In 2004, total expenditure in the UK on travel and tourism was £70.08 billion, a rise of 4.8 per cent on the previous year.
These figures, according to market intelligence firm Keynote, take account of inbound tourism as well, but illustrate how important the travel industry is to the UK economy as a whole. The overall market will show further expansion up to 2009, Keynote believes.
The range of organisation across the industry is varied, with the likes of BA at one end of the scale, and tour operators and niche players at the other. While technology is critical for both, their challenges are very different. For the high volume, commodity players like flight or rail operators, the internet has lent itself easily to their business, reducing the cost of sales and enabling self-service bookings. By contrast, specialist holiday suppliers like to interact with their customers and argue that because of the range of options on offer, customers want to talk to someone about their holiday before booking.
Henry Harteveldt, vice-president and principal analyst for travel research at Forrester Research believes technology has made a huge impact on the travel industry, particularly for airlines that have embraced the internet, self-service and RFID. He says that even smaller tour operators are using a number of specialist technical solutions on the market but feels the internet is not yet ready to offer everyone in the industry a new business model. “Although back-office and call centre systems are improving efficiency, the internet is not advanced enough for specialist travel providers,” he says. “In Europe online sales in general are not as high as in the US and because there can be such an up-sell opportunity for tour operators, they have to make sure they really engage their customers. The internet cannot do that yet. It will get there but is still quite limited at the moment.”
Scalable, robust applications to support tour operators or travel wholesalers like agent call back or instant messaging (IM) are more practical, according to Harteveldt. “Travel booking through IM or chat alert for call centres do add business value, the technology is just not ready for booking yet, it is more about planning and information.”
The other problem is that travellers rarely make instant decisions about their trips, and whereas offline reservations can be held on a system by travel agents, it is harder to reserve something on the internet because of the dynamics of online booking. Even using BA’s online check-in booking a seat can be problematic if others are trying to book at the same time.
For most industry sectors the move to online sales models is proving to have huge benefits to the bottom-line but for some parts of the travel industry it comes with disadvantages as well. The problem is in the complex nature of some travel sales. For organisations like BA, where sales can be seen as commoditised, the internet has been nothing short of a saviour. But for tour operators selling different, and sometimes complicated holiday packages, the internet is being used as an information tool, rather than a transactional device. The reason is clear – one US travel agency, which sells holiday packages, reckons that it makes on average 25 per cent more for each offline sale than for online ones.
Key IT issues
Improving efficiency: Although the travel market is still showing healthy growth, firms are still looking to trim their costs through improving back-office systems, replacing legacy systems with more flexible options which take account of the evolving business model in the industry.
Online versus offline sales: Cross-selling and up-selling are important parts of a tour operator’s business. While the internet has offered specialist firms a great method to present information, both they and their customers still want to talk to each other before booking.
Content management: For some travel firms, collecting and presenting the different information from around the world that makes up their products is complicated. Looking for flexibility and ease of use is the key.
Even so Keynote says that trends within the industry that are affecting the overall market show that there is an increasing tendency for travellers to arrange their own holidays and book their flights and accommodation over the internet.
Forrester’s Harteveldt believes that parts of the travel industry still have some way to go before they begin to make the most of the technology available. “It is partly the peculiarities of the industry and interreliance between different parts, like the airlines and hotels,” he says. “It has got better but at the heart there are still a lot of legacy systems out there. A lot of the tour operator stuff looks like it has been put together by stoned high school kids after class.”
He highlights BA as one of the organisations in the travel industry leading the way, but says it had to be ‘really gutsy’ to throw out the old stuff first. “In three to five years time there may be the technology tour operators need to drive down their costs of sales without hindering the cross-sell opportunity but currently tour operators will want to keep the bulk of their sales off the internet and use online offerings more as an information channel, than a booking device,” he says.
- Headquarters: Port Solent, Portsmouth
- Number of employees: 170 worldwide
- Last full-year revenues: 30 million euros
- Head of IT: Andy Bex, IT director
CRM and content distribution are the key technology areas for Inland Waterways. The company, which is part of the First Choice Group, includes three different brands: Connoisseur Boating Holidays, Emerald-Star Boating and Crown Blue Line Boating Holidays. It has agents and offices in 20 different regions and offers holidays in seven different countries within Europe.
Its booking systems, customer databases, central websites and back-office operations are all run centrally, but Joe Lynch, sales and marketing director of Inland Waterways, says the organisation’s major challenge lies in linking customer propositions to the three different brands. “Managing the information between markets and destinations is complicated,” he says. “There are 58 different boat types alone. Then there are different cruising areas, languages and sales regions. It all makes for a complex content management challenge.”
