2017: Where did it go?!
2017 has been a year of changes in the Australian travel and tourism sector, with the ongoing proliferation of new technologies continuing to impact travel agencies, airlines, cruise operators, wholesalers and suppliers. Bruce Piper looks at how innovation has affected the industry — in both good and bad ways — during the year that was.
With the end of the year fast approaching it seems that 2017 has passed in the blink of an eye. Life moves quickly in travel, and with so much going on it’s good to take a breather and reflect on the last twelve months which have seen a plenty of highs and lows.
“If you’re not constantly moving forward, then — without a doubt — you’re moving backwards”. That’s a quote from US politician Bill Owens, speaking about technology and the economy, but it certainly also applies to the Australian travel industry if the events of the last year are any indication. Disruptive innovation is all around us, and while that can be a frightening prospect, the opportunities created by new technology are being grabbed with both hands by many travel businesses.
An intriguing development over the last year has been the rise of formal partnerships between traditional travel suppliers and some of the major online disruptors currently shaking up the tourism landscape. The most recent of these has been the alliance between Qantas and Uber, which has seen tight integration between the Qantas smartphone app and the ride-sharing platform. Qantas frequent flyers can earn points on Uber trips booked to and from the airport at each end of their trips, with Qantas thus taking more control of the whole customer journey.
Airbnb is also being embraced by some in the industry — again Qantas has a deal which allows frequent flyers to earn points on Airbnb bookings, while a number of TMCs including Flight Centre’s corporate arm FCM Travel are also evolving their policies to allow customers to utilise Airbnb accommodation.
These are some of the bigger examples of how the industry is embracing innovation — but there are plenty of other instances right across the travel and tourism sector.
Travel agent innovation
Innovation in the travel agency sector during 2017 has been defined in many cases by acquisitions, as larger companies seek to move into areas where nimbler startups have established a foothold. Flight Centre and Helloworld have both been among the purchasers of small operations which are being bolted on to give them additional capabilities, while other groups have also been innovating in a multitude of ways.
Flight Centre in particular was an avaricious acquirer, most notably with the $3 million purchase of Travel Partners from founder Jeff Hakim, as well as the NZ-based TravelManagers network — unrelated to the Australian group of the same name. The deals expanded Flight Centre’s home-based agency footprint, with independently contracted home-based consultants providing a new, lower-cost distribution model. Flight Centre ceo Graham Turner noted the deal also provided new career opportunities for existing staff.
However this innovation wasn’t so good for some 200 casual Flight Centre employees who were already working within the group as home-based agents. In the weeks preceding the announcement of the Travel Partners acquisition they were forced to choose between signing up for a sub-contractor agreement, or an employee arrangement with an extremely high — some would say unattainable — sales target. The move was interpreted by some as Flight Centre seeking to clean up its industrial relations slate by wiping out its casual travel consultant workforce, who were previously on questionable employment contracts that were effectively “commission-only”.
Helloworld Travel’s minority acquisitions of some of its member agencies — notably the Hunter Travel Group and Helloworld Mackay owner Cooney Investments, were not so much ways for the group to innovate, as to shore up its network and ensure these top performers have their interests clearly aligned with the overall group. HLO already has a significant presence in the home-based agency sector with its 2016 acquisition of MTA Travel. Indeed the major branding developments within Helloworld this year could be seen as the opposite of innovation, with the reintroduction of the former Harvey World Travel “The Travel Professionals” tagline definitely a ‘back to the future’ initiative.
Helloworld’s new tagline wasn’t the only industry introduction which saw the pendulum swinging the other way. Savenio announced the development of so-called “agent hubs” where individual members can come together in an office environment to manage their own clientele — kind of like a new wave bricks-and-mortar agency. Travel deals website Luxury Escapes launched its own retail presence in the Melbourne CBD. And online rival Bon Voyage — an offshoot of Catch Group’s Scoopon Travel — announced a major prime time TV promotion including celebrity endorsement through Aussie favourite Jennifer Hawkins.
Flight Centre looked to get in on the action generated by “flash sites” such as Luxury Escapes and Bon Voyage with its 2016 49% acquisition of Ignite Travel Group. Over the last year that has seen Escape Travel and Flight Centre branded stores offering a range of My Holiday Centre deals, seeing these offers made available in the retail space. In the same genre, an intriguing innovation was the new alliance between Travellers Choice and TripADeal offering the consumers the opportunity to purchase “affordable, bucket list holiday packages” compiled by the deals site but available through their local Travellers Choice store. Travellers Choice managing director Christian Hunter described the move as “a new business model in which offline and online enterprises combine their respective strengths to generate new business, rather than continually competing to shift customers from one channel to another”.
