2008 – A look in the rear view mirror

Warren Buffett, one of the richest and most successful businessmen in the world, said: “In the business world, the rearview mirror is always clearer than the windshield.” In other words, it is easy to look back on the past, but not so easy to predict the future. If we look back in the rearview mirror at the travel industry over the past year, it is clear that there has been dramatic change.

This time last year, things were enormously different. Analysts were talking about rising customer demand for travel, and a positive outlook for growth across the travel sector – particularly in the Asia-Pacific region where strong economic growth was driving the development of corporate travel and tourism markets.

Airlines were rushing to meet the IATA deadline for 100% e-ticketing. The buzzwords of the industry were web 2.0 and social networking, and industry experts were debating whether engaging customers directly on social networks would have positive or detrimental effects.

Fast-forward 12 months and it’s a very different landscape. The credit crisis that has been brewing in the United States peaked and quickly spilt across borders to cause a global economic meltdown.

Travel writers and pundits, who just months ago had been predicting continued expansion of the industry, are now reporting slowing passenger traffic across the globe. Airports that were previously worried about lack of capacity are now concerned about emptying halls. Corporations are urgently cutting budgets, including travel costs, while airlines are decreasing capacity and flights to deal with the shortfall.

Meanwhile, the paper air ticket is a dinosaur of the past (do you even remember what one looks like?). What was termed ‘new media’ (i.e. web 2.0 and blogging) is now old news, and engaging customers through social networks is arguably a norm across all business sectors.

And mobile devices that combine multiple functions such as communication, information, entertainment and commerce are increasingly commonplace.

It’s certainly been a dynamic, if not an unpredictable year. Now as we leave 2008 to enter an uncertain 2009, looking through a windshield that is not so clear, it’s a fitting time to review the road we have travelled, in order to navigate the twists and turns of the coming year.

Partnerships

In good and bad times, the key to survival and staying competitive is responding and adapting to change. This is particularly true for the global airline industry, which according to IATA chief Giovanni Bisignani, has hitherto been fragmented and suffering from over-capacity.

This, together with volatile oil prices and fluctuating demand, has resulted in increasing consolidation and cooperation, with airlines initiating takeovers, forming partnerships and interlining agreements. Many airlines are also forming closer alliances, such as the Star Alliance.

This has enabled the sharing of technologies, such as the Star Alliance Common Information Technology Platform (CITP), which provides Star Alliance members with the benefit of a shared technology platform.

At the same time, more airlines are recognising that they need to be using international-standard technologies and processes. As a result, it’s interesting that despite the general economic gloom, airline investment in solutions from external expert partners is at a high level.

Travel agents are also transforming themselves, in order to ensure they remain relevant to travellers who now have the option of online booking. Agents are becoming more retail orientated, and using new technologies from IT partners to streamline their business and offer new services.

Technology Convergence

Most of us could no longer imagine life without Internet. Web-based services are now an expected option for travellers to book and research travel.

Technology providers have continued to develop new ways to bundle multiple technologies in 2008, to engage consumers in a more personalised manner.

A key example of this has been Web 2.0, which is now a commonplace functionality that allows consumers to generate online content. This has exploded in the travel industry where traveller reviews are now a common part of researching travel options online. During 2008, experts have started hypothesising about the rise of Web 3.0, and what that might mean for the future.

But today, it is the mobile device that is at the centre of technology innovation. The increasingly IT-savvy consumer and business user places a premium on convenience, and smartphone sales are growing rapidly.

The travel industry has not escaped this trend, and travel operators, especially corporate travel managers, are racing to find ways to deliver products and services to travellers via their iPhones and other smartphone devices.

Amadeus recently conducted a study, entitled ‘Upwardly Mobile’ with the Association of Corporate Travel Executives (ACTE), which revealed that the corporate community are increasingly recognising the benefits of mobile technology in terms of productivity, flexibility, and employee welfare.

To date, we’ve not seen widespread adoption of mobile technologies, but as is the case with any technology adoption process, it’s just a matter of time before the mobile device becomes the key component in business and consumer travel.

This is especially so in Asia Pacific, where mobile adoption is very high in markets such as China, India, Indonesia, Japan and Korea. Travel operators in this region thus need to keep up, by finding new ways to connect to customers via their mobile phones or PDAs to make travel more convenient.

The road ahead

The downturn in the global economy is an excellent example of the many uncontrollable, volatile elements that influence the ebb and flow of the travel industry cycle. There have been major setbacks in Asia before – the Bali bombings, the SARS outbreak, and the 1997 Asian Financial Crisis.

Each time, the travel sector was scalded but emerged undefeated. In fact, these incidents have taught the travel industry to be adaptable and resilient in order to survive.

The fact is, travel remains a necessity of life. With globalisation of business and more people migrating overseas, travel is essential. Travel demand will eventually pick up again as it has after downturns in the past.

We can make shrewd guesses, but no one knows for certain what the next year will bring. Perhaps this time in 2009 the economy may have worsened, or the outlook could be very positive. In fact, the only constant in the travel industry is change.

In the coming year, the travel industry will need to make wise, strategic moves to strengthen revenue management and streamline processes, whilst finding new means to access traveller markets, enhance the traveller experience, and build customer loyalty.

Most importantly, the industry must be open to change. This may mean re-defining the way that things are done or offering travellers something totally new, but all players must be prepared to change in order to adapt to a new environment.

This is when technology from a partner like Amadeus is needed more than ever as a driver of innovation. A technology partner is vital to support a company through good and challenging times, to advise on what solutions can produce real value and address a company’s specific needs. Our focus is fixed on the future, and how we can propel the travel industry forward and sustain its growth as economic recovery takes hold.

In this new year, we look forward to strengthening our relationships with all our customers to provide them ever-more customised and targeted services, leveraging on our global expertise and solutions to help them through the economic uncertainty, take maximum advantage of opportunities and minimize damage caused by challenges. In this way, the travel industry can be poised to move in whatever direction is needed, when the road ahead becomes clearer.

This article was previously published in The Business Times