T H E F U T U R E O F A I R T R AV E L : IMPROVED PERSONALISATION AND PROFITS THROUGH THE INTEGRATED USE OF CUSTOMER DATA WHITEPAPER Published by Sabre Airline Solutions® and written by The Economist Intelligence Unit [THE FUTURE OF AIR TRAVEL [ CONTENTS Introduction Poor customer experiences erode loyalty Improving the customer experience: Available and cost-effective solutions Solution 1: Using existing technologies to personalise travel Solution 2: Building on best practices from other industries Solution 3: Wielding the wealth of data that travellers provide Addressing the pain points in the traveller’s journey 11 Improving booking 11 Improving the airport experience 13 Improving the in-flight experience 16 Capturing more of the value chain 20 Full-trip customer care and the power to address externalities 20 The competitive landscape 24 Conclusion 28 About the research: An Economist Intelligence Unit (EIU) customer and executive survey To gain greater insight into changes and innovations that could usher in this new era for travellers, The EIU conducted parallel surveys of 100 airline executives and 810 air travel customers in August and September of 2013 Half of the executives hold C-level positions, with the rest being SVPs, VPs or directors The regions of North America, Asia-Pacific and Europe are equally represented with 30% each, while Latin America, the Middle East and Africa make up the remaining 10% of responses About one-third of the companies represented in the survey report US$1bn or less in annual global revenue, while 29% boast revenue of US$5bn or more Participants in the consumer survey were screened to include only individuals over 20 years of age who had travelled by air in the previous 12 months; the gender balance was near-equal (53% male and 47% female), with respondents spread across 18 different countries In an effort to better understand the issues facing airlines today, The EIU also conducted in-depth interviews with 16 industry leaders and observers We’d like to take this opportunity to thank all those who shared their time and insights [THE FUTURE OF AIR TRAVEL [ Introduction In the coming decade, airlines will have the opportunity to transform themselves from commoditised providers of transportation to full-trip coordinators that interact in an integral, more profitable way with travellers during every step of their journeys Existing technologies such as in-flight Wi-Fi, mobile devices and social media can help the industry improve the customer experience at a manageable cost Moreover, by adapting customer information management strategies from other industries, airlines can empower passengers by personalising air travel, making it pleasurable once again By exchanging information with their customers in a more consistent and intuitive manner, airlines will be able to understand and actively respond to their customers’ needs and desires To so, airlines will have to improve the customer experience, revive brand loyalty and undo the effects of years of cost-cutting By adapting best practices developed by or refined in other industries and making the best use of existing technologies and the wealth of data travellers provide, airlines will be able to improve their return on investment (ROI), reduce costs and give customers more of what they expect of the total experience As airlines master these approaches, they will also be positioning themselves to vie for the role of full-trip coordinator — taking passengers from the booking process to and through the airport experience, on to the flight itself and beyond Online travel agencies (OTAs) and the hospitality industry, as well as Big Data companies, such as Google, are already displaying an interest in this potentially lucrative role The Economist Intelligence Unit surveyed more than 100 airline executives and 800 passengers, as well as conducted in-depth interviews with 16 industry leaders and observers, in an effort to better understand the issues Research has confirmed that customers want a more personalised and satisfying experience and that airline executives want more sustainable profit margins Fortunately, these goals can be attained together As this contest intensifies, the winners will be able to substantially improve the travellers’ experience — and be paid for it Airlines slow to adapt risk being reduced to commodity suppliers and, therefore, to be mere links in a chain over which they have little control The strategies outlined in this paper will help the airline industry respond to the heightened competition for domination of the travel value chain IMPROVED PERSONALISATION AND PROFITS THROUGH THE INTEGRATED USE OF CUSTOMER DATA [THE FUTURE OF AIR TRAVEL [ Poor customer experiences erode loyalty Airlines currently operate under fierce cost pressures Deregulation removed a variety of supports and protections for the traditional network carriers, and several waves of nimble, clean-slate, low-cost airlines — unburdened by retiree pension obligations, older equipment or outdated systems — have changed the industry’s operating standards Additionally, airlines are hit regularly, but unpredictably, by a variety of disruptions — in the weather, in energy markets, in political or security situations — thus making planning difficult or impossible Most critically, brand loyalty has declined Passengers used to clearly understand the differences between and nuances among airlines and often preferred flying with one over another However, cost-cutting has made air travel and what amenities remain feel generic, if not austere or virtually nonexistent Travellers have issues with every segment of the experience: booking flights, getting to and from airports and traversing the airports, as well as the actual experience of flying When customers are asked what improvements in their overall air travel experience they would most like to see, spending less time in the airport (78%) topped the list, followed by having a more enjoyable experience in the airport and improving on-time performance (both at 74%) [Exhibit 1] Unable to control many variables, airlines have focused on not merely holding down costs, but on paring back as many costs as possible Cost-cutting — which used to be a discrete, periodic process of reviewing and optimising systems — has become a continuous process that, in the short term, has proven effective: costs have come down The unintended consequences have included a reduced focus on issues that passengers care about and that cause concern when left unaddressed 2% Less time in airport Exhibit Preferred improvements in air travel experience over the next 10 years 53% 25% 17% 1% More enjoyable experience in flight 38% 36% 20% 5% Improved on-time performance 37% 37% 21% 4% Improved baggage handling 36% 32% 23% 6% 23% 5% Streamlined search and booking systems that operate industrywide 1% 3% 1% 1% 1% 2% 1% 2% 36% 32% 0% 10% 20% 30% 40% 50% 60% 70% 80% Very strong preference Somewhat strong preference Moderate preference Somewhat weak preference Very weak preference Don’t know 90% 2% 100% Note: Asked of consumers IMPROVED PERSONALISATION AND PROFITS THROUGH THE INTEGRATED USE OF CUSTOMER DATA [THE FUTURE OF AIR TRAVEL [ For airline executives surveyed, however, the customer experience comes in third on their priority list (40%), behind building customer loyalty (49%), while cost reduction remains on top (57%) by a wide margin [Exhibit 2] Reducing operating costs Exhibit Top strategic priorities over the next 10 years 57% Building customer loyalty 49% Improving the customer experience Increasing passenger revenue per seat-mile/kilometre (PRASM/K) Developing/strengthen partnership strategies Gaining market share This is good news for the flying public: for some carriers, the focus may now be shifting from costs to customer experience It can be good news for the industry as well Having been