Big tech and start-ups are set to drive inevitable change, says Viktor Nekrylov, managing partner of DRCT
Guest Post: What the travel industry needs is a post-COVID revolution
Viktor Nekrylov, managing partner of DRCT, says the balance of power in the travel industry is ripe for change and for legacy players change is inevitable
The travel industry has a chance to fundamentally change itself.
If it doesn’t grasp the opportunity to build a stronger, smarter industry now then quite simply the crisis of the past two years will have been wasted.
Nothing short of a revolution will go far enough and here’s why.
The old adage around a crisis being a good time to innovate is certainly true now. A look back at the global financial crash and its aftermath can serve as a model for travel to follow.
Experts credit the 2008 crisis for giving rise to fintech start-ups that moved away from traditional financial products to offer alternatives to consumers who had lost trust in banking institutions.
Fast forward to 2022 and there’s a proliferation of investment, insurance and other financial products for consumers to choose from and today these innovations are beginning to permeate travel as well.
Ripe for revolution
Many segments in travel – aviation, corporate travel and hospitality to name just three – have been hampered by legacy technology for decades and it’s time to take on companies that have grown fat on business models launched in the 1960s, or earlier.
Newcomers emerge all the time but their ability to gain traction and grow is often hampered by existing players unwilling to let go of the data keys and status quo they hold.
The pandemic has only served to highlight that current systems and processes are no longer fit for purpose.
One former British Airways-boss recently slammed airlines for sticking to old processes and creaking systems.
Alex Cruz described airlines as unable to live up to the demands of today’s consumers and criticised the technology at the heart of operations as increasingly unreliable.
The former BA chief executive should know, he lived through at least two significant IT failures during his tenure at the airline.
But many airlines have used COVID-19 to begin to address some of the challenges. While passenger numbers were almost at a standstill, many airline executives took the opportunity to think beyond the restart to what could be improved.
The crisis also gave them the opportunity to step back from day-to-day operations and take risks with small developments that could reap big benefits longer term.
Revenue management is a great example and one which gives carriers the opportunity to set themselves up for newer ways of retailing and merchandising, online and using the New Distribution Capability (NDC) standard.
It’s also an area airlines must address because what happened in the past, the data that pricing and yield has traditionally been based on, will not be relevant for the future.
But it’s not enough. Distribution is one of most expensive parts of the price of an airline ticket, so there is work to be done in shaking up commercial models, but we must do so without increasing costs for intermediaries and consumers.
APIs, the rise of cloud-based technologies, and even distributed ledger technologies will continue to bring development and distribution costs down.
What’s required is a change in mindset that brings everyone to the table to acknowledge there is a better way to address outdated, expensive modes of distributing flights.
Big tech is coming
The travel industry must ask itself what happens if it doesn’t change?
The threat of giant ecommerce ecosystems such as Alibaba and Amazon is looming and that’s not to mention the fintech companies that are already eyeing up their place in travel.
And of course there’s Google. Many travel experts can see how Google’s data dominance could eventually lead to it offering a far better, joined-up travel booking experience for consumers.
It’s time for travel to take note of the easy experience these companies offer their audiences.
Amazon’s palm scanning technology, for example, is being implemented at shops in airports and train stations.
Airlines, hotels and travel intermediaries may not see this kind of innovation as a priority as they emerge from the pandemic, but consumers certainly do.
These tech developments set consumer expectations going forward and distract them away from travel to spending their hard-earned cash elsewhere.
AirAsia is one such airline taking note, with their ‘super app’ now covering services from flight booking, ride hailing, food delivery and digital payment.
As such, it is valued at $1 billion, more than the market value of AirAsia Group itself. The industry has more to learn from the COVID crisis, in my view.
Many will go back to the way things have always been done until companies from outside travel, in the financial, consumer and ecommerce sectors, decide they can do a better job and move in.
I believe aviation will be disrupted by start-ups, and the balance of power in the ecosystem is ripe for change.