The human element
Of course, like the rest of the travel industry, Inland Waterways is examining how to make best use of online technology but Lynch believes the complexity of choosing a complete holiday offers additional tests. “Compared to commodity travel options like choosing a flight between say Manchester and Barcelona, booking a holiday is far more complex and emotive,” he says. “We now do about 15 per cent of our bookings online but there is more call for technology to work well alongside human intervention.”
Each of the organisation’s brands has its own website, which gives a clue to the diverse offerings Inland Waterways has to accommodate in its IT strategy. The Connoisseur and Crown Blue Line Boating holidays operate holiday boat hire throughout Europe including Ireland, France, Germany, Italy, England and Holland.
The company has just launched a new site for Crown Blue Line, which works around giving customers information about the different holiday options available and a journal so they can follow the progress of their booking. A second new site is due to launch as MIS UK goes to press. Lynch says the new site is giving fantastic results and is excellent at optimising searches and providing customers with the information they need to make a decision. “Obviously this is leading to more sales, because what we are doing is making it as easy as possible for the customer to find out about different options. As we add to the site we will make it even easier for them.”
"We now do about 15 per cent of our bookings online but there is more call for technology to work well alongside human intervention"
Joe Lynch, sales and marketing director, Inland Waterways
People have different approaches when they are researching holidays, according to Lynch, but managing the content they are looking at is vital. “Many do their holiday research online, but those searches can be very different especially given the broad range of our offerings. We make sure their browsers can find what they need and then they often want to speak to someone who has been there for reassurance,” he says. “They want to be sure the information on the website is not just the result of a clever marketing agency, so they use our call centre teams, where we have to ensure we are all using the same versions of data. This is a major challenge for our IT systems.”
The call centres are sourced in 20 different local regions and must have access to the most up-to-date versions of data, as the holiday products on offer are constantly changing. “Every team has to be working from the same data version or the systems just wouldn’t work. Otherwise customers might want a boat that has already been booked out, without another part of the company realising,” he adds.
Inland Waterways also uses various CRM databases to improve the efficiency of its transactions and says customer retention is high, at about 50 per cent. “All the content about bookings and sales of their holiday is available to the customer, as well as all the background information on the holiday itself. We try to be as transparent as possible.”
Lynch believes that the biggest role technology can play in the travel industry is to help the customer and make sure that the information they need is available and accurate.
“We are using some shared services throughout the company, and work with some partners as well. But the most important aspect for us is helping customers by providing the information they need to make their choices and to enjoy their holidays.”
Neilson Active Holidays
- Headquarters: Brighton
- Number of employees: 900 worldwide
- Last full-year revenues: £1.6 billion (Thomas Cook Group)
- Head of IT: Piers Beddington, IT manager
Neilson Active Holidays was founded over 25 years ago to provide active, packaged holidays, rather than, as it says on its website ‘fly and flop’ vacations. It has had various parents but is now owned by Thomas Cook (which in turn is owned by the Lufthansa Group) and is one of the leading active holiday providers in the UK. Around 100 staff work in its headquarters in Brighton and another 300 work in resorts and activity centres at its holiday locations.
Pete Tyler, managing director of Neilson Active Holidays, says the main technology challenge moving forward is to replace its old fashioned legacy reservations system with a more flexible, dynamic approach that takes account of the changes in the holiday market. Neilson has evolved out of structured charter flying, and guaranteed beds in chalets, hotels and apartments. “Our traditional packaged market runs for seven or 14 day holidays and encompasses skiing, snowboarding, sailing, windsurfing, water sports, mountain biking and tennis,” he says. “There is now some demand for more flexible holidays, with different durations, departing from different UK airports especially within the ski market and our current charter-based system does not offer this type of flexibility.”
Dual purpose IT
The objective for Neilson’s IT is to find systems that can cope with both business models. The systems currently run on old fashioned legacy systems, where what Neilson needs are component based systems which can easily link bed stock with scheduled and ‘no-frills’ services from the likes of BA and Easyjet, according to Tyler. “We have been looking for a new reservation system to do this for us, with more flexibility to match our client needs going forward,” says Tyler. Charter and packaged holidays have always been very good value for money and the more flexible options are not always the cheapest, says Tyler. “But for some of our clients, time not money is the over-riding priority and we need to provide more flexibility.”
Neilson’s current booking systems were designed for the charter market but stock balancing, with different holiday durations and departures means the current database and legacy system is just not adaptable enough. “What we want is a dynamic package pricing system, which can take account of customers choosing different component options during the booking process and at the end comes up with the correct details and price.”
He believes currently there are only a couple of organisations doing it properly. “We are still looking for the charter business to be the backbone of our business but there has to be a mixture of both types of operation within the system. Running two systems side by side makes no business sense.”
