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Articles > The FinLab Expands Accelerator Programme to the Travel Industry

The FinLab Expands Accelerator Programme to the Travel Industry

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By Gladys Ng Kai Xin, Associate at The FinLab 

 

To book a flight in the 1980s, you’d have to call up an airline, visit a travel agent or head to the airport to buy your tickets. In today’s digital age, where trips can be confirmed with a few taps of the finger, this process is hard to imagine. Thanks to technological advances, travel is more accessible, affordable and convenient than ever before.

The travel industry has been at the forefront of digital transformation, and will only intensify in time to come. According to the World Economic Forum’s Digital Transformation Initiative, from 2016 to 2025, digitalisation in travel, aviation and tourism is slated to create up to US$305 billion in value through increased profitability. It will also migrate US$100 billion of value from traditional players to new competitors, and generate US$700 billion in benefits through cost and time savings, improved safety, and reduced environmental footprint.

Digitalisation is here to stay, and it will only become more complex. How has this affected traditional players like travel agencies, and what do they need to do to retain their market share?

 

Disruptions faced by travel agencies

Travel agencies have long been hallmarks of the travel industry, but that is changing in today’s digital age. Technological advances have significantly lowered barriers to entry, fuelling the emergence of digital travel platforms. This, coupled with increasing portability and consumers’ desire for convenience, has made the platforms immensely popular. Today, millions of travelers bypass travel agencies to book accommodation on sharing platforms like Airbnb and Trivago, and airfares on like Skyscanner, Zuji and Expedia.

 

Source: PCMag

 

There are hence doubts about the future of travel agencies. In 2014, the US Bureau of Labour Statistics reported a fall in the number of US travel agencies from 132,000 in 1990 to 74,000 in 2014, and predicted a further decrease of 12% by 2024. In Singapore, closures of travel agencies have risen year after year since 2011. In the first six months of 2015, the number of closures surpassed entrants. In both countries, many of these travel agencies have failed to develop strategies to grow and thrive in an increasingly competitive tourism landscape.

More travel agencies have been forced out of business, as travelers go online to book their trips. Image Source: TODAY, 11 June 2015

 

 

Yet despite being termed as endangered species, the need for travel agencies should not be underestimated. Travelers continue to visit travel agencies for less explored destinations, specialised services, and unique experiences that self-service platforms cannot provide. Data from Zuji Singapore in 2017 showed that about 70% of travelers in Singapore still book their holidays through offline platforms like travel agencies and trade shows.

Travel agencies that view the digital revolution as an opportunity to innovate and equip themselves with relevant ‘tools of the trade’ – and communicate their value in the segments still relevant to them – will survive. A case in point is Thomas Cook, one of the UK’s largest tour operators. After years of financial troubles, Thomas Cook started to close unprofitable outlets, and shifted towards selling and customising travel deals online. It soon returned to profit in 2015, for the first time in 5 years.

 

Embracing the vacations of tomorrow

The answer is clear: travel agencies need to embrace digital, innovate product offerings and remodel their businesses to remain relevant. Here are a few ways in which they can do so:

Focus on personalisation. Personalised travel is a growing trend, as more customers now seek tailored ‘experiences’, be it an hour dancing tango with locals in Argentina, or a sushi-making workshop in Japan. Travel agencies have always leveraged on personal service as a unique selling point, and are hence well-positioned to meet the increased demand in personalised trips. To do so more effectively, travel agencies should use digital tools to deliver enhanced customer experiences, especially the personalised ones.

Jump on social. Social platforms like Facebook, Instagram and Snapchat have drastically changed our travel behaviours. With 97% of millennials reviewing and posting about their travel experiences on social platforms, the Internet now serves as a hive of highly accessible and influential content for travelers. Hence, travel agencies should actively utilise social media and user-generated content to interact with customers, and create relationships that endure even after customers have returned from their trips.

Go mobile. Today, travelers increasingly live, work and play on their mobile devices. Mobile travel sales have witnessed phenomenal growth, from 2% of total travel sales in 2012 to 12% in 2015. By 2021, mobile will account for nearly 50% of online travel sales. Travel agencies should thus optimise for mobile: concentrate on ease of use, ensure mobile compatibility of websites and improve page loading speeds. Going mobile also allows travel agencies to provide tailored experiences, for mobile applications can push out content based on the point travelers are at in their journeys.

Recognising the benefits of going digital, governmental support for digitalisation in travel agencies has intensified in recent years. Launched in 2015, the Singapore Tourism Board’s Business Improvement Fund seeks to encourage technology innovation and adoption amongst travel agencies, so as to improve their productivity and competitiveness.

 

The way forward

As travel agencies look towards digitalisation to remain competitive, there is growing interest to collaborate with technology companies. Demand is huge for travel tech solutions; since 2013, travel tech startups from booking platforms to virtual tour guides have raised over US$10 billion across 1,000+ deals. Yet, travel agencies are looking for tech solutions to not only develop new product offerings, but also strengthen internal processes and improve efficiencies. Tech companies keen to sell to travel agencies may seize such opportunities – and more.

The FinLab is well-positioned to foster collaborations between travel agencies and tech companies. We are a joint venture between United Overseas Bank and SGInnovate, and is Singapore’s first corporate FinTech and SME accelerator. Through our mentor networks, as well as our expertise and experience in business model innovation, solutions implementation and business expansion, we provide companies in our programme with valuable insights and connections into the ASEAN region. In so doing, these companies can then scale and grow their businesses more effectively.

Click here to read how our Travel Agencies from The FinLab’s 2018 Programme are banding together during COVID-19.

 

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