broadly successful in reducing costs, airlines can now turn to rebuilding one of their most important, if recently neglected, assets: a core of loyal customers 40% Three broad areas offer a wealth of underleveraged tools to achieve this goal: 34% 34% 33% Note: Asked of airline executives Respondents were asked to select up to three Surprisingly, the goal of increasing revenues comes in fourth place at 34%, indicating that airlines have reduced their focus on this priority by adopting the low-cost carriers’ pay-for-what-you-use approach to maximise passenger revenue per seat mile • • • Technologies that are already available can be used to better personalise air travel, from before customers book through post-trip feedback Best practices in hospitality, logistics and gaming offer powerful road maps for improving the customer experience, thus boosting loyalty and increasing repeat business The abundance of data available to airlines — about both their own operations and about their customers — can be used to provide travellers with more information on which to base decisions, while also allowing airlines to better understand and, thus, offer more of what customers want IMPROVED PERSONALIZATION AND PROFITS THROUGH THE INTEGRATED USE OF CUSTOMER DATA [THE FUTURE OF AIR TRAVEL [ Improving the customer experience: Available and cost-effective solutions Solution Using existing technologies to personalise travel Technology can yield unexpected savings Carriers are understandably reluctant to invest money and resources in unproven technologies Adopting (and possibly adapting) a new technology and testing it can be arduous, complicated, costly and time-consuming Making in-flight Web access a standard feature instead of a frill often provides demonstrable operational savings Such access can also open up new onboard revenue-generation opportunities — from premiums for special content to profit sharing across e-commerce partnerships Airlines can sidestep these problems by turning to technologies that have already been tested, refined and accepted As airlines welcome Wi-Fi, notebooks, tablet computers and other mobile devices on-board, air travellers are no longer in-flight Internet exiles Moreover, keeping current with how customers communicate — Web, text, Facebook, Twitter, etc — allows carriers to stay connected to them from booking through their arrival home “We firmly believe that giving people access to in-flight entertainment when they’re captive for an hour or two will make us a fortune,” says Michael O’Leary, Ryanair’s chief executive officer “But we don’t want to spend a fortune to make a fortune.” As a European airline, Ryanair pays higher access costs than US or other international carriers and will take longer to see a return on its investment The biggest game changer is Wi-Fi — a crucial gateway People assume they will always have Web access to modify and personalise their environments; thus, making in-flight access the norm instead of the exception opens up tremendous possibilities for both productivity and entertainment After the initial investment, Wi-Fi can be provided at a relatively low ongoing cost Newer technologies, tablets, for example, can add revenue in unexpected ways and even help airlines save on fuel In 2012, Qantas began distributing iPads to passengers to enable streaming of on-demand content on its older Boeing 767 fleet; this was less expensive than rewiring the cabin Once Qantas had all the obsolete wiring and racking removed, the airline saw a measurable drop in fuel consumption, according to Alison Webster, executive manager of international customer experience for Qantas Putting communications, entertainment and productivity devices literally back in the customer’s hands is one of the most powerful and efficient ways to personalise a trip China Airlines’ Hsiao-Hsing Tung, vice president for corporate development, points to the “dual-use benefits” of making Web-connected tablet computers standard equipment for cabin crew Tablets can help cabin crew recognise most-valued customers and pay special attention to them The crew can also use them to reduce repair time on the tarmac by requesting spare parts for a broken seat, for example, during a flight IMPROVED PERSONALISATION AND PROFITS THROUGH THE INTEGRATED USE OF CUSTOMER DATA [THE FUTURE OF AIR TRAVEL [ “Twitter is here today But what about WhatsApp? BBM? We have to go where the customer is.” – Glenn Morgan, head of service transformation at British Airways   Joachim Schneider, Lufthansa’s vice president of product management, explains how his airline uses social media to respond quickly to passenger problems: should a customer post to Facebook from a taxi, warning that he will be late, Lufthansa will proactively rebook his flight The airline thus becomes the solution rather than the problem Leveraging social media Airlines can make additional gains by making better use of another proven technology — social media — before, during and after flights Social media can improve customer service by serving as a fast workaround for overwhelmed phone lines or gate agents They can also provide a richer exchange of information with customers in both directions, giving carriers an opportunity to listen, learn and respond Solution2 Building on best practices from other industries The airline industry can learn a lot from its would-be competitors and others The hospitality, logistics and gaming industries offer well-honed best-practice templates, systems and approaches that could substantially improve the air traveller’s experience Some of those best practices even have their roots in innovations originated by airlines — loyalty programmes, for example “Different platforms lend themselves to different functions,” notes David Cush, Virgin America’s president and chief executive officer The 144-character limit for Twitter is effective for marketing time-sensitive promotions and for resolving customer service queries “By virtue of its format, you have to be very clear, very direct and very brief,” he says “Facebook allows Virgin America to connect with the consumer on a deeper level.” Customising, pushing and pulling data Glenn Morgan, head of service transformation at British Airways, predicts that customer engagement will continue to shift to the Web, but warns that platforms fall in and out of favour — airlines have to be sufficiently attentive and sufficiently nimble to keep up with change “Twitter is here today,” Morgan points out “But what about WhatsApp? BBM?” he asks “We have to go where the customer is.” Collecting, exchanging and analysing data are the key to these approaches Sector leaders in the hospitality, logistics and gaming industries constantly collect detailed information Among other metrics, they study how and how much their services are used, monitor operational efficiency and analyse customer responses The hospitality industry, a competitor with airlines for ownership of the full travel value chain, merits particular attention Airlines may find it difficult to allocate resources to these constantly changing media channels, but that attention is now mandatory “You cannot hide” from the social media space, says Thierry Antinori, Emirates’ executive vice president and chief commercial officer “You’re either completely out, and you have a lot of missed opportunities Or you are in, and you have to be good So we chose to be in.” Hospitality companies routinely collect and analyse data to make their operations more efficient If a hotel has clear data about the types of food eaten more often on specific days of the week, it can order more accurately and cut down on waste Such information can also help the same company IMPROVED PERSONALISATION AND PROFITS THROUGH THE INTEGRATED USE OF CUSTOMER DATA [THE FUTURE OF AIR TRAVEL [ An investment, not a gamble Harrah’s Entertainment, a resort and casino company (now Caesars Entertainment), started to develop and refine the collection and analysis of customer information back in 1998 on a level not seen before in that industry, according to a Harvard Business School case study Using a loyalty programme introduced the previous year and expanding the use of its patented swipe-card system, Harrah’s tracked every customer transaction it could Data gathered included not just choices for bet-by-bet gambling, but food, lodging and other forms of entertainment as well Every Harrah’s property across the country was included give its customers more of what they want, in ever-more fine-grained detail If a hotel knows the guest in Room 268 favours a Black Angus rib-eye steak cooked rare with hot sauce on the side, that guest is more likely to rebook at that hotel The finer the distinctions, the more personal and compelling the customer experience and service Improving efficiency and personalisation can create powerful synergies: cost savings married to personalised service can lead to greater customer loyalty and higher profits Logistics companies something similar Many have expanded the package delivery options they offer in response to customer demand; they then track systems efficiency from package pick-up to package delivery, assessing and adjusting their services in response to customer behavior What a stay-at-home parent earning an income by selling goods on eBay needs differs from what a family business that mostly ships between the US and the Indian subcontinent needs, for example Logistics companies track these trends and tailor their services, defining them with greater precision and specificity: time to destination; time, place and circumstances of delivery; level of security; packaging used, etc As noted in the case study, this information did not simply track how customers behaved in the past It created information-rich customer profiles that enabled prediction of how they might behave in the future and what kinds of incentives and interventions would either encourage or discourage more visits to Harrah’s Expanding the scope and sophistication of its rewards programme allowed Harrah’s to run on-the-ground experiments to test different marketing strategies Having defined a specific cohort of interest — perhaps women between 55 and 75 who live within 10 miles of a casino — it could divide the group in half, provide different incentives to each, then track the resulting purchasing behavior to see which works better Hospitality and logistics companies track data in two different ways Systems that monitor packages, customers, guests and transactions automatically “pull” that data and report them on demand Thus, these companies can know immediately how many packages were late today because of snow in Cleveland, Ohio, or how many room-service orders included hamburger versus steak When data need to be interrogated or analysed further, these systems will “push” for an answer The businesses might need to know, for example, how many people hold the logistics company responsible for the snow delay or how much the hamburger vs steak decision was influenced by price Increasingly, data analytics and correlation algorithms are automating that process Airlines face legitimate and serious questions about using new technologies Indeed, they can be expensive: the design and implementation of Harrah’s upgraded Total Rewards Program was done at a cost reported by The Wall Street Journal in the US$100m range It bears underlining that this was 15 years ago: the technology has since been vetted, improved and come down in price But Harrah’s ROI was just as impressive: in 1999, Harrah’s revenue increased over the previous year by 50%, according to the Journal The company’s stock price and profits doubled IMPROVED PERSONALISATION AND PROFITS THROUGH THE INTEGRATED USE OF CUSTOMER DATA [THE FUTURE OF AIR TRAVEL [ Solution Wielding the wealth of data that travellers provide Airlines already collect much of the data that would allow them to make best use of the approaches of the hospitality, logistics and gaming industries Airlines were an early entrant in the modern data collection business when they pioneered computerised reservations systems But the industry now lags other sectors in how it uses its data Similarly, airlines need to leverage the data they already collect to make trips as smooth and efficient as possible, to make flyers feel not only welcome but at home onboard and to understand the combination of factors that will engender repeat business and brand loyalty Customisation as a norm Logistics Consumers have come to expect their daily life to be as customisable as their online experiences Web browsers, for example, now incorporate a slew of functionalities that — whether customers are consciously aware of it or not — make navigating online more efficient and more personal Software, in effect, predicts future behavior based on an analysis of previous patterns, anticipating and, therefore, preparing for what will likely be desired next A top-tier logistics company can more than simply move a package from a suburban porch in Belgium to an office in Hong Kong on the agreed schedule It can also pinpoint the package’s location at any time and, with sufficient awareness of the larger transportation network, reroute that package on the fly to save time or money or to skirt difficulties • • • Hotel A high-end hotel also knows, ahead of a guest’s arrival, that she prefers turn-down service to be done when she is at dinner, that CNN should be the default channel on her television and that she is happier if sugar is removed from the coffee supplies in her room Gaming A resort casino with a well-tuned predictive analytics programme can note the interval since Mr Tanaka’s last visit and foresee that an appearance by a famous Italian tenor and the offer of a US$25 dinner discount may tip him towards visiting on the upcoming weekend Cloud-stored profiles serve as a personalised desk top wherever a customer logs in: bookmarks, favourites and auto-fill information to facilitate filling out forms Predictive analytics allow browsers to cache images or information customers use more frequently; invisibly, this reduces the frustration and irritation of lags and wait times E-mails and online calendars are mined by profiling algorithms that then produce context-appropriate advertising: mention scuba diving in an e-mail, start seeing ads for swim fins IMPROVED PERSONALISATION AND PROFITS THROUGH THE INTEGRATED USE OF CUSTOMER DATA [THE FUTURE OF AIR TRAVEL [ Airport commerce as opportunity or obstruction Virtual-shopping venues could provide additional revenue streams for the industry and an expanded range of options — with a smaller physical footprint — for travellers Germany’s Frankfurt Airport already features a virtual-reality wall that sells duty-free goods Passengers point their smartphones at a product’s QR code, adding it to a virtual shopping cart, then pick up the merchandise at a collection point 15 minutes later Some executives (13%) would like to see these options expanded [Exhibit 7] Airline executives and customers agree that streamlining the airport experience would reduce both costs and frustration They not agree, however, about how to use these newly open spaces As long as they don’t put additional clutter in travellers’ paths, many executives surveyed (44%) would like to use some of the space freed up to increase airport shopping options, along with providing opportunities for ordering restaurant food or duty-free goods for onboard delivery Only 21% of potential customers, however, were interested in those options [Exhibit 6] Top priorities for improving day-of-travel experience over the next 10 years Single biometric ID accepted at every security point along the journey Exhibit Airline executives Consumers 63% 54% Permanent baggage tags linked