Travel and hospitality gone digital

64 Pages·2017·2.05 MB·English

Expedition 3.0:
Travel and hospitality
gone digital
Innovations, challenges and way forward
to win the Indian consumer
March 2018
KPMG.com/in
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Forewords
KPMG in India FICCI
India’s Travel sector has expanded in the Travel and Hospitality is one of the key
recent years, driven by the increase in sectors for the Indian economy. Not only is it
domestic spend, internet penetration and one of the highest foreign exchange earners,
availability of smartphones. Technology but also one of the largest employment
today plays a ubiquitous role in shaping the generators. The future looks bright for
travel industry. travel and tourism, with more demand
for supply growth in inbound as well as
Key advancements in the travel space
domestic tourism. The sector is also getting
revolve around fve themes, namely
a signifcant boost from several government
Artifcial Intelligence (AI), Big Data,
initiatives. The rampant penetration of
mobile applications, social media and
internet and mobile has transformed the
Virtual/Augmented Reality (VR/AR).
way of travel consumption by today’s tech
These advancements could enrich travel
savvy consumers. Because of which the
experiences through direct and fexible
dynamic and personalised content has
interactions with customers. Budding
become the cornerstone to drive more
popularity of such applications backed
booking.
by user generated content and sharing-
economy services, has opened the door for Companies that utilise technology to
many new travel start-ups, offering choices facilitate a dynamic response mechanism
to tech-friendly travellers. across all operators will emerge as the
leaders of tomorrow.
This trend is led predominantly by
millennials, who account for nearly half of This report from KPMG in India and FICCI
the working age population. Incumbents on the technology landscape for Travel
are adapting swiftly to the emerging and Hospitality provides a quick look at the
bouquet of travel start-ups. To differentiate current pace of digital disruption, consumer
themselves, existing players are honing the trends and innovation.
ways to personalise customer experience,
build loyalty, automate operations and gain
deeper insights on the customers. This deep
customer focus is also blurring the lines
between business and leisure travel.
This paper attempts to portray an immersive
view on the trends, challenges and
consequences of digital travel, thereby
painting a broad-brush picture of digital
travel revolution unfolding.
Jaideep Ghosh Rahul Chakravarty
Partner and Head Consultant
Transport, Leisure and Sports Tourism
KPMG in India FICCI
© 2018 KPMG, an Indian Registered Partnership and a member frm of the KPMG network of independent member frms affliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved
© 2018 KPMG, an Indian Registered Partnership and a member frm of the KPMG network of independent member frms affliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
Table of contents
Executive summary 01
Growth of India’s travel and tourism sector 09
Digital transformation in travel 13
To win the customer — The path travel companies are heading towards 23
Breweries of travel — Search engines and social media platforms 33
Veterans and start-ups — Evolving together amidst blurring lines 37
Innovation in travel — Obstacles to overcome 41
Digitisation of travel — Government’s initiatives and learnings
45
from leading countries
What is the way forward 51
About KPMG in India 54
About FICCI 54
Glossary 55
Acknowledgement 56
© 2018 KPMG, an Indian Registered Partnership and a member frm of the KPMG network of independent member frms affliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved
01 Expedition 3.0 — Travel and hospitality gone digital
Executive
summary
© 2018 KPMG, an Indian Registered Partnership and a member frm of the KPMG network of independent member frms affliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
02
The Indian travel and hospitality sector continued (GDP).04 Growing disposable incomes and the rise of
its steady growth with 15.6 per cent year-on-year millennials as the ‘chief wage earners’, who account
(y-o-y) rise in Foreign Tourist Arrivals (FTAs) and 20.8 for 47 per cent of the working age population, were
per cent y-o-y growth in Foreign Exchange Earnings the key drivers for this rapid growth.05 In addition,
(FEEs) during 2017.01 Further, in 2017, the travel and the proliferation of smartphones, Internet and
tourism sector was estimated to directly contribute technology-driven tools and platforms is acting as
to 25.9 million jobs and INR5,141.1 billion (USD75.8 a catalyst for speedy digitisation of the travel and
billion)02,03 to the country’s Gross Domestic Product hospitality sector.
