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By Dan Norris-Jones, founder of technology consultancy Priocept (clients include Skyscanner & Tui Travel)
What is the very first interaction that a customer has when they decide they want to take a holiday or arrange travel?
In 2014 they are not likely to have an interaction with a human advisor at a travel agent desk or over the telephone.
In fact, a recent survey from Webcredbile found that 85% of British people prefer to book their travel online.
So an obvious answer might be that the customer’s first interaction will be “with their mobile device” or “with a travel website”.
But in reality, the first thing that a customer is interacting with is a piece of software.
And in the travel industry, where a non-physical, ticketed product is being purchased or a reservation being made, software is the only thing that the customer will interact with right up until the point they start travelling.
To reiterate – the first and only interaction that most travel customers will have, from their initial travel need or desire through to their commitment to purchase, is with a piece of software.
Or more likely, a huge array of integrated software systems including mobile apps, online search and comparison tools, travel content and customer review systems, scheduling and availability software, pricing engines, and payment gateways; all of which are nothing more than (admittedly very complex) pieces of software.
So if you thought the travel industry drives value creation through destination variety and discounted deals, it’s time to think again.
As one of the most software-dependent sectors of our times, travel companies’ equity value is increasingly derived from their software systems.
Companies like Airbnb, Skyscanner, Tripadvisor and Booking.com have excelled in software development.
They have been able to innovate and build ever more sophisticated user experiences that make ‘self serve’ travel planning and booking quicker, easier and more cost effective.
In short, they have managed to build a layer that sits between the ultimate travel provider and the customer.
These companies are increasingly in control of the customer relationship. Leaving the ‘real’ travel companies that sit underneath – the airlines, hotel chains, car rental firms or package holiday vendors – increasingly isolated from customers during the decision making process.
In the early years of consumer use of the internet, it was a commonly held belief that the internet would allow customers and suppliers to eliminate the ‘middle man’.
The reality is quite the opposite. This disintermediation has not happened because the task of the middle man – or ‘middle software’ as it should perhaps be called – is a complex and challenging area in it’s own right, with huge value-add.
Very few, if any, of the big names in online travel have grown out of traditional travel businesses, which suggests that the mainstream travel industry still isn’t able to match the level of digital innovation that is coming from start-ups, venture capital funded outfits and other disruptive business.
The ability of these digital businesses to out-innovate traditional travel businesses can be attributed in a large part to their ability to build and deliver superior digital products and services.
This entails successful execution of complex software development projects to make a new digital product or service a reality.
Traditional travel businesses need to carefully consider their software development capabilities, whether in-house or outsourced, and the extent to which they will need to invest in this area, if they are to keep up with their purely-digital competitors.
Software has become such a crucial element in the travel sector that the businesses with a future are those bold enough to start thinking like software companies.
This means being prepared to invest heavily in continual and long-term R&D and product development, rather than discrete or one-off web projects subject to ‘business case’ approval each time.
Travel businesses need to redouble their efforts on expanding their software delivery capabilities, as control shifts to the digital innovators and their software engineering teams: the ‘middle men’ who have increasingly intimate relationships with travel consumers.