The appeal of package
Tyler believes it is an exciting era for the travel industry and although there may be a perceived view of customer demand moving away from packages, he cannot see the market altering that much. “The UK mindset is still to take seven or 14 night breaks and booking active holidays like skiing or windsurfing are far easier in a packaged environment,” he says.
"It is costly and complicated developing this type of system, so we need to make sure we move forward with the right supplier in the right direction"
Pete Tyler, managing director, Neilson Active Holidays
“But there is now an add-on market for long weekends and mini-breaks. Ryanair and Easyjet have pretty much created this market and we are looking to make the most of it.”
It has taken months researching the new flexible reservation systems available, according to Tyler. “There seems to be nothing that exactly suited our needs off the shelf. It is costly and complicated developing this type of system, so we need to make sure we move forward with the right supplier in the right direction.”
The online function of Neilson’s business is becoming increasingly important. The company sells through travel agents and direct sales as well as through its Brighton-based contact centre and via its website.
“A lot of our customers are web savvy,” says Tyler. “But they often want to talk to my team as well, if they are new to skiing say, or if they are considering going to a new resort. They want advice and it gives us a chance to cross-sell and up-sell as well. The key to our job is trying to understand what customers need, and then giving them what they need to make informed decisions.”
- Headquarters: Heathrow, London
- Number of employees: 46,000
- Last full-year revenues: £7.8bn
- Head of IT: Paul Coby, CIO
In spite of recent investigations by US and UK regulators into fuel surcharge price fixing on long haul flights, BA remains the flagship example of how to use technology effectively to benefit a business. The organisation has turned itself from the inefficient IT monster of the mid-1990s, to a slimline giant, squeezing every last bit of effectiveness from its IT operations.
After saving £850 million and cutting staff by 23 per cent over the last four years, it is now in a very strong position as it looks forward to moving into Heathrow airport’s new Terminal Five (T5) when it opens in 2008.
Paul Coby, CIO at BA, believes technology has entered into the commercial mainstream of the airline. “Our business plan for the year ahead shows how central technology is now,” he says. “Technology is driving the whole commercial side of the business.”
BA is looking to increase its online sales, now at about 22 per cent worldwide and make 80 per cent of its check-ins online or via self-service kiosks by March 2008. This spring it introduced total self-service check-in on all its domestic flights as part of building towards the 80 per cent target. Coby believes that this use of the technology is very powerful, as passengers feel far more empowered when they fly. At Heathrow 11.5 per cent of check-ins take place online, and 10 per cent across other airports.
He reckons now around 6m passengers are regularly booking through ba.com, up from 4m a year ago and a third of all passengers use ba.com before travelling. “It is increasing the number of users that matters,” he says. “100 per cent has to be the goal. We now have 98 per cent of our staff using our intranet now. This is all making technology a mainstream part of the business. There are alternatives where necessary but many are using the technology and liking it. It makes a simple way to do business.”
Coby envisions that check-in desks at airports will soon change to customer service desks. Newcastle Airport is already operating at 60 per cent of self-service check-in. “We are really seeing big numbers move the technology to the mainstream,” he adds.
Internally BA is introducing online payslips to its staff over the next few months. “Employee self-service is very popular, they are already using it for their rosters and travel, so it makes sense to transfer it to the easy routine stuff, like monthly payslips,” says Coby.
"Our business plan for the year ahead shows how central technology is now. Technology is driving the whole commercial side of the business"
Paul Coby, CIO, BA
Now BA’s IT team is increasingly focusing on systems for T5 at Heathrow. Coby says it is going very well, despite being such a large and daunting project. “It is on schedule and we have eight mega milestones to reach as targets over the next year. But devices are deployed, connections are being integrated and 2007 will be testing year. The airline is moving onto the T5 systems, so they run for a year ready to operate at the new terminal when it opens in 2008. This is the year we put the IT infrastructure and systems in place to manage our people and passengers,” says Coby.
BA’s IT organisation has also increased its productivity again, slicing £10m off its operating costs, reducing its headcount by 50 and is still increasing the amount work it is doing. “We are able to do it by delivering simpler technology and standard ways of building. We are putting VoIP into the terminals and offices and our SOA allows us to move faster, while where we use Linux it is easier to increase volumes as well. We are doing a lot more with less through more efficiency and it is a great tribute to the whole team.”
Coby reorganised his team last year, splitting it into three different parts: IT operations, which runs the systems; IT development, which is building new systems and integrating those it already has with T5; and IT and Business Change (IBC) which are closely focused on using IT for effective business change within the airline. “What we have done with the reorganisation is to try to solve the problem of how you deliver IT to the business,” says Coby. “We are absolutely passionate about what smart use of technology can do for the airline.”