Digital transformation in travel —
Rise of the tech-friendly Indian traveller…
The travel and hospitality sector is rapidly online sale of travel bookings in India is expected to
evolving with the rising adoption of various tools, increase at a healthy rate of 14.8 per cent Compound
technologies and digital platforms — primarily to Annual Growth Rate (CAGR) from INR1,512.7
improve customer experience, build strong loyalties billion (USD22.3 billion) in 2017 to INR2,625.7 billion
and run businesses effciently. These include (USD38.7 billion) by 2021. 02, 03, 06
mobile applications, social media, Big Data analytics,
Evidently, Indian travellers are displaying high affnity
artifcial intelligence (AI) and machine learning, virtual
towards technology usage in travel; this tech-friendly
reality (VR) and augmented reality (AR). In addition,
Indian traveller can be characterised as below.
Key characteristics of the tech-friendly Indian traveller07
Searches and Most travellers go online, and 67 per cent even
books online use voice search while researching for a trip
71 per cent use smartphones for research and
Mobile-friendly booking, and 82 per cent would appreciate digital
boarding passes and e-tickets for convenience
Avid social 87 per cent use videos and photos posted by friends as
media user part of their travel research, and 83 per cent say being
able to stay in touch is most important while travelling
85 per cent use price comparison sites to
Seeks look for deals, and 58 per cent agree spending
discounts considerable time to fnd best price
Values online 91 per cent use review sites, though 52 per cent
reviews are wary of their trustworthiness
Wants free 75 per cent choose hotels that do not
Wi-Fi charge for Wi-Fi
01. Market Research and Statistics, Ministry of Tourism, accessed on 22 February 2018 05. Millennials to redefne India’s consumption story: report, Livemint, 20 February 2018
02. Currency conversion from INR to USD at USD1=INR67.809 06. eMarketer Forecasts India’s Digital Travel Sales Will Top $22.5 Billion This Year, eMarketer, 2 August 2017
03. Yearly average currency exchange rates, IRS, accessed on 1 March 2018 07. The Indian Digital Traveller Research, Travelport, November 2017
04. Travel and Tourism Economic Impact 2017 India, World Travel & Tourism Council, March 2017
© 2018 KPMG, an Indian Registered Partnership and a member frm of the KPMG network of independent member frms affliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved
03 Expedition 3.0 — Travel and hospitality gone digital
…and the tools and technologies driving it
The tools, technologies and digital platforms that are fnding major applications in the travel sector include
mobile applications, social media, Big Data analytics, AI, machine learning, VR, and AR.
Major tools, technologies and platforms driving digital travel
Mobile Big Data Artifcial Virtual Reality (VR)
applications analytics Intelligence and Augmented
reality (AR)
• Mobile applications • Big data analytics is • AI in the form of • VR and AR could
have emerged as one the key to informed chatbots, virtual potentially change
of the most critical decision making. assistants and even the way travellers go
points of interaction • It can help robots is increasingly through the process
with consumers. personalise customer being employed across of travel planning —
• Online Travel Agents experience, employ the travel sector. enabling them to get
(OTAs) are getting dynamic pricing, • In addition, machine closer to the reality of
majority of their traffc optimise operations learning makes these the experience they
from mobile. and channelise tools smarter over time would have when they
marketing efforts. and helps improve actually arrive at their
customer experience. destinations.
While the adoption of these tools, technologies and utilised to add more value for customers. Further,
platforms is rising across the travel and hospitality some players (such as technology-driven OTAs) are
sector, it may not be considered to be directly typically more deeply invested in this aspect than
correlated with innovation, as innovation is also others.
about the minor tweaks in the ways these tools are
© 2018 KPMG, an Indian Registered Partnership and a member frm of the KPMG network of independent member frms affliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
04
Winning the customer — The path travel
companies are headed towards
Using the various tools, technologies and platforms mentioned, travel and hospitality players are focussing on
some key areas to win the tech-friendly Indian traveller.
Key focus areas for winning the tech-friendly Indian traveller
Marketing to Personalising Pushing towards
the modern-day services direct bookings
01 traveler 02 03
Search Engine Marketing Big Data analytics, AI and Direct bookings enable
(SEM) and Search Engine machine learning enable hotels and airlines to
Optimisation (SEO) are players to cull out insights avoid commissions and
among the key focus that can help personalise build a direct connect with
areas for players; other products and services; customers; this concept is
key marketing strategies personalisation is deemed likely to gain more emphasis
include following a mobile- to be the future of travel, as going forward.
frst approach, leveraging travellers increasingly seek
social media, providing customised services.
personalised offers and
utilising user generated
content (UGC).
