve had with TripAdvisor and those developments have really helped that shopping experience. There is a question that user generated content is extremely important, particularly on some of the hotel reviews, but also innovative content that we can be bring to the site ourselves is also very interesting. That isn’t always generated by the individual users themselves and I think it is a combination of those elements that helps people in the shopping experience and what they are actually looking for.
Far from being complacent about it, for ourselves we are trying to keep the experience very easy. There are different shopping needs with the same person, coming back at different times, but you don’t always want to file them into a highly complex process for a trip that may just be point-to-point. You have to be really careful about making assumptions about how complex you want to make it – it is all about keeping the experience right for that particular occasion. A lot of the work we are trying to do around that is just keeping it simple, making the experience a delightful one and if they want to spend an hour browsing on going to Caribbean, they can do that, but if they want to spend 20 minites booking a flight or weekend break they can do that too. There are different thoughts and processes for both of those.
MAY: If we filmed this conversation and showed it some of your agents what would they say?
BOTTERILL: They would say ‘What is Web 2.0’. The agent community is not as sophisticated. They are not in a great place right now. And, in terms of embracing technology, I don’t think it is where we need to take travel agents. Groups like ourselves [Global Travel Group] are in a much better place to be able to see how the travel agent is going to become relevant going forward. In certain quarters they are not relevant today. For example, in the mass market they are not relevant. This has got nothing to do with technology, it’s due to the fact that the transaction lends itself far better to being booked online, it’s point-to-point, it’s less emotive, it’s a lesser average selling price – and they will be losing that business and travel agents are losing that market.
The technology piece, B2B, is a very important piece for travel agents and for groups like ourselves, in slightly different space that some of you are talking about, our focus is about giving infrastructure to become relevant again to consumer, in every channel. That’s our biggest challenge, B2B. The reality is now every conversation you have is about every channel, so if you are a web player you still talk about face-to-face, or interaction. The best interaction you can have is being sat opposite somebody, looking into the whites of their eyes. But the reality is that they may not want to book there and then, they more want more information or time. There is nobody better place to do the whole piece than a travel agent, but unfortunately the groups they are affiliated and associated to, because that space has been nicely split over the years, there’s been no consolidating effort to bring those independent agents together to form something that is relevant to the consumer and is going to be relevant going forward. Technology, B2B, is going to play a major part of that and I suspect there will be less people who can do that going forward.
We are trying to shake that space up to become relevant again, to get the B2B technology in place to make sure they can give the consumer what a lot of the web guys are doing in one channel. So for us it is still about multi-channel, it is still about different experiences, in those channels.
GASSMAN: The travel agent has a massive advantage over the big players if people like Andrew can give them the technology. How difficult is it for BA, who has ten million customers, to personalise the website or to do really good CRM. It is bloody impossible with so many customers. For a local travel agency it probably does know its customers and what they like and prefer, so if they can use the technology to provide the right products they have an advantage.
BOTTERILL: There are some guys that are doing this really well – a lot of very good, web-based independent agents out there. To personalise or customise in the mass market is very tough. The perception of the consumer is that the biggest fad out there at the moment is the web. But as far as I am concerned the web is a part of a broader experience that has just not been integrated yet by the agency community.
If you are a smaller or niche player you are going to know your customer better and you will be able to tailor your product or offering to the consumer in a far more sophisticated way.
LALLY: Part of it depends on how it is done online as well. One of the next developments we are going to see in the larger online sites is tools to allow consumers to personalise the service for them in a member area, where the customer tells you what their preferences are, when they want to travel, where do they want to go, and they only get hit with communications that are relevant to their trips. Highly personalised, with tools to book, tools to shop, so that tghey can get that relevant service to them. Now what you don’t have is that trust of the face-to-face relationship that an offline may have, but on the flipside very often the relationship is only as good as the agent themselves on the other side of the desk.
BOTTERILL: But it becomes self-fulfilling as the more sophisticated the CRM is the more sophisticated the booking can be as well. if you are dealing with GDS, taking that right through multi-centre, Far East, round-the-world itineraries do not let themselves well – and won’t do for the foreseeable future – to a good online experience.
