Digital: Rocket Fuel for the Travel Industry

There are times when all of us make the mistake of assuming we know the facts behind an event, trend or circumstance - only to learn at some point how very wrong our unchallenged assumptions and beliefs were.  For instance, take a recent event, light years removed from the travel industry, which undercut a flawed understanding held by many people.

George Martin had always been associated with the fame of the Beatles; several generations gave him credit for signing the group to EMI and supervising Abbey Road recording sessions where music took a new direction.  As it turned out, that credit was woefully off target.  After his death last month, well researched articles revealed what few had ever gotten right: Martin contributed an essential genius of his own to the wunderkind’s music, without which they would have been no better or worse than other talented musicians no longer remembered.  

The point of this example is unexamined assumptions generally make perfect sense – right up to the moment when they turn out to be perfectly wrong. Of course, being wrong about George Martin means nothing. On the other hand, being influenced by flawed assumptions on important topics such as travel technology can lead to far greater consequences.

This blog addresses digital technology, a term often loosely or ambiguously defined in travel technology articles and easily dismissed as something to do with databases, social media, marketing or abstract corporate strategies. Needless to say, those characterizations are as close to the truth as most views of George Martin were. The facts are: before George Martin and the Beatles met each other, digital information was the most powerfully disruptive force in travel; 50+ years later that power is undimmed. For any travel company to plan for the future without understanding digital is to risk a great deal.

What does “Digital” mean?

It doesn’t take long to discover that digital means many different things to different people, such as: digital strategy; digital marketing; digital channels; digital engagement and the Internet of Things. To keep confusion to a minimum, let’s start simply.

The basis of digitalization is configuring information so it can be stored, transmitted, processed and created by a computer. Unlike people, computers only recognize a numbering scheme with two values – a 0 and a 1. To send a computer unique data – for example, a government registration number – the information must be expressed in a unique string of 0’s and 1’s. This is such a common occurrence almost everyone knows the name for these unique strings – they’re called bytes.

Before bytes, analog technology was used to store and transmit information as electronic signals of varying sound wave frequencies, lengths and amplitude. George Martin certainly mastered analog technology; in his time tape recordings and vinyl records drove the music industry. Currently, many people reading this blog may unknowingly have a close familiarity with analog if their personal Wi-Fi runs through a cable modems; its purpose being to translate the cable company’s analog land line signals into digital signals for the router, then your laptop, tablet or smart phone. 

How does Digital fit into the Travel Industry?

Digital information doesn’t just fit into the travel industry, it’s indispensable to travel companies and customers alike – and it’s been that way for a long time. Once it becomes clear just what a powerful and long-standing influence digital has had on travel, any mistaken belief the industry’s future can be understood without accounting for this technology will be dispelled.

In fairness, the term “digital” has been thrown around so much in the last two or three years it’s natural – but wrong – to assume the technology is that new. Looking at the role digital’s played in the evolution of travel technology shows how mistaken that “natural” assumption is.

Digital technology hit the industry in the late 1950’s, particularly in air carriers and triggered by a surge in passenger volumes as jet technology made air travel faster, safer and more comfortable.  Initially the technology was used within each air carrier to harness early computers for operational purposes, such as: crew scheduling; flight plans, maintenance intervals and seat availabilities. Configuring digital information to manage seating set the stage for a logical next step: computerized reservation systems (CRS). American Airlines introduced the SABRE system in 1960 and the industry learned how dramatically digital information, tied to mainframe computing power, could increase seat yields and ticket revenues.

While CRS was very effective fleet-facing technology it didn’t answer the needs of travel agencies for much the same functionality in their offices.  In response, airline consortiums developed agent-facing software called global distribution systems (GDS) and also provided agencies with ticket stock. For the first time, a travel agency could check seat availability and book a traveler on a flight without making a phone call – plus create and issue the physical ticket to the customer. These two new capabilities transformed travel agency volumes and performance: within ten years agency revenues were up almost 400 percent while staff size increased by only 20 percent.

Digital and the Future of Travel Industry

There’s no question the impact of GDS on agency growth and profits was about as dramatic as rocket fuel at a launch pad. However, it should also serve as a cautionary narrative for every travel sector looking at the future; because the impact of digital information used in innovative ways can – and does – cut both ways.

By the mid-90’s, having propelled travel agencies to multiples of growth, digital technology became linked to the power of the Internet. A new competitor in travel emerged – the online travel agency (OTA); brick and mortar agencies fell from the sky (in the U.S. falling by 2/3 between 1995-2013), and a 2014 Google report showed 75% of leisure travelers used OTAs because it offered the best travel deals.

In 2016, digital innovation is making new forms of value possible. New travel technology such as affordable travel ERP is making it possible for small to mid-sized travel companies to compete with larger ones with highly integrated and specialized distribution channels. Those same travel ERP systems also enable agencies to leverage Big Data and analytics to understand customer behavior in ways that were impossible just two or three years ago. Those agencies can use data to efficiently focus on website visitors most likely to become customers. Social media and online content empowers agents to differentiate themselves from OTAs by showcasing travel experience and expertise.

The common thread through all these changes, transformations and disruptions in the industry is digital innovation. Its potential to quickly and dramatically change the travel landscape has to be respected by every travel company in the industry. Its ability to put the power of information in the hands of employees and management lays a foundation for innovation to those with imagination and expertise. Its long history within the industry provides every travel company with an opportunity to learn from the past as it plans for the future.

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