The recent disproportionate hoopla around the introduction of the new Qantas Boeing 787 long-haul aircraft amazed some in the industry, who noted that the Dreamliner has in fact already been in service since 2007.
Indeed Qantas offshoot Jetstar has been operating 787s since 2013 so it is hardly a world first for QF. What is new, however is the aspiration of Qantas to operate non-stop between Australia and the UK, with Perth-London 787-9 services to kick off early in 2018. This innovation, which has also seen significant investment in the ultra long-haul passenger experience, has in turn led to a range of major changes in the relationship between Qantas and its key alliance partner Emirates. In particular, a significant backflip and blow for the UAE has been the decision by QF to once again operate its flights from Australia’s east coast to the UK via Singapore rather than Dubai. The change to the flagship “kangaroo route” returns Singapore’s Changi Airport to its former key stopover status in the minds of Australians, with the move also assisting Qantas in bedding down its burgeoning Asia network strategy.
Qantas and Emirates also innovated on the Tasman, where Emirates had long been offering full service A380 flights at bargain basement prices as a way of increasing aircraft utilisation. It has now become more efficient for EK to leave its Auckland-bound superjumbos on the ground in Sydney and Melbourne during the day, while Qantas is adjusting its Tasman schedules to pick up the slack in a great example of how immunity from competition laws allows carriers to optimise their operations. Emirates is making the most of the change by adjusting its flight times out of Sydney to provide more convenient departure schedules and connections over Dubai for its Australian clients.
Qantas and Emirates weren’t the only airlines to introduce new concepts over the last year. Air New Zealand continued its aggressive Americas strategy with the introduction of wide-bodied 787 flights between Adelaide and Auckland. Complementing 787 services ex Perth, the move expanded NZ’s premium one-stop offering to Canada, the USA and Argentina which has proved compelling for passengers, backed by its popular “Dave the Goose” TV promotion.
Virgin Australia’s international innovation in the last 12 months has seen the carrier launch non-stop flights from Melbourne to Hong Kong, after withdrawing flights from Sydney to Abu Dhabi and cancelling a short-lived plan for Perth-Abu Dhabi services. The VA Hong Kong strategy has been complemented by a wide-ranging deal with airlines operated by one of its major shareholders, China’s HNA Group, which are now feeding their Chinese passengers into the Virgin Australia domestic network.
Most recently we have also seen significant investment by Singapore Airlines in its new A380 cabin experience, with revamps of its groundbreaking First Suites, Business Class, Premium Economy and Economy cabins to feature later this month on the key Sydney-Singapore route.
Innovation isn’t always good for airlines, as has been evidenced by the demise of Etihad Airways’ global strategy over the last 12 months. Former EY ceo James Hogan spent up big on stakes in overseas carriers, most notably airberlin and Alitalia, both of which failed in spectacular fashion once Etihad saw the writing on the wall and pulled the pin on further investment.
The collapses continue to resonate through Etihad’s formerly premium product positioning, which has already seen the withdrawal of chauffeur services (apart from within the UAE) and even pyjamas for business class passengers, leading some to contemplate what else is being cut behind the scenes.
And finally on the airline side travel agents and technology suppliers have witnessed the most unwelcome innovation of additional fees for GDS bookings introduced by Lufthansa, British Airways and the Air France/KLM group. The carriers insist this won’t penalise agents who book through alternative, direct methods, but in some cases these new interfaces haven’t been clearly defined and for smaller travel agencies developing software to connect with these systems is likely to prove unaffordable — and unnecessary, given the GDS option is working well already.
A fast-growing sector is often a strong driver of innovation and that has certainly proved to be the case with the cruise industry. In ocean cruising over the last year we have seen major technology-focused announcements from both Carnival Corporation and its rival Royal Caribbean. Carnival has touted its new “Ocean Medallion” system — announced by ceo Arnold Donald during the massive Las Vegas Consumer Electronics Show — as being able to offer unparalleled opportunities for cruise personalisation, as passengers use their personal gizmo to do everything from access their room through to order drinks, set the temperature in their cabin and make onboard purchases. Similarly Royal Caribbean recently gave a sneak peek at its vision for the future of cruising which includes customer recognition through tech-enabled “WOWbands” along with facial recognition to check you in — and ensure waiters always bring you your favourite cocktail.