to customer profile, offering real-time baggage tracking across the journey 65% 54% Seamless real-time trip information streamed to mobile devices from every provider on the journey 46% 33% 44% Ability to order meals from airport restaurants or duty-free purchases for delivery aboard aircraft 21% 29% Augmented reality devices (such as Google Glass) to guide travellers through airports 16% Note: Respondents were asked to select up to three 15 IMPROVED PERSONALISATION AND PROFITS THROUGH THE INTEGRATED USE OF CUSTOMER DATA [THE FUTURE OF AIR TRAVEL [ Exhibit Top ways industry players can use technology to collectively enhance the traveller experience Single electronic ID for security, check-in and boarding 63% Data sharing to integrate updates of flight status, security delays and inter-carrier transfers 63% 43% Mobile apps providing end-to-end travel information from multiple providers Permanent baggage tags common to all airlines (eg, RFID) 32% On-board meals ordered from local in-terminal restaurants 25% Data sharing to establish airports as inter-modal hubs 24% Duty-free purchases from a virtual retail wall 13% Note: Asked of airline executives Respondents were asked to select up to three mproving the in-flight experience PJ Wilcynski, payloads chief architect at Boeing Commercial Airplanes, cites research on the company’s new 787 Dreamliner to argue that perception can trump physical realities “We found that passengers on the same airline, same routes, same seats, same seating configuration and same meal service thought their seats were wider and the food service better in the new interior,” he relates All-LED lighting, brighter colours, increased humidity, overhead pivot bins and larger windows created a sense of space and comfort that transferred to aspects of the environment that had not been changed, Mr Wilcynski suggests A personalised experience results from personal decisions Air travel, of necessity, revokes most adult privileges and choices Passengers sit in their assigned seats, sitting up straight when prompted; they eat when it’s snack time and only what’s available; they can even be refused bathroom privileges Legitimate concerns about costs, revenues and ROI have led to a far more Spartan flying experience with more seats, less legroom and flights often at full capacity Heightened security concerns have also inserted intrusive and time-consuming hurdles between the traveller and the departure gate Airlines are constrained in responding to these issues by space limitations, by regulations and by costs Nevertheless, airlines can make significant improvements to the travel experience by making affordable adjustments to elements of the onboard environment, for example, lights, colours and air quality, and by expanding virtual options Technology is also permitting more of the customised options that passengers both desire and value Some will require infrastructure upgrades, but others are relatively low cost or even offer potential revenue streams 16 IMPROVED PERSONALISATION AND PROFITS THROUGH THE INTEGRATED USE OF CUSTOMER DATA [THE FUTURE OF AIR TRAVEL [ Toward the horizon Current barriers, along with cost concerns, limit the degree of change most of our executive survey respondents can envision A minority, however, take a more expansive view, projecting an unbounded future for air travel Henry Harteveldt, founder and travel industry analyst at Atmosphere Research Group, is skeptical about the rebirth of supersonic travel “Unless the cost of fuel—traditional oil-based or alternative fuel—comes down, and the environmental impact can be managed appropriately,” he says, “I don’t think you will see supersonic flights happening over large masses of land, certainly not densely Supersonic travel: Supersonic travel has not been a reality for the travelling public since 2003, when the last Concorde was retired from service Despite dramatically reducing flying times, only 23% of surveyed executives believe that such jets would improve customer service—the Concorde was infamous for its cramped, unglamorous cabins populated areas We may see transoceanic supersonic travel emerge, but it would have to be commercially and environmentally viable.” Prospects for hypersonic travel—generally above Mach 5, or 3,850 mph—are more distant Lockheed Martin expects to have a scaled-down model of its SR-72, a pilotless, hypersonic military drone, in the air by 2023 The company is working toward a 2030 launch of the operations-ready version, with both offensive and intelligence-gathering capabilities Among the major players, however, Boeing is reportedly working on an aircraft that flies 120 passengers at more than 1,000 miles an hour And NASA has been investigating ways of reducing the sonic booms associated with supersonic aircraft, while private firms are also working on making them more efficient On the civilian side, Airbus Group’s Zero Emission Hypersonic Transport (ZEHST) concept plane, using currently available technologies, would carry 100 passengers at Mach 4, burn carbon-neutral algal fuel until it got to altitude, then switch to a mix of oxygen and hydrogen, emitting only water as exhaust But Airbus does not see such transport being available before 2050 In the realm of business jets, several companies are accepting orders for planes that generally seat between and 20 passengers, cruise at better than 1,000 mph—above Mach 1, but below Mach 2—and retail for somewhere between US$60m and US$80m Spike Aerospace hopes to bring its S-512 to market in December 2018; Aerion is aiming for 2021 with its SBJ; while HyperMach is a bit of an outlier—its SonicStar is intended to have room for up to 32 passengers, a cruising speed of around 3,000 mph, just below Mach 4, and an entry date of 2024 Pilotless aircraft: A majority of commercial jets already have most of the technology necessary to fly without a pilot Researchers are developing drone technology to operate cargo flights—even through wildfires and other hazardous conditions 17 IMPROVED PERSONALISATION AND PROFITS THROUGH THE INTEGRATED USE OF CUSTOMER DATA [THE FUTURE OF AIR TRAVEL [ Some 29% of executives surveyed can see pilotless aircraft entering their fleets, their comfort with the idea likely based on knowledge of current airline practices: pilots take control during take-off and landing, with most of the flight time usually spent monitoring decisions made by the autopilot Pilotless take-offs and landings are not too far away Letting passengers make themselves virtually at home Passengers are the best judge of what type of access would help make them feel at home For many travellers, losing time is even worse than losing autonomy So much of modern life — work, play, commerce and communication — depends on Web access that to be cut off for several hours feels to many like the time has been rendered unusable Provide Web access and that time is recaptured Travellers are far more leery: only 2% express interest Mr Harteveldt is skeptical because of the economics and potential liability “The insurance companies, frankly, won’t let [pilotless aircraft] happen,” he says “Accidents occur You need to have well-trained pilots on the flight deck in case the technology isn’t working as it’s designed to work.” By allowing more comprehensive information exchange during booking, airlines can make a more personalised flight a reality Parents could be allowed to lock out certain content at a child’s seat during the booking process And, even though customers with open Web access could retrieve whatever they wanted on their own, they might also be offered an additional menu of profile-based personalised options as an important welcoming touch Helium airships: Models are now on the drawing board for helium airships that could carry as much as 500 tonnes A niche market exists for craft that would enable cargo delivery— sometimes referred to