Travel and Leisure: IT As a Competitive Tool

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Travel and LeisureIT As a Competitive Tool

• Peter Bubb
• 16 October 2001

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The IT Industry

• I dont mean Information Technology
• I mean Inclusive Tour
• Otherwise known as Package Tours
• An Information Intensive Industry
• Sells by exchange of information
• Fulfils by providing information
• Satisfies customers through information provision
• Competes by processing information

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Structure of the Industry
CUSTOMER
TRAVEL AGENT

• 10,000,000 holidays
• 7,000 travel agents
• 700 tour operators
• 100,000 hotels
• 100 airlines

TOUR OPERATOR
AIRLINE
HOTEL
BUS
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How Can You Sell by Exchanging Information?

• 700 tour operators print 100M brochures
• Send them to 7,000 travel agents
• Customers call in and take brochures
• Customers talk to 50,000 travel agent staff
• Staff connect to tour operator computers
• Search for available packages
• More searches find a product
• Purchase transaction
• Agent acts as banker for tour operator

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How is IT being used to Compete?

• Avoiding the cost of brochures
• Cds Teletext Internet
• Reduce other operating costs
• Target information
• Substitute staff costs
• Complaints etc
• Communications within distribution channel
• Closing the sale faster

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Seligo brochures

• Seligo (based in Birmingham) is the market leader
  in selling accommodation to travel agents
• Used to produce 200,000 brochures
• Many brochures per sale
• Now distribute accommodation photos and details
  from database with tickets
• 8,000 brochures go to travel agents moving
  towards cds
• Savings funded database

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How is IT being used to Compete? (2)

• Speed up the transactions
• Capacity and performance of tour operators
  computers
• Travel agent terminals/PCs
• Data broadcast
• Monitoring competitors
• Tilt

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Horizon Holidays

• Year 1
• 3 market share
• slow network
• poorly viewed selling application
• unreliable system
• still handled 40 of sales in Jan and Feb (ie
  peak 2.2 times average)
• Year 2
• network quadrupled in size
• applications rewritten
• system capacity up 5 times

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Horizon continued

• Year 2 (continued)
• 24 hour availability
• awareness campaign
• 6 market share
• peak 5 times average
• Year 3
• new booking system
• new processors
• additional capacity
• peak now 150 times average (0.9 sales in 30
  mins)
• 11.5 market share
• becomes favourite system for travel agents

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Data Broadcast

• BROAD-
• CASTER

DECODER SLAVE DATABASE
TOUR OPERATOR COMPUTER
TRAVEL AGENT TERMINAL
BOOKING CONNECTION
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Data broadcast pilot

• 200 selected travel agents
• Search transaction reduces from 4 sec to 0.03 sec
• 5 minute inventory updates for broadcast
• 5 extra load on reservations system for
  inventory updates
• Equivalent to 40 reduction in load from searches
  downloaded
• 40 increase in sales
• Net reduction in load 31

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Horizon Monitoring System Performance

• Typical transaction thread search-option-confirm
• More searches than other transactions
• Searches are processing hungry
• System resources are monitored and tuned, for
  resource balancing etc
• Showed sub second response times
• However, travel agents still complained

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Horizon Monitoring System Performance

• Visits showed Horizon system slow and variable
• Horizon built a system to simulate travel agent
  searching on its system, to monitor performance
  including both network and processing
• Showed search response times varying from 9 to
  300 seconds
• Led to completely different programme of work to
  modify and tune the booking system
• This enabled reduction of search times to 3.6
  seconds with little variation

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Horizon monitoring system performance -more

• As it owned a chain of travel agents, it had
  access to other ABTA tour operator systems
• It pointed the monitor at its competitors
• This showed the two main competitors took 8 and
  30-50 secs for the same transaction
• The variability of this measure also gave clues
  to pressure points in their systems
• These were used daily by Horizon for marketing

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Horizon Monitoring System Performance -More Still

• Horizon sequentially numbered options
• Used the option number as prime tracking
  identifier
• It realised belatedly that this told the world
  how much business it was doing
• It immediately encrypted these sequential numbers

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Horizon Monitoring System Performance Even More

• It then examined what its competitors were doing
• They had different schemes, but it was possible
  to deduce the algorithms used
• Modified the performance monitor to place an
  option, and record the serial number daily
• It then had a daily assessment of how much
  business its competitors were doing

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How is IT being used to Compete? (3)

• New types of travel agents
• Internet eg lastminute.com
• Public Access Machines eg Holidays Now
• Replace travel agent staff by public systems eg
  Thomas Cook
• Preference elicitation/profiling

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Holidays Now

• Network of Flight Points
• Stations/Motorway services/Hypermarkets
• Screen/Keyboard/Ticket printer/Card reader
• Robust packaging
• Holidays Now Ltd is ABTA travel agent

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Holidays Now

• Pilot Network of public access machines selling
  holidays and flight tickets
• Artificial intelligence used to establish
  customer requirements
• Machines shared knowledge of where to find
  product
• Better hit rate than travel agent staff
• Public resistance to high value purchases
• Company purchased so that technology could be
  used for selling car insurance

