Behind the scenes of your next vacation

May is the month millions of people throughout the western world plan their summer holidays. Chances are you're in the middle of planning your own right now? Maybe you work in tourism or hospitality? This article is about those industries and the rapid changes they're goin through right now. Let's have a look behind the scenes.

Digitalization changes the rules, and the players

When you plan your vacation you're the consumer, and you probably won't pay much attention to the exact nature of the companies you're dealing with. Are you using a META (a meta-search site like Tripadvisor), an OTA (Online Travel Agent like, a tour operator like TUI or traditional travel agent like Ticket? Is there a GDS (Global Distribution System, e.g. Amadeus or Sabre) involved?

The fact that vacation planners don’t know isn't news, what is news is that neither does the major players in the business. This is because the old boundaries between the types of companies are becoming less relevant as different firms encroach on each others' turf and entirely new actors enter the market. In many cases new entrants are from entirely different industries. Google recently launched a new service giving combining information about flights and accommodation into destination searches. AirBnB has expanded into leisure activities and is considering working with flights as well.

Digitalization opens up industries to newcomers, not just tourism but all of them. Our study "The End of the Beginning" from this January, reveals that almost half of participating business leaders believe that tech-heavy startups will be the most important factor driving change in their industry.

War rages over commissions and business models

The tourism industry is in a state of war. The territory seeing the most action right now is commission and pricing. Hotels in particular have become heavily dependent on online booking agents and revenue coming their way from such sites, airlines have been more successful in their attempts to retain influence -- many still book flights directly from airlines. Who will emerge victorious in the end remains to be seen. What we do know is that a lot of structural change is going on:

  • online travel agents are buying up meta search sites
  • meta search sites are adding booking features
  • companies traditionally catering to businesses are starting to target leisure travelers, expecting more growth there
  • tour operators are becoming more like travel agents when expanding and adding more personalized options
  • airlines start offering accommodation and car rental services in an attempt to grab a larger piece of the pie

Keeping track of mergers, acquisitions, expansions and new entrants is a tall order. The rules and positions are being renegotiated and the future of the whole system is up in the air. The only thing we can trust is that consumers will use whatever solution gives them the best deals for the least amount of effort.

AI for fewer but better options

Our series of annual surveys show that the share of Swedish respondents who want "more freedom of choice" has dropped from 70% to only 40% in just a few years. We've reach "peak choice" and now prefer fewer but better options to a limitless buffet. The big players in travel are all aware of our desperate attempt to navigate information and choice overflow. They're in the middle of investing large sums developing systems to intuit exactly who a visiting prospective is and what they want from their trip. Back-end and front-end software developers alike are working around the clock to get travelers the right information and capabilities and present them in the most intuitive and attractive way. The ultimate goal is an artificial sales representative that can give travelers appropriate recommendations for their needs and situation – ideally cheaper and better than old-style travel agents ever could.

The end of tourism as we know it

These changes reach all the way to the destinations themselves. National and regional organizations dedicated to promoting tourist destinations are finding out that they no longer have a monopoly on what they do. Wonderful Copenhagen owned up to this in a bold new campaign called "The End of Tourism as We Know It" launched in January. With a self-aware wink they say their goodbyes to times past:

“We recognize the expiration of our role as the destination’s promotional superstar, the official Destination Marketing Organization (DMO) with authoritative consumer influence, broadcasting superiority and an exclusive right to promote and shape a destination.”

In a digital world, country and city may not even be the most relevant organizational scheme for promotion and marketing. Instead segmentation by needs, wants and interests become more important, and they know no national borders. Surprising, then, that so many global organizations still use geographically based marketing. Maybe it's time to try a different tack?

The art of surfing the waves of tourism trends

In a quickly shifting business environment it's especially important that your strategy and innovation is in tune with the changing environment. Please contact us for information about how we help organizations in the tourism and hospitality industries get to the future first. Read more about our work with Wonderful Copenhagen, and our other projects in travel and hospitality.

By Johanna Danielsson