as “road-less trucking”—in areas inaccessible to airplanes Helium, however, is a non-renewable resource With global demand outstripping supply, prices have more than doubled in a decade The shortage has been sufficiently severe to force the US military to scale back in-theatre use of airships High-tech applications that require helium—MRI scanners and superconductors, for example—use more than four times as much as is consumed by “lift” applications Given market realities, the odds don’t favour use for passenger travel 18 IMPROVED PERSONALISATION AND PROFITS THROUGH THE INTEGRATED USE OF CUSTOMER DATA [THE FUTURE OF AIR TRAVEL [ This personalisation could be achieved at virtually no marginal cost An airline that consistently makes its customers feel surrounded by the comforts and options of home is far more likely to encourage loyalty, maintain connection and get repeat business Improving the flying experience is essential to the rebuilding of customer loyalty that airlines need to shore up their businesses The critical calculation of ROI should include: • Synergies of combining upgrades for passenger services with necessary data and communications upgrades on the operations side; • Comprehensive analysis of potential efficiencies across the full range of systems — from savings in labor, time and weight, for example; • Revenue enhancements enabled by these upgrades, from premium service up-selling to e-commerce, both direct and with partners; • The value of additional, more timely and richer infor mation about customer preferences, desires and complaints And, as in the gaming industry, airlines can apply the information gleaned about which options are utilised and which are not to improve their customer profiles Costs, benefits and ROI Making Internet access a standard part of the flying experience will require significant investment Air-toground data transmission and upgrading onboard systems will prove expensive But improvements in technology will bring transmission costs and weight down, and installing systems as a standard part of aircraft assembly will be much less expensive than retrofitting 19 IMPROVED PERSONALISATION AND PROFITS THROUGH THE INTEGRATED USE OF CUSTOMER DATA [THE FUTURE OF AIR TRAVEL [ Capturing more of the value chain The limits of hardware, the elasticity of data processing Trains today travel about six times faster than they did in the mid-19th century—a rate of speed first achieved 50 years ago Many factors outside of airlines’ control nonetheless affect how passengers respond to them Economics, politics and, of course, the weather play roles beyond anything a carrier can manage Airports, while an intrinsic part of the aviation system, involve even more uncontrollable variables, including security and transportation issues Planes fly about 10 times faster than they did in 1914; passengers first reached today’s average air speed for commercial travel, roughly 500 mph, in 1952 If we consider electronic data transmission to have started with telegraphy and Morse code and that the initial rollout of Google Fiber represents the current high-water mark, then, between 1844 and 2012, the speed of data transmission increased by a factor of 256,000,000 Full-trip customer care and the power to address externalities Airlines may be reluctant to take on the additional complexities of coordinating their operations with a bigger, more complicated and less integrated travel industry But what was once defensible prudence has become problematic hesitation and resistance Circumstances have changed, and technology has matured The rationale for focusing on data throughput as a way to improve both the economics and the experience of air travel derives from that stunning set of numbers While land and air speeds have not increased recently, data speed has attained escape velocity—with corresponding increases in processing power and storage capacity At the same time, costs for computing equipment and services—and the communications and sensing technologies that use data as a platform—continue to plummet A single Web search involves more data processing than was used by NASA’s Apollo programme over all the years of its existence and the multiple flights it launched Technology is no longer a barrier — inertia is If the industry does not involve itself in a larger piece — arguably the entirety — of the travel value chain, another industry will so to the peril of airlines These technological gains and economic efficiencies are the airline industry’s greatest unleveraged asset Compared with hardware and physical infrastructure, moreover, changing and expanding the use of technologies in the digital sphere is much more under the unimpeded control of the industry 20 IMPROVED PERSONALISATION AND PROFITS THROUGH THE INTEGRATED USE OF CUSTOMER DATA [THE FUTURE OF AIR TRAVEL [ Maximising efficiencies over the long term Airline and hospitality websites, along with online travel agents, are aiming to take on the coordinator role — but their offerings are still more aggregation than coordination They provide access but not enough intelligence Travel packages are not so much personalised as divided into silos — business, leisure, adventure, etc In many cases, they can offer bargains, but not the personalisation and coordination passengers seek A key measure of efficiency is being able to match capacity and demand Flying empty seats, heating empty hotel rooms or leaving rental cars in their stalls — all are underused assets and represent lost revenue across the travel chain Individual service providers what they can to combat this: if the flight from New York, New York, to Denver, Colorado, is only half-booked, the airline cuts the price of the remaining tickets Information and communication are key For customers, however, the value of that discount has to be weighed against all of the other pieces of a trip they are left to cobble together on their own An entity that offers to handle all the resulting changes as a complete package — taking customer preferences into account, making best use of facilities across the full chain and delivering all at a good price — would transform its role from vendor to coordinator — a powerful and more profitable position An excellent in-flight experience is less likely to be remembered as such when sandwiched between a traffic jam on the way to the airport on one end and missing the shuttle to an unsatisfactory hotel room on the other While those are outside the scope of the airlines’ responsibility, travel segments blur together: a bad day is remembered as a bad day and the airline is included in that memory Full-trip coordination addresses these issues in a manner similar to a combined on-call travel agent and an unobtrusive personal assistant A clear path through traffic jams cannot be blazed, but technology now provides a range of ways to keep abreast of kinks in the travel A full-trip coordinator is able to efficiently deliver a more consistent customer experience across the complete journey because it has a detailed and complete picture of the customer’s preferences, needs and desires, as well as how all the parts of the trip connect Its customers will experience a more coordinated and personalised trip than even the traditional personal travel agent could provide 21 IMPROVED PERSONALISATION AND PROFITS THROUGH THE INTEGRATED USE OF CUSTOMER DATA [THE FUTURE OF AIR TRAVEL [ chain, to communicate with customers in a timely fashion and to offer solutions that either help work around problems or quickly address fallout if the problems are insoluble imposed That kind of problem-solving and path-smoothing could make travellers more loyal to the coordinator than to any individual vendor An airline able to step into the role of efficiently solving problems can also use information in softer, more proactive ways, like making sure that a hotel greets