Research Insights Travel 2.0 Confronts the Establishment

Travel 2.0 Confronts the Establishment

June 2006
Ram Badrinathan

Travel 2.0 Confronts the Establishment

My daughter is in college. My son is a year away. When I entered this industry (travel, tourism and hospitality), my children were in diapers. The online travel marketplace was in diapers, too. Everyone was trying to create something more than a zero billion-dollar industry.

I have traveled a long road since those early days, scrutinizing the travel distribution marketplace at every turn, braving many a metaphoric rotten tomato en route. Since its founding in 1994, Phocuswright has tracked, analyzed and opined on the strategic center of the world's largest industry. So I often reflect from a rare and experienced perspective on how much has changed and how much will.

Current marketplace activity represents the most exciting time that I have witnessed since the first online travel wave hit. It's pregnant with potential. One reason is that travel distribution evolution is inextricably linked with the fantastic advancements in software and Web applications. Another is that we are reaching a tipping point where 50% of all U.S. travel will be booked online and international growth is explosive. My favorite thing underway is the many new entrants challenging the very 1.0 companies who themselves challenged the status quo a generation ago.

Ushering in Travel 2.0
At last year's Phocuswright Executive Conference in Orlando, many entrepreneurs were replaced with lawyers, bankers and executives from bigger businesses. Controversial talk was muted. Was that a sign of the times? Yes indeed.

In fact, last November we witnessed Travel 1.0's swan song. You heard it here first. We've officially entered the era of Travel 2.0. It's a positive, advancing force holding great promise for our industry.

Travel 1.0 started around 1995; it was characterized by the shift from offline to online reservations and was dominated for a decade by three things: price, price and price. Name your price, find the lowest price, price guarantees, 24 hours a day, 7 days a week. Price drove online adoption in historic proportions. While price will always be important, several factors have come together to challenge its influence, pushing us in a new direction that Phocuswright coined "Travel 2.0."

Travel 2.0, our industry's collective fulfillment of Web 2.0, embodies how companies can differentiate themselves in a vast, dynamic space. It is unleashing the power of the Internet and enabling many ballyhooed possibilities to be realized. New travel researching and planning approaches are empowering consumers in unprecedented ways. As was the case with Travel 1.0, this phenomenon is not entirely about technology; rather, 2.0 is focused on solving big problems for all types of travel customers by exploiting the latest advancements.

Travelers are keen to take control and find/create the perfect trip, not just the cheapest trip. Here's a sampling of Travel 2.0 at work:
  • Social travel's surge takes networking and CRM to new levels
  • Personalized user-generated editorial profoundly impacts purchasing behavior
  • Reaching customers "beyond the browser" opens opportunities
  • Mapping, mash-ups and tagging resonate with travel buyers
  • Grass root adoption of real-time collaborative tools like wikis, blogs, bots and gadgets
  • Metasearch scorned by many while heralded by others won't go away
  • Vertical search embeds travel features and profiling to attract more qualified eyeballs
  • RSS comes of age and influences travel distribution
  • Customer experiences online are significantly improved by RIA-based (Ajax, Flex) applications
  • Hungry for electronic snacking?

You can't miss the increased focus on community with companies fast climbing aboard the social search bandwagon. It's no longer about getting visitors to your site to network with each other but about harnessing that power with search. You may not frequent these new sites, some of which have catapulted into the elite tier of 10-most trafficked, but you must understand why their popularity has soared so you can hone your strategy.

Travel 2.0 Confronts the Establishment
The potential impact of Travel 2.0 on global travel distribution is so significant that we have dedicated a significant portion of our research and consulting work to helping clients understand and exploit Travel 2.0. Come November 13-15, The Phocuswright Executive Conference (now in its 13th year) will cast a Hollywood-style spotlight on the world's largest industry with its theme being "Travel 2.0 Confronts the Establishment."

"Who is the establishment?" a long-time client recently asked, "Suppliers? OTAs? Legacies?"

"Not necessarily... it's subjective by design," I explained, "but any travel company, no matter its size, bank balance or position in the industry's value chain is eligible. Industry players will form their own definitions of 'establishment' and so will consumers."

Some courageous Travel 1.0 companies are already forging ahead with 2.0. Start-ups founded around 2.0 principles are advancing with vigor because they have no baggage. Yet some Travel 1.0 pioneers are ironically reticent toward 2.0. And plenty of 1.0 laggards are putting on the 2.0 breaks.

The private equity world is awash in capital after back-to-back banner fundraising years. And while some pundits believe venture capital is too risky (except for the biggies), there is still plenty of money to fuel a new generation of start-ups and makeovers. Whether they falter, merge, are acquired, absorbed or go public, leisure and business travelers are destined to be beneficiaries.

Expectations are Enormous
Fresh ideas and incredible energy are flooding our industry now. Travel 1.0 strategy doesn't work in a Travel 2.0 marketplace. There's no better time or place to seriously assess your spectrum of opportunity than right now.

Philip C. Wolf is president and CEO of Phocuswright Inc., an independent travel, tourism and hospitality research firm specializing in research, consulting and events.