Innovation in the travel industry is being stifled because start-ups are not able to achieve the volumes they require to establish their companies.
WTM 2012: Sustainable relationships are key if travel start-ups are to outlast their competition
Innovation in the travel industry is being stifled because start-ups are not able to achieve the volumes they require to establish their companies, the Travel Innovation Summit at WTM heard today.
Charles Ehredt, group director of venture farm and innovation at Odigeo, the parent of Opodo, eDreams, Go Voyages and Travelink, said that the changes in the sector were providing opportunities.
But he said low barriers to entry in the online travel sector are working against start-ups because they create competition in the initial phases of growing a business when the customer base is small.
Ehredt, speaking at the event organised by Travel Technology Initiative and OpenTravel, said:
“At the same time as the travel industry is modifying itself, technological and social factors are coming in to play. Therefore, it is a time of innovation.
“An awful lot of things are changing and there’s change that creates opportunities for travel companies. Barriers to entry for start-ups are very low.
“But twenty five companies might start doing the same thing competing for five million customers. But they cannot get volume, therefore lower entry barriers might be a bad thing.
“Dozens of companies launch every single month and mane have very similar business models and often a number of them go out of business. That’s a shame.
“The key element is sustainability, the ability to stay in the market long enough to allow your competition to die.
“In the travel industry meeting people is easy, but building durable relationships is complicated. If you do not have staying power it’s difficult to build up the relationships you need.”
Ehredt said that he saw the planning, shopping and booking stages of travel gradually merging and that it was in this area that OTAs could benefit by remaining close to the customer during the holiday.
He claimed that exploiting new opportunities in social and mobile would offer additional revenue earning opportunities for travel firms by providing the means of selling products to customers during their trip.
“Inspiration is going to remain fairly separate but planning, shopping and booking phases are going to start to blur together, especially as companies engage with flash sales before they get to the booking stage.
“During travel there will be a lot more opportunities to engage with the customer. Sometimes we are our own enemy in terms of making things complicated for the customer.
“There is an impressive array of innovation going on in social, mobile and local and it’s not clear which of these companies are going to win.”
