Travel businesses have a poor reputation when it comes to technology, especially when it comes to innovation.
However, we’re starting to see that change. Recently, we saw some of our highest-ever assessment scores awarded to travel businesses. In this post, we’ll discuss:
- How complex back-office requirements affect travel businesses
- Where travel companies are demonstrating innovation
- How travel companies are overcoming barriers that hold most businesses back
- And why it’s time to start thinking about the industry differently
The Elephant In The Room (Ageing back-office systems)
Before we discuss innovation, however, we need to talk about something familiar to almost all technology-powered travel businesses: large, complicated and unwieldy back-office platforms.
As in industries like manufacturing and finance, a sizable majority of travel businesses rely on creaking, older technology to power their operational teams, and manage product and supply. These systems are often viewed as ‘black boxes’, providing a significant challenge when companies look to decouple and move functionality out of the applications.
What does this mean for those companies? They get held back by inefficiencies and the technical debt in their legacy systems. Progress becomes slow and laborious. New features become increasingly difficult to ship. In many cases, large scale digital transformation programmes are required.
So big is the ‘back-office burden’ faced in travel that hundreds of tech businesses have started to hone in on the problem. They offer innovative SaaS packages, solving these technological challenges and easing the operational load faced by travel businesses.
However, it’s typically the larger, more established travel businesses most in need of re-engineering or replacing existing systems that struggle to build business cases strong enough to make upgrades happen.
Newer, smaller companies aren’t held back by burning platforms or old code.
We see this in the travel industry now too, with businesses like TravelPerk raising hundreds of millions of dollars to take on industry incumbents. Newer, smaller companies aren’t held back by burning platforms or old code. A young travel tech startup’s increased agility and lower technical overhead give it a natural advantage over its older, more established competition.
But that’s not the only competitive pressure that larger, more established tech-enabled travel businesses face.
How are travel companies innovating?
In 2022, consumers are confident in their ability to build their own travel packages. There are hundreds of independent, online options for transport, attractions, and accommodation. This choice can make customers tricky (and expensive) to win over. Innovation isn’t simply a competitive advantage in such a competitive environment: it’s a necessity.
Some of the travel businesses we’ve seen recently are exploring user behaviour and using that data to acquire the right customer, for the right cost, by reaching them at the right stage of their buying journey.
The sheer level of competition in the market has led some businesses to constantly refine this approach, reducing friction, allowing for price sensitivity, and customising user experiences.
Travel companies rank significantly higher for Conversion Rate Optimisation (CRO) than other businesses we asses.
In our assessments, tech-enabled travel companies have shown a clear lead in Conversion Rate Optimisation (CRO). Perhaps surprisingly, they even rank significantly higher for CRO than the eCommerce businesses we have examined.
Simplification of the customer support experience is also a key theme, with the industry moving away from traditional approaches such as telephony and email to provide a more dynamic, proactive approach to communication.
Internally, this means providing support staff with the right information at the right time to solve customer issues in an effective and timely manner.
What’s noteworthy is not just how they’re generating new customers. It’s how they’re building products for them.
Overcoming barriers: Innovation in spite of everything else
As we mentioned earlier, it’s not uncommon for travel companies to be saddled with legacy architecture, old technology, and out-of-support software components. Managing that level of technical debt is very difficult, and it can strangle products and overwhelm a business.
One might think this flies in the face of innovation… But the reality is a bit more interesting. Travel businesses simply aren’t letting their legacy technology hold them back. In fact, they’re finding ways to innovate despite their technical debt.
- They have de-coupled their product from their ageing back-office systems, and enabled product-led growth through new features and better customer experience
- They are using insights gained from consumer data and market research to determine what new features to build, and how to make a better customer experience.
Instead of being held back by legacy technology, this approach means travel companies can keep pace with the needs of their customers. This also has a secondary benefit, as it makes incremental changes to technology estates now possible. Greater freedom in product development means large-scale technical overhaul is less urgent, which lowers risk and increases choice.
Companies that create a culture focused on data-led, consumer-centric product development are in the best position. They’re equipped to deliver best-in-class customer experiences, while keeping pace with the needs of internal operational teams.
Changing to a Product-led landscape
We’ve discussed how travel companies are under enormous competitive pressure to find and win customers. We have also explored how they’re innovative in the way they’re manoeuvring around their legacy code and technical debt to adapt their products to suit their customers.
But how are travel companies innovating with their products?
Top travel companies use customer insights and data to build products that suit them. They know more about their customers than ever before. They know where they’re traveling, what they like to do, how much they spend and how often they travel. With such enormous pressure from their competitors, travel companies need to use this information to generate as much revenue from hard-won customers as possible.
Areas where we see product innovation include:
- Dynamic pricing based on conditions including local weather, sports calendars, school holidays and more
- Data models that can identify ‘up-and-coming’ destinations based on spikes in customer activity, informing inventory
- Cross-channel activity tracking, to suggest destinations and trips users might already be interested in
- Links to external platforms such as TripAdvisor, to recommend hotels and points-of-interest as an upsell likely to appeal to their customer
How travel companies are leading the way in innovation
Travel companies have a bad reputation for being “slow and stagnant”, and certainly not innovative. However, reality paints a different picture.
While some companies design new features and hope for a bright future, travel companies are in the midst of change. The best companies are doing everything they can to innovate their way ahead of the competition. They’re taking steps to improve, identify trends, and adapt their systems to make up for lost revenue from disrupted products.
By this criteria, travel companies are much more innovative than most in the market give them credit for: they’re leading the way.
Innovation is not always a matter of the latest industry trend or the snazziest new interface. It’s much more than that. Innovation is calculated, persistent, and most importantly, it’s meaningful to customers.
By this criteria, travel companies are much more innovative than most in the market give them credit for: they’re leading the way.