DONOGHUE: Is it a question of good economics as well though. Because you have access to product in the retail environment but the economics – take ourselves as a manufacturer – of the cost of distribution online versus the cost of distribution via a retail estate are massively different. We therefore drive our online business by passing a lot of that cost saving to the customer.
BOTTERILL: I think you are absolutely spot on. Operators are making it very easy for travel agents to stop selling tour operator’s product, so what is important is for agents to take control of that product. For a group like ourselves to do the manufacturing and to get our travel agents, where we do not own the asset, as they are independent, but you do have control and influence in they implement your technology. We’ve got the scale; we’ve not got the overhead; we’ve not got the issues that the vertically integrated operators have got with regards to their retail estates. But, you still have to have, with that scale, the right amount of control and influence over the people that are distributing your product, because otherwise taking control of that product becomes very difficult because source suppliers, such as hoteliers and airlines, want to see the kind of volumes that have historically got through the volume players. The dynamic has changed from being vertically integrated to virtually, vertically integrated. that is a model that would work for travel agent, but that travel agent has fundamentally got to understand how to change and embrace every single channel and be relevant to the customer in it.
It’s a massive challenge but, quite frankly, with the travel environment being where it is at the moment it is actually the only option.
FRANKCOM: The main challenge is to continue to innovate. Look at the number of technology improvements that you can do now. The use of Ajax – going back a few years ago very few people, if anyone, was talking about it, but it is something now that if you are not utilising, then why not. That is coming from the US. There are lot of new technologies that need to be incorporated so product remains key to growing our product because there are a number of new entrants in the market and the web is enabling the consumer to go and find niche travel sites – they don’t have to rely on the big guns to go and find what they are looking for. There are sites out there that have no problem at all acquiring traffic to their sites, so the challenge for all of us to continue to innovate and I really believe that personalising needn’t be that challenging.
For us personalisation is really about enabling the consumers to talk to each other. User generated is a real way of putting people in touch.
MAY: Is hiring good ecommerce people difficult or is it equally difficult retaining them?
BOTTERILL: I think it is difficult to get good people full stop.
CRUMMACK: There are more similarities between sectors than you are likely to think and it depends specifically on what you are trying to solve in your organisation, whether it’s a technical question or whether it’s a business-to-business relationship question, and exactly what you are looking for. If you get very narrow and specific about what you are looking then it gets more difficult.
KENNY: There is a problem and some of the traditional tour operators are not paying the market rates, in terms of perhaps somebody in financial services. They will probably be earning around 25% more that they would in travel. The companies need to be a little bit more flexible and have a wider salary band in order to bring in somebody clearly that will be able to add value.
DONOGHUE: Financial services are a particular issue. I had some my senior staff headhunted recently and they instantly doubled their salary. And we were paying reasonably good money for these people.
KENNY: I don’t think people you will be losing people just because the salary is low. You have to look at retention within the business. There has been so much integration, downsizing, and you have to look at leadership. There are lots of people that are quite de-motivated in companies actually in this room.
DONOGHUE: It is quite compelling when you can almost double your salary overnight and in some in cases walk into jobs that are easier, because it is quite tough, cutthroat and complex.
GASSMAN: In companies like BA we typically do not have very senior managers who have worked their way up through ecommerce, and who therefore know all the jobs that need to be done and how fit together. When you start talking about role such as information architects and usability specialists and those sorts of things, it’s not just ‘we need another one of those’, it is ‘what are you talking about – I don’t understand’.
HOBERMAN: The broader danger here is that the industry has had to be, by force of the market, quite defensive. It also means people are less innovative. A lot of this is how do you motivate people, get good ideas, execute those ideas, rather than keep on going up against brick walls or corporate bureaucracy.
GASSMAN: Our online effort has been an area that has been relatively protected, so due credit to my bosses that they recognise it is a key area for the company.
DONOGHUE: We have a similar thing. I have this web world of people, but apart from me nobody in my department has come through the industry. But we’re almost seen as ‘them over there. They never get cuts! They have the best equipment!’. Does it create animosity?
