For me, one of the most constant features of the travel industry in the 25 years that I have been involved in it has been the pace at which the industry has changed. This has been in almost every respect – in what holidaymakers buy, how they choose to buy their holidays, their choice of holiday destination, and how they choose to travel to those destinations. Even at the micro level, we have seen massive changes in expectation – as an example, wi-fi didn’t exist 15 years ago, and we now expect it wherever we go on holiday.
It is interesting to look at the ability of the travel industry to respond to that change, and for me, there is a real concern that in many cases, travel businesses have not responded, and have simply been replaced by new players, offering the products that customers now want. We believed in the 1980’s and 1990’s that we were an industry full of entrepreneurs, and thought that those entrepreneurs would be the ones that led the change, but how many of the industry’s leaders from that period are still the ones at the forefront of change in our industry now?
Some years ago, in a previous role, I was invited by the Croatian Tourist Office to visit Istria, in Northern Croatia, to look at the tourist accommodation and help them consider what they could do to grow in the UK market again. In the 1980’s, it is fair to say that the former Yugoslavia had been at the leading edge of mass market tourism, and had been in the top 5 of most visited destinations by British tourists. This had partly been driven by a very strong, state owned tourist brand, Yugotours, and it is interesting that after the civil wars of the early 1990’s, most of those leading tourism in Croatia had worked at some stage within that business. The civil war did however have a dramatic effect on tourism to Croatia, and as a destination, it almost fell off the radar for a number of years.
Whilst I was in Porec, I was shown a hotel which had been one of the best sellers in the Yugotours product range. I was struck, more than anything else, by the size of the rooms. They were just large enough to fit a double bed, and a shower room no bigger than about 6 ft x 4 ft. It is difficult to imagine that most British tourists would accept a room of this size now – even in a London hotel, but in the 1980’s, this had been a massive success for Yugotours. It is difficult to imagine today’s holidaymakers accepting that size of room.
This demonstrates one of the challenges for hoteliers – hotel refurbishments are costly, and many hoteliers are reluctant to spend big. I have heard it said amongst bar owners in the UK that typically a trendy bar will have no more than 3 years at the top before it needs to be reinvented, involving a significant re-investment. The tourism industry doesn’t see the need for this sort of investment, and there are still many hotels which have been largely untouched in the last 30 years. Whilst this adds a certain level of authenticity, it is easy to see why many tourists want to buy more contemporary experiences, which often leaves the traditional tourism product behind. How else can we really explain the success of Las Vegas or Dubai? They are destinations where that level of investment is made in hotels – whatever we may individually think about some of those developments.
Changing consumer tastes also led to the growth of All Inclusive accommodation. Many customers still want to travel to destinations with more reliable weather than they experience at home, but are on fixed budgets, and want to avoid the risk of being impacted by unexpected bills. All inclusive delivers that certainty, and enables holidaymakers to calculate their discretionary spend relatively easily. Despite this, many hoteliers were, probably understandably, reluctant to offer this as an option, and within Europe, we still see many hoteliers trying to offer All Inclusive on the cheap – too often customers will be offered little better than neat alcohol in place of the brands of gin or vodka they were hoping for. This is short sighted (and could easily make the customer blind!), and certainly does not encourage return visits.
It will be interesting to see whether the demand for All Inclusive continues in the UK market in particular over the next few years, particularly as Sterling appears strong against the Euro, giving increased spending power in destinations.
Product choice has been one of the major battle grounds of the past 10 years. Whilst I am sure that many in the industry will ask who could have predicted the growth of airbnb and similar homeshare type products, it could be argued that we should have foreseen that growth, and that we need to recognise that in a changing world, we have to identify what customers are going to want in 3 or 5 years’ time, and start preparing now to fulfil that demand. Unfortunately, as an industry, we think very short term, and rarely think beyond the next season that we are going to put on sale, so the idea of planning for the future simply doesn’t happen. This has allowed entrants into the market with more radical ideas, and a willingness to introduce new products or concepts, and effectively take a significant market share, almost by default.
Equally, it is enlightening to look at the growth of different forms of distribution. The internet has liberated travel products, and I find it fascinating that whilst the transport providers – and particularly the airlines, have been able to grow by selling direct to their end customers, in the accommodation market, there has simply been a switch in the nature of the intermediary. For many years, the tour operators and travel agents were king, as they were the only ones who had access to accommodation in destinations, and for hoteliers, they represented a cheap route to market – avoiding the need to incur marketing costs. This market is still largely dominated by intermediaries, as hoteliers still find it challenging to market their product directly, but now the biggest volumes are taken by the intermediaries who have the best IT systems to bring hotels to the market. Many tour operators have lost out due to their dependence on legacy IT, and a resulting inability to invest to the extent required to compete effectively. The traditional players have not been able to add sufficient value to the transaction to retain their customer base, and those customers have been happy to buy from providers who give them a wide choice, and who tell them what other customers think of the properties they are considering. Until the traditional market replicates that level of knowledge, or adds value in a different way, it will continue to lose out.
I listened last week to a very interesting talk by David Speakman, the Chair of Travel Counsellors. One of his key points was that his business did not sell travel, but sold trust, care and reassurance. That is clearly a good way to add value, and a strength on which traditional players should be able to rely. Unfortunately, there has been a historical reluctance to rely on those factors. I suspect that operators and agents have been afraid that as delivery is outside their control, if they make promises that are not delivered, they will be blamed for those failures. Unless operators and agents can overcome that reluctance, what is to stop customers continuing to find added value elsewhere?
The travel industry has to learn the lesson that in the long term, and even in the short term, we have to recognise what our customers most desire, and as those desires change, we need to update our business models and products with them. Charles Darwin put it the most succinctly: It is not the strongest or the most intelligent who will survive but those who can best manage change.