Artificial Intelligence (AI) is already changing the way we live and work, and as the technology evolves it promises to bring disruption to virtually every industry – including the travel industry. From chatbots to travel clubs, AI has the opportunity to make every aspect of trip planning and execution frictionless – from researching to booking, and even experiencing destinations.
What is really boils down to, though, is personalization. When data empowers a travel company to make recommendations and even make actions before a customer even has to ask (or search), that’s when AI fulfills its destiny.
Game-changing AI technology promises to not only make existing workflows easier but it also opens up a potentially new competitive landscape in the travel industry. According to recent research from L.E.K. Consulting, the travel industry is ripe for major change arising from the use of artificial intelligence, which will both open up opportunities and create challenges for travel companies in all areas of the industry – from budget to luxury brands. Those who survive and thrive this impending technology shift will be paying attention to these three takeaways identified by L.E.K.
1. Middle Tier Travel Companies Benefit Most AI
In what it calls the “Goldilocks effect,” L.E.K. predicts that middle tier travel companies will get the most benefit from implementing AI, making those companies more competitive with luxury brands that already put a premium on personalization, and also luring budget travelers who may want to upgrade for the increased value of personalized service.
Let’s examine this… Budget travel companies will always sell on price and will limit their offerings in order to get the best price for customers. But the question posed by this recent research is, will budget customers be satisfied with the status quo, or will they be tempted to enter the middle tier with the lure of more tailored and personalized services? Some travelers will no doubt continue to create DIY itineraries for the best value, but others will likely pay a little bit more to have a more customized travel experience.
On the other end, can the luxury market continue to justify its heftier price point if middle-tier companies can provide a similar level of personalization? At present, the luxury market is poised for a large amount of growth. A recent report from Analytical Research Cognizance predicts that the market will grow to $8,460 million U.S. by 2024. The fastest growth area is in customized and private vacation aimed at culinary and shopping – areas that require detailed data about the customer in order to sell. If middle-tier companies can provide the right customized experiences, they have the potential to steal market share from the luxury market, unless the luxury market rises to the challenge and finds another way to differentiate themselves.
2. AI Allows Data-Driven Personalized Experiences
The second disrupter predicted by L.E.K. is “the Netflix effect,” which says that companies with the best data collection technologies will become the industry leaders. Like Netflix, Amazon, and Google have done in other spaces, companies that are able to employ artificial intelligence to collect, aggregate and use data to create highly personalized experiences will gain market share because of the value provided. That market share will create more customers, which produces more data, and the “virtuous cycle” continues.
OTAs often already have an advantage in the race for data with access to the complete customer journey – and good reason for customers to give data willingly. Companies, including Google, have readily acknowledged that customers are open to giving out their information when it benefits them. Google’s Oliver Heckmann, VP of engineering for travel and shopping said, “People don’t just want faster access to information—they want better, more personalized experiences,”, adding that nearly 60% of consumers believe that their travel experience should deploy the use of AI and base their search results on past behaviors and/or personal preferences.
3. Travel-As-A-Service Scaled Using AI
Finally, L.E.K. predicts growth in “travel-as-a-service” with room for smaller players to gain market share with travel clubs and subscriptions. Once again, the keyword is customization. Travel companies that can use AI to accurately predict and sell consumers on experiences that are perfect for them can win market share from bigger players. These types of services cater to the DIFM (“do it for me”) market who want to skip the planning and go straight to the trip. In this way, travel companies will come full circle from the roots of the industry, fulfilling the role that traditional travel agents played in years past, but scaling it using AI.
One startup is already tapping into this market. BRB (BeRightBack) is a London-based service that sells a monthly, reasonable priced subscription (starting at around £50 GBP per month) and provides three times yearly (or more) surprise vacations based on the consumer’s stated preferences. The idea is that the consumer provides enough information, such as preferred airports, their travel dates, and other preferences so the company will be able to book the right vacation for each customer. To date, the service, currently only available in the UK, has already signed up 13,000 travelers.
These three predictions illustrate the wide-ranging changes that artificial intelligence might have in the travel industry. AI is not just about enhancing the customer experience – it’s a game-changer for how travel companies attract, sell, and service their customers. Travel companies open to the promise of AI will be able to navigate the change and be better positioned in the new competitive landscape.