When it comes to the travel industry in the recent period, 2021 easily exceeded low expectations set up by the first year of the pandemic. However, the blow was unexpected, sudden and it will be months, years for some, before they recover. The ones that experienced a slight uptick in the business this summer season know that wasn’t just a bit of mere luck fueled by traveler’s restlessness after the lockdowns. Making use of the downtime in early 2020 many travel companies re-evaluated their business processes and what they need to attract demanding travelers in the post-pandemic times. Never in the past was it so clear – the change needs to be on the digital frontier.
Iva Vodopija, Head of Sales Operations at Lemax, points out that even though we have seen high levels of online penetration in airlines and, more recently, short-term rentals, the overall trend for digital transformation is slow, and the undergoing changes in the travel industry are not developing at the same pace as most industries.
What can be done?
The previous emphasis on products is no longer efficient
Digitalization isn’t some new buzzword. We have been talking about it for years now. Still, travel companies didn’t really follow up with their willingness to implement digital solutions… Why is that?
Digital transformation is not just about introducing new technology. It is about mindset shift, having technology and people co-exist, using technology to automate and streamline administration and back-office processes, and focusing more on cost savings and customer experiences.
From my experience talking and working with all kinds of tour operators worldwide, mindset shift and willingness to think differently were major reasons for lagging behind with digitalization.
Travel saw consistent growth even when financial crises and previous pandemics affected the global economy. They managed to generate revenue using the same “tactics”, such as pen and paper, so low focus on digital transformation is somehow “understandable.”
Why is that so? In the period 2000-2019, tourism grew at a high rate, travel and tourism industry generated 10.4 percent of all global economic activity in 2019. It was the second fastest-growing sector in the world. In this fast-growing market marked by the demand that exceeds supply, there was never enough time to focus on business processes, some quick wins and smaller adjustments were made on the way, hiring more people was a better option to fulfill all administration and back-office tasks.
All of the above has contributed to the situation we have today and what we currently have is not suitable for new demand, Iva explains why things won’t work as they used to…
Today’s situation is different because this pandemic enhanced focus on individual needs. Previously travel companies were focused more on WHAT they were selling it, e.g. on the product itself, but now it becomes equally important HOW do they sell it and to WHOM.
The customer, in this case, the traveler, is the one who has specific needs, wants them to be accessible and executed quickly, with a high focus on the experience. To respond to these needs, travel companies will have to proactively work on their mindset, letting go of some old habits, and replace time invested in repetitive parts of their processes with investment in ensuring excellent customer experience.
Customer experience must become the focus instead of selling a specific product, and to do so, readiness to digitalize will increase even more in the coming years.
What travelers value the most about travel organizations?
In summary, we are witnessing a shift of the paradigm. What exactly changed for tour operators? How can tour operators prepare for the next generation of travelers in your opinion?
Till pandemics, traditionally managed businesses spent most of their time investing in the relationship with the suppliers, and now they need to refocus on the customer himself – and their new needs and habits. Differentiation between travel companies on the market will be made based on the experience of their customers.
Travel companies can prepare for the ‘next generation of travelers’ by automatizing the repetitive work and freeing up their time to be focused on the customer experience.
Also, a great part of preparation is to understand what attributes do travelers most value from travel organizations. As it can be seen in the picture above, the word ‘experience’ is emphasized many times.
Last, but not least important, travel companies should focus more on understanding and fulfillment of ‘new generations’ expectations. More than 70% of Gen Y, and Z are travelers which is a higher ratio than in the ‘older’ population. Therefore, using this pandemic and post-pandemic period for preparing will be crucial to stand out among the competition.
Customer experience must become the focus
In what shape do we find the industry now? Are travel companies aware of their need to shift perspective, the importance of digitalization – are they ready to invest in it?
According to the Arival survey, 33% of surveyed tour operators don’t use any kind of digital solution for their operations, while 25% have some custom system developed 10-20 years ago. Those legacy systems are outdated and the majority of them cannot be upgraded to fulfill current requirements. Luckily, according to Euromonitor’s latest Voice of the Industry – Digital Survey, travel businesses are ahead in planning their technology investments and we do see a shift in perspective and their willingness to act.
Unlike in previous crises, where travelers’ spending power was weakened, this one has irrevocably changed consumer behavior, decision-making processes, and values. Digital technologies have entered all aspects of everyday life, from researching, collaborating, ordering, and purchasing whatever is needed. These new habits will become necessary for travel companies as well. Travelers expect an on-demand and foremost personalized service with seamless communication through various channels.
With digital solutions ⅔ resources can be re-focused on more important activities
One of the biggest challenges for digitalization is that tourism is a very complex industry with little to no standardization. Although there is no “all in one” solution, Lemax has experience in the automatization of various processes. Can you tell us a few examples of how digitalization helps your clients to free up their time to focus on the customer experience?
The Lemax system is currently used by +120 customers, all of which are different types of tour operators, from DMC, Outbound agencies to Inbound agencies. Among the whole network of our customers, it is really hard to find two travel companies that worked in a similar way before introducing Lemax.
We helped our customers by automating the business processes, the resources (time, workload, budget) spent on repetitive, administrative and, back-office tasks are reduced, meanwhile more resources are generated for so-called Revenue generating activities.
The example in the picture below is a typical booking process measured before and after introducing Lemax. The most common booking process consists of 7 steps and after introducing technology those 7 steps have been reduced to 4 steps, while time spent for the whole process is reduced 60%. That means that ⅔ resources can be re-focused for other so-called Revenue generating activities.
Where do you want to be in the next 3-5 years?
However, digital transformation is not a process that can be done overnight and Lemax has a decade worth of know-how about how various companies managed their business to get through the change most efficiently – what are the most common strategies that you know helped other companies through the process?
If you talk with tour operators these days, they want to increase their sales and increase the number of bookings. Understandably, that is their biggest problem right now. But do they offer competitive enough services? On the right sales channel (online vs. offline) at the terms their customer wants?
The first step is knowing where they want to be in the next 3-5 years and what they want to achieve in that period, to whom they wish to sell, how and where, what could stop them on that path, what if another crisis is right behind the corner?
The second step is to revise business processes. Are their current processes supporting previously defined strategy or need revision? How many resources (time, money, people) do they spend on admin and back-office kinds of activities? Do they invest enough time in customer-driven activities such as opening new sales channels, developing new destinations in your portfolio, creating offerings for specific groups of customers according to their previous preferences?
Identify activities that could be done more efficiently, introduce technology through reliable partners, and free up time for customer-centric activities which could differentiate you on the market. Build a foundation first in terms of business processes and technology, and when you have it in place, you can develop everything else on top of it.
The winning cards of the new normal
What would be your advice for decision-makers in travel companies who are ready to make their first step into digital transformation – what to watch for, what to expect?
With the global slowdown, we all got a unique opportunity, i.e., time to stop and look at the strengths and weaknesses of the current business model, amplify the good stuff, and fix what isn’t working.
Many companies have used this time and they will come out of the crisis stronger, which should be counted on. I am sure that the travel industry, as every time so far, will get out of the crisis in record time, demand will return, people will want to make up for a lost time in the last two years.
As I mentioned earlier, the uniqueness and personalization of the offer, the speed of reaction to customer inquiry, and customer experience throughout the journey will be the winning cards in the new normal.
Tour operators who are ready for this new demand will be the winners, and those who did not take advantage of this moment will soon cease to exist.