arrivals from a late flight by providing them with information on restaurants in the vicinity that are open late and serve their favoured cuisine, for example, or offering expedited room service This kind of personalisation makes for a tangibly better experience and makes travellers feel cared for as well It builds loyalty Particularly valuable is the ability to identify and adjust to problem cascades, for example, those caused by missed or cancelled flights Years of cost-cutting have meant that a flight cancellation can result in hours of waiting to speak to a representative on jammed airline customer-service phone lines to rebook that single part of the trip — after which other time-dependent reservations and plans also must be adjusted Passengers are frustrated, angry and out time if not money Providing customer care at this level requires the meshing of several different kinds of information The trip coordinator needs to know the customer, see the full trip and remain aware of the traveller’s evolving circumstances This level of care combines the customising approach of the logistics and hospitality industries with the predictive analytics of the gaming industry A full-trip coordinator would be able to see how, and therefore address, problems can ripple across the full trip; the coordinator could, perhaps, even have the power to bargain down or pay whatever change fees might be 22 IMPROVED PERSONALISATION AND PROFITS THROUGH THE INTEGRATED USE OF CUSTOMER DATA [THE FUTURE OF AIR TRAVEL [ Both customers and executives favour this trend towards integration, but executive interest (51%) is significantly higher than that of customers (31%) [Exhibit 8] If customers don’t demand a feature, it’s hard to get an industry to invest in providing it The problem may be that customers don’t yet see all the benefits of full-trip coordination On the other hand, executives, who have their full-trip travel arrangements made for them (usually still by human assistants), are keenly aware of the value of this service Customers want a faster transit through the airport They can see the path, and technology can deliver that experience Technology can also facilitate the delivery of a much more integrated, cohesive and personalised experience across the full trip That path is not yet clear to customers Travellers want a faster transit through the airport They can see the path and technology can deliver that experience Technology can also facilitate the delivery of a much more integrated, cohesive and personalised experience across the full trip Travellers not yet clearly see that path Top priorities for improving the booking experience over the next 10 years Integrated booking and schedule information across the travel industry, including different modes of travel Exhibit Airline executives Consumers 51% 31% Seat selection based on matching of taveller profiles and preferences Opportunities for advice based on the specifics of travellers’ bookings (eg, advice that a traveller can secure a lower fare by driving to an alternative airport) 14% 22% 2% 20% 24% Individual travel options based on past purchases and preferences 19% Note: Respondents were asked to select up to three 23 IMPROVED PERSONALISATION AND PROFITS THROUGH THE INTEGRATED USE OF CUSTOMER DATA [THE FUTURE OF AIR TRAVEL [ Considering the interface The competitive landscape Technology can a great deal to automate and drive down the cost of this level of service Finding the balance between efficiency and a positive experience is tricky, however E-mails and texts can be fast and effective; automated telephone agents can provide more flexibility in ramping up capacity when problems are widespread and demand spikes; the range of interactive avatars continues to expand A number of players in the travel sector are trying to step into this coordinating role Airlines, the hospitality industry and online travel agents have been joined by data-centric companies like Google and Amazon, along with a host of start-ups Travel-sector competition Often through loyalty programmes, hospitality companies provide booking access to other parts of the travel chain: offering special deals, rooms at a discount and the ability to pay for related services like rental cars with points While still embryonic, these efforts demonstrate that hospitality is making a play for owning the full trip And the prowess the industry has demonstrated in profiling guests, differentiating market segments with ever greater precision and personalising the customer experience with increasing success makes the industry a formidable competitor But whatever technologies trip coordinators use — to provide services or to offer options — these technologies have to be reliable, accessible and not alienate customers Henry Harteveldt, founder and travel industry analyst at Atmosphere Research Group, cautions about moving too quickly or too far away from live agents “We’ve seen airlines in the United States and Europe using [live] customer service as a competitive tool and winning,” he warns Nonetheless, it bears reminding: in 1980, many people were uncomfortable leaving messages on answering machines, but by 2014, people were completely comfortable having conversations with their phones via virtual personae such as Apple’s Siri On their websites, airlines often offer specials or package deals Increasingly, the flight-booking process includes or leads to click-through options, connecting customers to partner providers of lodging or rental cars 24 IMPROVED PERSONALISATION AND PROFITS THROUGH THE INTEGRATED USE OF CUSTOMER DATA [THE FUTURE OF AIR TRAVEL [ “The challenge is making the data come alive, so we get a better picture of the individual customer.” – Jeff Foland, executive vice president of marketing, technology, and strategy at United Airlines   Meanwhile, online travel agencies range from those specialising in a particular segment to more comprehensive, but still-not-complete, booking services; others are offering added value by bundling in access to a travel advisor to help coordinate the trip and deal with problems The online proliferation of what appear to be one-stop travel shops obscures the fact that far fewer companies are running the back end of the systems, whether hardware or software Coherently organised and credible information — accurately matching services to need and preference — can help automate much of this process Abundant information that is insufficiently organised just makes things worse To be offered a choice in this sea of information can be more of a problem than a solution Companies that can offer truly coordinated and personalised information will pose a far greater competitive challenge to airlines Big Data enters the fray Branded services compete on price, but almost never have access to the full range of options within a travel sector or across the full trip Some airlines, for example, require that bookings be made through proprietary websites Entities like national railway systems can have similar policies The struggle for all of these portals has been to differentiate themselves, to be seen as something other than wholesale travel warehouses In April 2014, Google licensed the technology of Room 77; its mobile hotel-room search app combines price and availability search — across multiple travel sites — with detailed information on individual hotel rooms, including simulated views out the windows Many analysts have taken this as a signal that Google may no longer be hanging back from expanding its role in the travel industry Passengers left to the work Along with the companies under their respective corporate umbrellas, Expedia and Priceline are the dominant OTA players According to Skift, the online travel news and information service, their combined Google advertising spend in 2014 is projected to be nearly US$2.5bn, close to 5% of the search engine’s