Automating Leveraging the Partnering with
operations User Generated the sharing-
04 05 Content (UGC) 06 economy players
Automation enables end In contrast with owned In the travel sector, cab
to end applications across media, earned media is transportation and
booking, customer service now considered to be more accommodation aggregation
and even operational aspects effective for marketing. In are two major areas where
of travel and hospitality addition, in the form of sharing-economy has made
businesses; however, the customer reviews, UGC positive strides; hotels,
hospitality sector is highly can help brands with hotel aggregators and OTAs
human-intensive and would identifying and resolving are partnering with cab
continue to be predominantly issues, while enabling them aggregators to leverage
driven by manual processes. to build a direct connect with synergies.
customers.
© 2018 KPMG, an Indian Registered Partnership and a member frm of the KPMG network of independent member frms affliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved
05 Expedition 3.0 — Travel and hospitality gone digital
Breweries of travel — Search engines
and social media platforms
Google is the custodian of an extremely large on its platforms acts as a signifcant source of
number of search and queries around travel, and encouragement for people to travel. For businesses,
positions itself as an enabler to travel.08 It is not an it works on creating relevant interactions with users
OTA, but does have several products specifc to the and offers various marketing opportunities to large
travel and hospitality sector, including Google Flights, and small businesses alike. Similarly, other social
Google Hotel Ads, Google Trips and Book on Google. media platforms, such as Twitter and Snapchat, also
These products cater to various aspects, including have their distinctive features and opportunities for
fight bookings, locating hotels and itinerary planning. travel businesses to reach out to their audience.
Facebook, on the other hand, has the ability to Essentially, these platforms act as breweries of
sway consumer perceptions and thus, travel-related travel, encouraging people to explore, plan, book and
decision making. The content produced by users share their experiences.
Veterans and start-ups — Evolving
together amidst blurring lines
The Indian travel and hospitality sector is India is also witnessing a growth in technology-
witnessing several changes, as innovative tools driven start-ups in the travel space. These start-ups
and technologies continue to surface quite rapidly, are infuencing the industry with their niche offerings
in addition to the shift in consumer behaviour led — complementing the traditional players in some
by millennials. While on one hand branded hotel ways and disrupting them in others. These players
chains have turned around to become digital over the operate across various segments including online
past few years, on the other, OTAs and metasearch travel communities, travel planning, activities and
engines are encroaching each other’s lines. experiences, travel guide services (emphasising on
Essentially, OTAs, metasearch engines and even localised and authentic experiences), food delivery
travel management companies (TMCs) are turning (during travel), niche/customised travel packages,
into ‘travel experience platforms’ that would cater to digital communication platforms (e.g., for travellers
multiple aspects of a traveller’s journey. and locals) and online accommodation booking.
The sector is also increasingly getting consolidated The changing dynamics of the Indian travel and
with mergers and acquisitions. Increase in the hospitality sector are signifcantly driven by
number of M&As over the past few years has been millennials, who typically seek much more than a
driven by: glimpse of the renowned tourist spots during travel
excursions. This demographic demands true and
• Fragmented nature of the sector
authentic experiences, and looks to ‘live like locals’
• Need for achieving economies of scale in a wherever they go. The travel and hospitality players
volume-based Indian market are in a race to appease this traveller segment.
The large organisations within OTAs, metasearch
• Focus on diversifcation to provide a
engines and hotels are watching millennials closely
comprehensive travel experience
and adapting to their needs and preferences rapidly.
• High level of competition, and On the other hand, start-ups are fnding niche white
spaces to cater as they fnd targeting a single type of
• Requirement of different offerings for dissimilar
consumer to be a better business proposition.09
consumers.
08. Industry discussions conducted by KPMG in India, 2018 09. What is driving the sudden boom in travel start-ups in India?, YourStory, 27 February 2015
© 2018 KPMG, an Indian Registered Partnership and a member frm of the KPMG network of independent member frms affliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.