GASSMAN: By and large there, not really a lot of animosity – but you do get a lot of squabbling at senior levels as to who is going to control.
FRANKCOM: The last two roles we filled at Yahoo! Travel both went to people already in Yahoo! It is similar to what Brent was saying. Both of them were both ideas people. They had good ideas and I think that is a fantastic way of rewarding loyal people.
BROOKS: But perhaps an issue with Yahoo!, presumably a lot of people that work there are online-savvy and have a good understanding of the online world, whereas if we are dealing with recruitment for traditional companies they just do not have the people with ecommerce experience. They are forced to go out and get them and to bring people in from outside the travel industry is difficult because of salary structures. Therefore there is only a limited number of people within travel that have got that experience.
FRANKCOM: My problem is the opposite. We’ve got the web-savvy people, we don’t have the travel experience. It’s a balancing act as you have to bring people in from the travel industry who have got a degree of web-saviness, but also have a huge knowledge in relation to travel, such as UGC and search.
HOBERMAN: I would far rather have web-savvy people than travel people. But travel is notoriously badly paid and web-savvy people are in demand by everybody.
LALLY: I am actually one of those people that made the move from financial services into travel. [general laughter] My perception of the industry was one of being exciting, fast moving, a lot happening and untapped potential. I find that in interviewing people for Ebookers. It is not difficult for people to perceive the excitement of the industry and be attracted to it. Certainly from my perspective I look for good people, web-savvy in certain positions. But I think it is the same challenges in other industries: if you get the right people who really believe in the company with potential then they will do fine. As the market has moved more online, probably the reliance on a career previously in travel is now different.
CRUMMACK: If you add a fast-moving environment, a complex environment and one that is quite fun, then there is a mix that is quite attractive. Talking about industries maturing and it looking more difficult and people make less money, traditional bricks and mortar retail has been like that for a while. It is quite a cyclical business and not every day is a barrel of laughs, but it is a very attractive business.
MAY: Any other business?
DONOGHUE: We have a lot of assets. We are seeing a lot of changes in the industry and general consumer behaviour. I’m not saying it is the right model for us and we have a lot of internal debates about what is the right model, do we go asset-long and have 400 aircraft, build another 300 hotels, or do open more travel agencies and call centres, or do we just become a pure online player and take out all of our assets. Is the future going to be hybrid of two, or one? Where are our margins going to be made?
BOTTERILL: I think you [Donoghue] should pay more commission. [general laughter]
DONOGHUE: I think you’re talking to the wrong guy!
BOTTERILL: The very thing that you have – beds, shops, aircrafts – there are times, for me looking in at TUI, we are enviable. Having your own air gives you lots more opportunity than being a player without that control, but inevitably it also has its downside, like if you don’t fill the aircraft. As much as cost as you take out of the business, whether that is layers of people or bureaucracy, it is very difficult to take out the cost of running airlines, agency estates and long term contracts with hoteliers. I think it is a hybrid of the two. Take as much control of the supply chain without being as agile as you need to be in the online world. What we are searching for at the moment is trying to own nothing but establish everything – and it is very difficult, particularly with air, not so much of a problem with beds as by and large you can go around the world and buy beds. But controlling air is something Brent and I have talked about before and, unless you actually own it, it is very difficult to make it work for you online.
HOBERMAN: The problem is consumer demands have changed at a greater pace than they have in the past, so predicting that and getting that right is difficult.
DONOGHUE: I am looking at this from a margin point of view, because when we look at profitability of our tour operating, retailing, airline and hotel business, it makes a nice number.
CRUMMACK: Being flexible in a marketplace that is changing so fast with assets of course it’s always going to be tough. It’s a real challenge for asset-management depending on short, medium or long haul. The pace of change on that has been faster over the last two or three years than it has over last 10 to 15.
DONOGHUE: Should you guys have assets though?
GASSMAN: Yes, we have a product to sell but the question is what do they want and do they want to buy it? If they want to buy our product packaged with other products as well then we’ll go and look for those types of products.