annual advertising revenue, thus making it unlikely that Google would go up against them But while customers are being offered a growing range of portals that offer to provide the full range of travel services, what they are really being given is a full box of puzzle pieces with which to assemble their own trips Aggregation, putting everything in one place, is not the same as coordination, fitting all those pieces together Nor does coordination necessarily mean personalisation Google’s Flight Search and Hotel Finder are not prominent and are only nominally linked Google acquired ITA Software, a developer of fare-search technology, in 2011 However, no significant moves seemed to have come from this transaction The Room 77 deal, however, is seen as different The full set of tools the company now has at its disposal, moreover, make it one of the most serious potential Big Data candidates in the full-trip coordinator arena Other Google services, knit together, constitute an impres- Travellers have to build their own schedules, most often in a limited price range Working within those requirements, they have to make choices about how they can personalise their trips The information they have about a hotel or an airline, for example, will typically come from two primary sources: the vendor or experience Vendor information may come directly from vendor websites or through various kinds of advertising Experience may be personal or reported, either from a single trusted reviewing source or from online ratings and customer feedback 25 IMPROVED PERSONALISATION AND PROFITS THROUGH THE INTEGRATED USE OF CUSTOMER DATA [THE FUTURE OF AIR TRAVEL [ sive foundation Google Maps is situationally aware, alerting drivers to traffic problems and suggesting alternate routes Google reads online information like calendars and search histories, combines them with location data and then offers a stream of information likely to be contextually useful And Google Wallet facilitates and tracks transactions Smartphones with Near Field Communication (NFC) functionality — which enables “wave-of-the-phone” payment — could ultimately replace biometric ID and the boarding pass profile hotels with a much higher degree of specificity than other such services, its website lists “design/boutique,” “green/sustainable” and “unique,” among almost 30 preference descriptors OLSET can be used as a hotel search engine; it can also be set to read customers’ calendars, anticipate trips and “instantly e-mail” a list of hotels that match the time and location with the customer profile Relatively small functions added to OTA sites — sometimes as a result of technology purchased or licensed from little-data companies — can also be significant and point towards potential problems for airlines KAYAK Mix, for example, could be seen as the ultimate commoditisation tool: it constructs flights on a segment-by-segment basis to achieve the lowest price — round-trip from New York, New York, to Los Angeles, California, via Chicago, Illinois, could involve four different airlines The role of “little data” According to Mobile Commerce Daily, a majority of business travellers 30 and under now book using smartphones or tablets; they want to be able to book quickly and on-the-go Price is still a factor in this demographic, but more so for leisure than for business travellers Millennials (also known as the Millennial Generation or Generation Y) have been described as valuing experience over material possessions, expecting experiences to be personalised, paying a premium for “unique” They gravitate towards whatever travel services or vendors can best meet those criteria, whether for discrete segments or for the full trip Individually, these apps and services are not hugely consequential Collectively, however, they show customers the services they are not getting from airlines or other providers They also present the risk that a company like Google or KAYAK could buy them and weave them into a more comprehensive solution — a potential opportunity for airlines as well Room 77 is part of an ecosystem of what might be referred to as little-data companies that promise highly data-centric services — often focused on a specific part of the travel chain, but with some on the full trip They are a direct response to the travel needs and expectations of millennials: speed, mobility and maximum personalisation with minimal effort Competition and cooperation How fast and how far Google will proceed is unclear Facebook and Amazon both have their toes in the travel pool, though neither has made serious integration moves In this context, the hospitality industry and airlines have a common interest in not having the travel business comprehensively disrupted by outside companies Models are available that would permit them to Another such start-up, OLSET (“all set”) currently focuses on hotels and harvests customer data from the Web — from social networking sites like Facebook Claiming to 26 IMPROVED PERSONALISATION AND PROFITS THROUGH THE INTEGRATED USE OF CUSTOMER DATA [THE FUTURE OF AIR TRAVEL [ “If the airlines don’t re-strategise and become either travel facilitators or solution providers to the problems that people are facing,” he says, “if they say, ‘we just fly seats from Airport A to Airport B,’ people will still travel, but they will buy their travel services through new intermediaries.” compete with each other in some ways and cooperate in others — for example, allowing limited reciprocal access to each other’s reservations systems As providers, the airline and hospitality industries have a number of advantages over outside entities, from the OTAs to Google They have different, potentially complementary, strengths Both know a great deal about travellers’ habits, needs and desires Airlines, as the heart of the network that physically moves travellers from place to place, have a broader information map of where and how people travel Hotels have more space, a greater range of amenities to offer and, therefore, more information about which are favoured by different demographic groups and under which circumstances Mr Taneja, author of the recently published book Designing Future-Oriented Airline Businesses, argues for a higher level of “customer care” across the full cost spectrum as well, stressing that helpful interventions can be high value without being high cost due to new technologies “We’re not just talking about sending limos to firstclass travellers,” he says “We’re talking about sending a taxi to an economy-class traveller or suggesting to an ultra-economy-class customer: ‘we know where you live; three blocks away is a bus station; that bus will take you to the subway, which will bring you to the airport.’ In other words, providing some sort of solution to the entire travel journey for the full spectrum of passengers.” Looking to the future Nawal Taneja, professor emeritus at Ohio State University’s Center for Aviation Studies and former president of a small airline, has long stressed the importance of helping travellers manage the journey across the complete travel chain While this expansion increases complexity for the airline industry, he does not see moving in this direction as optional, given the availability of technology to meet customer expectations “My overall view is very positive,” he stresses, looking 10 years into the future “Travel is going to grow in all segments: not only at the low end, but at the high end The winners will be those [airlines] that are able to provide more customer-centric and personalised service.” “The winners will be those [airlines] that are able to provide more customer-centric and personalised service.” – Nawal Taneja, professor emeritus at Ohio State University’s Center for Aviation Studies 27 IMPROVED PERSONALISATION AND PROFITS THROUGH THE INTEGRATED USE OF CUSTOMER DATA Conclusion Demand for an improved travel experience is well-documented, as is the increase in satisfaction when some of those demands are met The J.D Power 2014 North America Airline Satisfaction Study, released in mid-May, shows a positive trend in how customers feel about the airlines Rebounding from a 2009 trough of 658 on a 1,000-point scale, customer satisfaction with the airlines reached a record high of 712 This still puts them well behind not only hotels (777) and rental cars (775), but even mortgage lenders (771) The culture of aviation is fundamentally conservative and for good reason If a car’s engine gives out mid-trip, that can be inconvenient and, in some circumstances, dangerous If a jet engine gives out mid-flight, the consequences can be catastrophic Pilots understand the seriousness of the basic risks inherent in their profession They not lightly assume unnecessary additional risks Aviation is a risky business to be in as well Airline executives know, from long and bitter experience, that circumstances they not and cannot control — and sometimes could not possibly predict — can devastate a company’s balance sheet within a terrifyingly short time In the press release that accompanied the study, Rick Garlick, J.D Power’s global travel and hospitality practice lead, cited technology upgrades — such as onboard Wi-Fi and improvements in check-in procedures — as one of the factors helping to lower customer dissatisfaction with high air travel costs Clearly, customers are willing to pay more if they get what they perceive to be better value Technologies come and go — promising fundamental change — most of them are quickly swept under the carpet, sometimes along with an airline or two that guessed wrong, invested too much, jumped too soon Customers want solution providers: when moving from point A to point B is the problem, an airline provides the solution When a trip involves any number of additional problems, the more of them that can be solved the better — preferably even before the traveller is aware that a problem exists For airlines, a tenacious adherence to cost-cutting makes sense, but, at some point, it becomes counterproductive; a focus on costs begins to obscure the focus on the customer Passengers not want to overpay, but they also not want to be underserved They are seeing technology being used in other industries to increase choice, personalisation and comfort — they want all these when they travel as well Smooth the flight and the customer is grateful Make the flight an experience that feels personal, one during which the customer feels cared for, and the customer is loyal Accomplish this across all segments of a trip and the customer is astonished — both grateful and loyal And that’s great for business 28 IMPROVED PERSONALISATION AND PROFITS THROUGH THE INTEGRATED USE OF CUSTOMER DATA [THE FUTURE OF AIR TRAVEL [ Worldwide Headquarters Sabre Airline Solutions 3150 Sabre Drive Southlake, Texas 76092 USA Please contact our nearest regional office for more information: Europe, Middle East, Africa Tel: +44 208 538 8539 Email: emea.contact@sabre.com The Americas Tel: +1 682 605 6750 Email: contact.americas@sabre.com Asia Pacific Tel: +65 6215 9500 Email:contact.apac@sabre.com [...]... systems as a standard part of aircraft assembly will be much less expensive than retrofitting 19 IMPROVED PERSONALISATION AND PROFITS THROUGH THE INTEGRATED USE OF CUSTOMER DATA [THE FUTURE OF AIR TRAVEL [ Capturing more of the value chain The limits of hardware, the elasticity of data processing Trains today travel about six times faster than they did in the mid-19th century—a rate of speed first achieved... AND PROFITS THROUGH THE INTEGRATED USE OF CUSTOMER DATA [THE FUTURE OF AIR TRAVEL [ Some 29% of executives surveyed can see pilotless aircraft entering their fleets, their comfort with the idea likely based on knowledge of current airline practices: pilots take control during take-off and landing, with most of the flight time usually spent monitoring decisions made by the autopilot Pilotless take-offs... [THE FUTURE OF AIR TRAVEL [ This ongoing analysis is inherently low cost It takes data already in the system and uses them in more sophisticated ways Airlines already have a huge amount of information about their customers: where they go, how often they travel and with whom, how much they spend, where they sit and what they eat To the degree that customers book package deals offered on airline... expanding the use of technologies in the digital sphere is much more under the unimpeded control of the industry 20 IMPROVED PERSONALISATION AND PROFITS THROUGH THE INTEGRATED USE OF CUSTOMER DATA [THE FUTURE OF AIR TRAVEL [ Maximising efficiencies over the long term Airline and hospitality websites, along with online travel agents, are aiming to take on the coordinator role — but their offerings are... THROUGH THE INTEGRATED USE OF CUSTOMER DATA [THE FUTURE OF AIR TRAVEL [ “If the airlines don’t re-strategise and become either travel facilitators or solution providers to the problems that people are facing,” he says, “if they say, ‘we just fly seats from Airport A to Airport B,’ people will still travel, but they will buy their travel services through new intermediaries.” compete with each other in... to the subway, which will bring you to the airport.’ In other words, providing some sort of solution to the entire travel journey for the full spectrum of passengers.” Looking to the future Nawal Taneja, professor emeritus at Ohio State University’s Center for Aviation Studies and former president of a small airline, has long stressed the importance of helping travellers manage the journey across the. .. CUSTOMER DATA [THE FUTURE OF AIR TRAVEL [ With the right planning and investment, and by making better use of information already available, air travel a decade from now could give both the industry and travellers more of what they want The passenger gets more options for personalising a trip, a smoother passage through the airport itself and a more pleasurable in-flight experience, while the airline gains... across the travel chain Individual service providers do what they can to combat this: if the flight from New York, New York, to Denver, Colorado, is only half-booked, the airline cuts the price of the remaining tickets Information and communication are key For customers, however, the value of that discount has to be weighed against all of the other pieces of a trip they are left to cobble together on their... Tony Tyler, the International Air Transport Association’s (IATA) chief executive officer, points out, if the booking experience is unsatisfactory, the whole trip starts off on the wrong vector A “richer presentation of the full range of the product offering”, he says, is part of the implementation of the recently approved New Distribution Capability (NDC), IATA’s favoured approach to allowing travel agent... a traffic jam on the way to the airport on one end and missing the shuttle to an unsatisfactory hotel room on the other While those are outside the scope of the airlines’ responsibility, travel segments blur together: a bad day is remembered as a bad day and the airline is included in that memory Full-trip coordination addresses these issues in a manner similar to a combined on-call travel agent and ... FUTURE OF AIR TRAVEL [ Solution Wielding the wealth of data that travellers provide Airlines already collect much of the data that would allow them to make best use of the approaches of the hospitality,... AND PROFITS THROUGH THE INTEGRATED USE OF CUSTOMER DATA [THE FUTURE OF AIR TRAVEL [ Some 29% of executives surveyed can see pilotless aircraft entering their fleets, their comfort with the idea... AND PROFITS THROUGH THE INTEGRATED USE OF CUSTOMER DATA [THE FUTURE OF AIR TRAVEL [ “If the airlines don’t re-strategise and become either travel facilitators or solution providers to the problems