October 2018, Las Vegas
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Why travel companies need to stop the blame game and focus
The lesson from travel conferences throughout 2017, was that more can be done to improve both the travel experience and individual travel company success, writes Tom Bacon
Chatbots, artificial intelligence, virtual assistants, new approaches to customer engagement, innovative forecasting techniques, total revenue management…
If what we heard at travel conferences throughout 2017 is the measure, then there is so much that can further improve both the travel experience and individual travel company success. But, repeatedly, consistently, relatively few of participants on the conference trail actually seem to exploit any of these new approaches.
Citing ‘total revenue management’ as one example, Paul Murray, the head of hospitality at tech firm Revenue Analytics made this point at this year’s Las Vegas Summit. According to Murray, a survey of hotel RM managers in 2010 predicted that ‘total revenue management’ would be the next opportunity. And yet, a survey of the same population in 2016 offered the same prediction six years later. Clearly, we know what we need to do, but we aren’t doing it!
5 things to blame
There are, of course, many easy excuses for not adopting new ways of doing business. Murray cited five things that are often blamed:
1. Technology: Many airlines face challenges with legacy systems that don’t lend themselves well to new technological solutions. In fact, the complexity of existing systems makes add-ons costly, time-consuming and, at times, risky. Some younger airlines actually have an advantage in adopting new systems given their more modern platforms.
2. Vendors: Most hotels and airlines rely heavily on technology vendors who in turn may be slow to adapt. With respect to ‘total revenue management’, for example, legacy reservations systems, revenue accounting and revenue management systems -- may all be outsourced and, unfortunately, vendors too are often slow to adopt new ways to do business.
3. People: As with any change, people represent an impediment. Murray pointed to the need to include all functions in developing any new approach and to listen to all concerns. At one airline, major new initiatives assigned a cross-functional team of experts – including experienced and respected front-line employees in each area – responsibility for addressing concerns and overall project implementation.
4. Investment: Obviously, the ideal approach is to start small, pick the low-hanging fruit, and deliver quick results. Large-scale projects encompassing multiple systems and impacting dozens of functions require tremendous investment and time – and thus, extraordinary risk.
5. Executives: Visionary leaders are critical to the success of any such change.
In a sense, all five issues are part of a bigger issue – focus. Here is a hypothetical scenario that often plays out.
One forward-thinking senior airline RM executive is quick to condemn existing RM techniques but is, at the same time, also slow to adopt change. Although he proclaims: “Current RM is obsolete,” rather than leading the industry in new, more modern, personalised and customer-friendly revenue management techniques, his airline is focused on more basic, more immediate concerns.
He continues to face more mundane issues like clean data inputs, easy access to the system for all users, robust forecasting, more transparent model optimisation and analyst intervention, and ongoing analyst recruiting and training. His airline operates a mega-hub with a 1000+ origins & destinations; it is growing into new cities and regions; competition is changing across its diverse markets, and there is constant pressure to meet aggressive revenue targets. Arguably, it’s not just a resource issue – more heads or a bigger budget would still not produce the desired results if he needs to continue to use his tremendous experience, expertise and creativity to just meet his monthly targets.
Another large impediment with many new technologies is lack of fully understanding the payoff. If your competitors haven’t adopted it yet, why should you? Total revenue management, for example, sounds logical but, in practice, will it really produce more revenue?
Two things to focus on
1. Dedicate resources: Whether it’s a distinct team without the requirement of meeting monthly revenue goals or just a dedicated afternoon each week, there should be discipline around exploring and implementing any new approach.
2. Start with the data: Total revenue management – and most other new technologies – relies heavily on new data. Begin collecting the data necessary for total revenue management – so you are prepared if the industry settles on a standard approach or so that you can better understand the value of pursuing the new way. Once you begin collecting the data, too, you may begin to learn how to best use the data to produce improved performance.
There are tremendous opportunities to exploit new technologies in the airline and hotel industry. ‘Total revenue management’, as an example, will likely add revenue to firms in both industries. Travel suppliers need to begin to move on potential new technologies – successfully pushing through the many impediments to change. Dedicating some resource to such change and beginning by collecting the required data is a first step to positioning a travel supplier for change in 2018.
Tom Bacon has been in the business for 25 years, as an airline veteran and industry consultant in revenue optimisation. He leads audit teams for airline commercial activities including revenue management, scheduling and fleet planning. Email Tom or visit his website