River cruising is also seeing lots of new developments — not least by APT and its sister operation AmaWaterways which this year announced the new AmaMagna — a cruise ship twice as wide as any others in their fleet which is set to launch in 2019. While the width means the AmaMagna isn’t able to sail the full length of the Amsterdam-Budapest route, the larger ship promises a host of innovations made possible by its bigger footprint, such as new dining options, more on board activities, and of course more passengers with a total of 196 guests.
Crystal Cruises is also bedding down its fledgling river cruise operations, which offer a significantly enhanced experience with just 110 passengers served by 68 crew on its four “Rhine-class” vessels and similar ratios on its Crystal Mozart which interestingly is also on an extra-wide platform, similar to AmaMagna. The brand new Crystal ships feature butler-service for all passengers, amazing window technology which bridges the gap between the cabin and the river, no entry-level “swan view” cabins at all, and exceptional all-inclusive beverages, dining and shore excursions including a Michelin restaurant meal on every cruise.
The Travel Corporation has also boldly targeted a new river cruise demographic with its youth-focused U by Uniworld operation. Cleverly allowing for the refit of its older Uniworld Boutique River Cruise Collection vessels, U by Uniworld promises on-board DJs, bunk beds, parties, mixology classes and more in an attempt to grab the Contiki crowd — along with a purely social media marketing strategy which heavily targets direct bookings.
2017 unfortunately saw several travel industry collapses, with the year starting out with the unfortunate demise of the UK-based All Leisure Group, which operated cruise lines including Swan Hellenic and Voyages of Discovery. While consumer protection arrangements in the UK ensured British customers were repatriated and compensated, no such coverage applied to Australian agents or consumers. AFTA ceo Jayson Westbury worked diligently behind the scenes to broker a win-win solution which saw more than $1 million repaid to Australian agents hit by credit card chargebacks.
Later in the year AFTA rolled out a more permanent solution to supplier collapses, with its highly innovative AFTA Insolvency Chargeback Scheme (AICS). Taking the opportunity afforded by the new rules around credit card surcharging, Westbury and his team successfully defined the concept of “forward delivery risk” which allowed AICS to add a minuscule additional surcharge to credit card processing for participating travel agents. That in turn means agents using AICS are now protected against credit card chargebacks in the event of supplier collapse — truly a significant shift in the risk landscape for people operating travel businesses in Australia.
We’ve only scratched the surface of industry innovation this year. There’s been the Phil Hoffmann deal with Ensemble Travel, while the Magellan Travel Group signed a significant agreement with Signature Travel. Many other airlines have launched new routes into Australia, including literally dozens of Chinese carriers. Cruise companies have grown further in the local market, including the development of new offices by Norwegian Cruise Line Holdings and Crystal Cruises, and new river players such as Riviera Cruises. Wholesalers are also embracing technology — witness the recent launch of agentflights.com.au by Eastern Europe Travel Centre, which provides an online booking engine for wholesale fares to help agents capture bookings and boost yield. We finally saw the demise of departure cards as the Australian Bureau of Statistics changed the way it handles departure and arrival data — and there’s likely to be lots more happening in this space, with developments such as facial recognition set to revolutionise the airport experience in coming years.
Looking forward to 2018, some parts of the industry will be hoping for a better year — not least the domestic sector in Queensland which endured the double whammy of Cyclone Debbie and the Dreamworld tragedy that continues to significantly impact theme park visitor numbers. The cyclone closed Daydream Island and Hayman Island for more than a year and also saw the end of the relationship between One&Only and Hayman — but both resorts are expected to emerge better and brighter. In another sign of a swinging pendulum, state tourism boards are once again starting to engage the travel industry, with a number of cooperative campaigns promoting interstate packages through some of the major industry groups appearing in recent months.
It’s an oft-repeated misnomer that the Chinese symbol for “danger” also means “opportunity”. The same could apply in reverse — that the massive opportunities afforded by technology and innovation will also be dangerous for parts of the industry — particularly those which aren’t able to adapt their business models to the brave new world. By all accounts much of the travel sector is embracing the digital economy, so it is exciting to look forward to the year to come and see how the foundations laid during 2017 will bear fruit for the travel sector. There’s definitely no doubt we are experiencing what is well described in another Chinese curse — “May you live in interesting times”.