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How is IT being used to Compete? (4)

• Disintermediation ie leapfrog the travel agent
  and tour operator
• Internet booking of components
• Direct sell brands
• Service improvement through data mining
• Many other retailers now selling holidays
• Tour operators going direct

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Current Trends

• IT enabling DIY packaging
• Stagnant demand
• IT changes product to a commodity
• Internet provides low cost of entry
• More difficult to tilt
• Vertical integration
• Strong shift towards Internet for business to
  business (e-)trading

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Building Tilt

• Tilt is about stacking the odds in your favour
• How a travel agent connects to a tour operator
• Viewdata terminal autodials / PCs default
  diallers
• Shared networks such as ATT Istel
• Make it easier and quicker
• Get counter staff to prefer you

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Building Tilt (2)

• Once connected
• Never say no
• Mimic competitors commands
• Ignore the customers requirement
• Keep the customer in your system
• Display things in your order of preference
• Breadth of product

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What Has Happened Since September 11?

• Air travel is less attractive
• Immediate 60 drop in US trips
• Many airlines cutting capacity or prices
• Budget European airlines predicting growth
• IT prices heavily reduced
• Cruise prices discounted 30
• Late offers down by up to 78
• Expected to recover, but might take some time
• Business reduced some 20 after the Gulf War, but
  recovered after a year or so
• Enhanced dependence on IT

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Tourist Attractions

• Theme parks
• Alton Towers
• Chessington World of Adventures
• Port Aventura
• Visitor Attractions
• Warwick Castle
• Flagship Portsmouth
• Madame Tussauds

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How do they compete?

• Marketing
• Repeat visits
• Visitor experience
• In visit spend
• Dwell time

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What about their IT?

• Ticketing
• Distribution
• Speed
• Marketing
• Databases
• Loyalty
• Operations
• Retail
• All the usual ledgers etc

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Ticketing at Alton Towers

• Key requirements
• Guests perception of quality of experience
• Speed of transactions
• Reliability
• Flexibility for pricing and promotions
• Financial controls
• Capture of marketing information
• Capable of handling trainloads

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Ticketing at Alton Towers (2)

• System acquired
• Supplied by Tor Systems
• Tor systems developed a high speed ticket printer
• Guest displays, souvenir tickets
• High speed local network
• Cash transaction in little more than 3 seconds
• 15 minutes downtime in 2 years

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Ticketing at Portsmouth

• Flagship Portsmouth is the largest attraction on
  the South Coast
• Complex ticket types
• Ticketing Hall
• Initially purchased bespoke system with touch
  screens - became unreliable
• Replaced with industry standard package

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Ticketing at Portsmouth (2)

• The Renaissance of Portsmouth Harbour - 46M
  Lottery funding
• Consortium of varied independent partners
• Joint ticketing mandated
• Choice of open access or tokens
• Choice of networking harbour or smart card
  technology or low-tech low function
• Technology choice dependent on political decisions

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Marketing at Tussauds Group

• The Tussauds Group operates Madame Tussauds in
  UK, US, Australia and Holland, Alton Towers,
  Chessington World of Adventures, Thorpe Park,
  Warwick Castle, Rock Circus and the London Eye
• Development of marketing database
• customer details
• visit details

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Tussauds Marketing Database

• Became 2nd largest club database in UK
• Helped to increase entries to record levels
• Target promotions for groups, coach operators,
  cross sales etc etc
• Showed how critical data quality was
• Enabled strong growth of volumes

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Style of IT in Tourist Attractions

• Most smaller attractions build up from retail
  systems
• integrate ticket sales with shop
• eg Isle of Arran Distillery, Merseyside Maritime
  Museum
• Low costs but limited functionality

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Style of IT in Tourist Attractions

• Middle sized and large operations often combine
  several separate applications
• retail ticketing financial package
• eg Warwick Castle
• enables best of breed decisions
• Low costs high functionality
• but integration sometimes complex

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Style of IT in Tourist Attractions

• Some of the larger players specify fully
  integrated applications
• eg Port Aventura uses SAP
• High costs high functionality
• Costs sometimes limit possibilities

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Operations at Port Aventura

• SAP used for all kernel applications
• Finance
• Human Resources
• Scheduling
• etc
• Specialised fringe applications tightly
  integrated
• Ticketing
• Point of Sale
• Time booking
• Costs per visitor about 4 times Alton Towers cost

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What Has Happened Since September 11?

• Overseas visitors spend in UK down 20
• Hotel bookings down 15
• Visitor attractions suffering more if they depend
  on overseas customers
• Tower of London down 30
• Security increasing
• Opportunities for IT to contribute more

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IT in Tourism and Leisure

• Very competitive industries
• IT is particularly relevant because of their
  dependence on information
• IT is often used as a competitive weapon
• Some examples of IT being used very aggressively
• Competitive use of IT will probably increase

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Travel and LeisureIT as a Competitive Tool

• Peter Bubb