In 2017, the travel industry realized a 1-5% growth across all segments. Online bookings increased 5% from 2016. Though the industry seems particularly rosey, margins are getting tighter and tighter as companies fight for customers.


One of the biggest changes in the travel industry since 2000 is the shift from customers booking travel via travel agents to booking online via online agencies like Expedia, new providers like Airbnb, or travel suppliers providing booking direct like airlines or hotel chains. According to a report from the Investor’s Business Daily, the digital transformation has reduced the number of travel agents 56% in the U.S. – once numbered at 124,000 in 2000 to 70,000 in 2014. That number is expected to decrease even more as online travel companies maneuver to attract customers by innovating new product or service offerings.

Investor’s Business Daily states online travel companies Expedia and Priceline accounted for 66% of global online travel bookings last year, up from 55% in 2014. Industry investors expect that number to climb to over 70% by 2020.

The expected increase in online travel booking travel in the U.S. and Canada markets is due to the prolific use of mobile devices, in addition to laptop and desktop computers. Mobile websites and mobile apps are responsible for the tremendous growth in travel related business transactions. Mobile apps geared towards travel have the highest conversion levels - as much as 5 times higher than mobile websites. 85% of non-branded hotel searches for last minute booking (today or tonight) occur on a smartphone. Mobile is NOT the only game in town, however.

Google research highlights how visitors behavior across devices: 94% of leisure travelers switch between devices as they plan or book a trip. And 46% of travelers with smartphones say they make their decision on mobile, but then book on another device.

Further, the number of touch-points being explored has dramatically increased, with travelers skipping across various channels during research for unfiltered reviews and price comparisons.

Kendra Travel Touchpoints

Google’s example above illustrates how the persona Kendra has arrived at a travel decision

This digital transformation presents new challenges and opportunities for independent travel agents, transportation providers and destination hotels and attractions, with the way they engage their customers or prospects. New opportunities abound in the travel space. For instance, Airbnb, the fourth largest online travel booking site in the world, built an innovative platform with no owned inventory.

In the highly competitive travel industry where margins are shrinking, one of the top consideration drivers vacation consumers have within the travel industry is customer service – where technology and the old-fashioned human touch can combine to create a radical point of differentiation that turns a prospect into a brand-loyalist.

This widespread customer perception creates an opportunity not just for pre-packaged vacation travel companies but other travel companies as well. The objective in the new digital landscape is to retain customers and to emphasize delivering consistent service by understanding the customer’s wants and needs and appropriately responding to them in the event that something goes off-course from what they expected on their journey. Companies that figure out their own formula to transform a one-time customer into a repeat loyalist will gain a competitive advantage.

The Nine Factors

Nine primary factors affect how consumers perceive the quality of a service or product. Most are within the control of and managed with the company/brand.

  1. How a customer learns about the product or service
  2. What others say about the product or service
  3. How a customer interprets the value proposition
    1. Saves time, provides a benefit, gives luxury, increases security, provides subsidence, better health, helps society,
  4. How a customer purchases the product or service (for direct to consumer)
  5. How a customer obtains the product or service
  6. How a customer gauges the product or service against the value proposition
  7. How a customer feels about how long the product lasts or attentive the service
  8. How a customer is treated if something goes wrong
  9. How quickly an issue is resolved

Like many industries, delivering exceptional customer service has a direct positive effect on a business’s bottom line. Within the travel industry, close to 40% of business expenses are marketing related. Research shows dramatic cost savings (up to 5 times) in retaining repeat business from existing customers.

Companies looking to squeeze better margins should consider adopting a customer retention model along with their acquisition strategy. For example, improving repeat sales from existing customers by 5%-10% or more for a company with a $10M annual revenue, can generate $500K to $1M in an additional revenue at a greater margin compared to the margin associated with acquiring new customers.

Three Tools for Management

There are three relatively easy ways to manage your customers and prospects, and simultaneously increase your understanding of your customer base to serve them better:

  • Customer Relationship Management (CRM) Tool - Using a CRM to capture and manage your customers and establishing criteria to segment your customers into logical groups for retargeting them with special promos and 1-1 email. Adobe’s 2018 Digital Trend Report research shows the value of a customer-centric approach stating that organizations with ‘a cohesive plan, long-term view and executive support for the future of their customer’ are more than twice as likely as their peers to significantly outperform their competitors (27% vs. 13%).
  • Feedback Loops – Onsite and email surveys (pre-sale, post-sale, post contact, and post travel) provide great insights into your customer’s psychology and behavior. A valuable metric to gauge customer sentiment is Net Promoter Score (NPS) and can benchmark your brand or service at different times of year. According to the 2016 Temkin Experience Ratings, companies that are categorized as ‘experience leaders’ have net promoter scores 22% higher than those rated as ‘experience laggards’, showing that the better the customer experience, the more likely people are to recommend a brand. You can view your NPS here.
  • Test and Learn Program – “Fail fast, fail often” is the mantra of new-age entrepreneurs. Within this mindset, there are ways to introduce new ideas into market via A/B testing with smaller target segments and learn what works and what doesn’t work. This mitigates the risk of failure at scale which is not good for business. Test and learn programs combine learnings from the structure of your CRM segments AND information gathered from feedback surveys that ultimately inform your business decisions about which ideas to prioritize and be brought to market.

Successful customer-centric companies have learned that gathering feedback from its customers at ALL stages of the journey enables them to identify negative interactions – especially those that may occur early in the customer lifecycle.

By soliciting feedback from your customers your company demonstrates a willingness to listen and respond to your customers on an individual level. If your organization learns about a recurring issue or problem, not only can you tailor a response to the customer who alerted the company and resolve it in a timely manner, but you can fix the issue to mitigate future problems other customers may encounter in the future – and developing and testing new ideas with smaller segments.

While the feeding frenzy in online travel continues to swarm around deals and deal-making, customers still expect great customer experiences and to feel valued throughout their interactions with your brand. How your company responds to them will bring them back again and again, or push them far, far away.

SMITH and our partners use state-of-the-art technology to advance your buying and selling experience, whether you’re a B2B distributor using .csv files as order form inputs into an ancient home-grown software, a B2C travel provider looking for an innovative edge in the travel space, or creating more meaningful relationships with your existing customers.

And while we can’t guarantee that our 8-week Discovery engagements will cause your stock to breach $1,000 per share or make your company’s founder the richest person on the planet, we’re still excited for the challenge. If you lie awake at night thinking about improving bookings or margins, give us a call. We’ll help you find ways to be more profitable.



Tags: ecommerce, Experience Design, Digital transformation, Online Booking, Strategy and Intelligence, travel industry