Consolidation and convergence: The internet’s impact on travel. TravelMole guest comment by Alex Christou, partner, Accenture transportation and travel services

Monday, 08 Jul, 2005 0

At one time, disintermediation was expected to cut third parties out of travel and allow consumers to go directly to suppliers through the internet.

While there have been major changes to both the travel industry and consumer behaviour because of the Internet, disintermediation has not come to pass. Two trends that have come about are consolidation and convergence.

Instead of a pure marketplace where thousands of sites compete for consumers’ business, the market is consolidating into a smaller number of powerful sites with strong market share and brand strength. C

onsumers’ desire for trusted brands on the high street have transferred online and they now seek trustworthy and convenient ‘shops’ on the internet. There are a number of well-known retail sites where it is possible to find books, music or groceries cheaper online.

Many people trust these sites to have good product, pricing, shipping policies and security which has helped them become favourites for online shoppers. In travel, consolidation has weeded out poor performers and niche sites leaving more powerful, trusted brands as the top choices for each market.

The other trend is convergence. Leading airline companies recognise that they can also sell hotel rooms, rental cars, insurance and foreign exchange. Convergence is the move to be the one-stop-shop holiday and business travel provider.

In addition to the obvious convergence consumers see online, there has been convergence between direct providers and traditional travel agents and tour operators.

If an airline company can team up with hotels and rental car companies to fulfil all of a traveller’s needs and offer them pricing or options they couldn’t get on their own, they can build a brand that’s trusted and valuable. So traditional airlines, low cost carriers, hoteliers and tour operators are converging into a similar space, all vying for ownership of the customer.

What does this mean for business and for consumers? Besides creating new business models, the Internet allows travel companies to place the customer at the centre of business instead of having a transaction at the centre.

The Internet allows an operator to serve customers better not only because they know their needs but also because they can track service and be more consistent in the delivery of it.

As consolidation and convergence continues, the leaders will be those that truly integrate channels for the ease and potential loyalty of the customer. The death of bricks and mortar stores was greatly exaggerated but it gave birth to a multi-channel consumer who wants to go online to make changes to a flight booked through a call centre or a store.

While the danger of disintermediation has waned, the danger of not meeting consumers’ more demanding needs is still real.

Each travel company has to work to accommodate customers – online, on the phone or on high street but always at the right price and quality level – or it leaves the door open for another brand to do it.