Strategies for the Travel Industry

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For the travel industry, the past three years have been a perfect storm. The industry struggles to find shelter under clouds that include a sluggish economy, war and terrorism.

Though there seem to be signs of improvement, any short-term recovery is hampered by vast overcapacity, debt and huge fixed costs. Slow economic growth and structural changes in travel behavior threaten any hope of a long-term rebound.

The occupancy rate is the lowest in 31 years, according to a PricewaterhouseCoopers report. Business travelers are traveling less, and leisure travelers are staying closer to home. What's more, online travel sellers such as Hotwire and Priceline are engendering a new class of brand-neutral bargain hunters.

The majority of travel research and booking has shifted from traditional channels to the Internet. The convenience, speed and access to comparison pricing that the Internet affords them has won over business and leisure travelers, forcing travel-related businesses to serve their customers online or die.

The Internet might be called a source of much of the travel industry's woe, but, curiously, it also offers a possible means of managing the very crisis it has helped create. The old adage, "If you can't beat 'em, join 'em," is as true now as ever. So let's forget the doom and gloom and join 'em.

Travel suppliers should heed three facts: The travel industry pie is not growing; a greater slice of the pie is going to online transactions; and a percentage of travelers has jettisoned brand loyalty in favor of lowest-possible prices. Only when the industry accepts these seemingly bleak facts can it plan and execute a workable strategy to deal with the challenge that online booking presents.

Travel suppliers can take three steps to help stay competitive with online travel sellers like Hotwire and Priceline. First, manage the brand-neutral bargain hunter. Second, transform their own Web sites into service and sales powerhouses. Third, cultivate brand loyalty through personalized marketing.

Managing the brand-neutral bargain hunter. This type is every supplier's nightmare, and the monster is not going away. Leisure travelers in particular have gone "mercenary." They spend more than $2,200 on travel, and they do so last-minute, five times a year without considering brand, according to Forrester Research. But the mercenary can be persuaded to switch sides.

Contrary to current mindset, efforts to all-out convert the brand-neutral traveler to a brand-loyal one will not necessarily yield results. He must be managed. The brand-neutral traveler can be used to offset part of the current overcapacity crisis. By partnering with online merchants or opaque travel sellers, travel suppliers can increase load factors without resorting to endless discounts and promotions. It is important for suppliers to remember, while forming these partnerships, to ensure the re-sellers' customers match the supplier's target demographic.

Transforming Web sites. To capture the transactional behavior that is migrating to the Web, travel suppliers must take their own sites seriously. This requires insightful, objective strategy and capital spending. The travel suppliers' sites need to make research, booking and buying easy for business travelers, leisure travelers and travel agents.

To that end, travel suppliers should invest in booking solutions. They should personalize the site so repeat customers are recognized and their needs met proactively. Pricing must be consistent across all channels.

Finally, travel suppliers' sites must use rich content to communicate the travel proposition. Travel is an information-rich product, and customers prefer to see before they buy. Integrating a dynamic content management solution with the Web site is critical to serve the information needs of customers.

Brand loyalty through personalized marketing. Travel suppliers can take a general-store approach to marketing by reconfiguring their site's infrastructure to collect, analyze and act upon customer data. They should consolidate their customer databases into one integrated marketing platform. Suppliers also should use fresh, integrated customer data to send timely, personalized, relevant and appropriate message to customers.

It's astounding that many travel companies still send the same, general e-mail to all their opt-in customers. Uniform messages are a turn-off to customers; they negate any benefit provided by an opt-in program.

Yes, the world has changed. Many firms will not meet the challenge. Others, though, will make a bold, intelligent leap to relearn competitiveness in a new era of travel.


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