Disruptors: what’s the big deal?
Recent months have seen plenty of commentary about new business models in the Australian travel industry. The proliferation of “deals sites” has certainly had an impact on the market, and many term these operators as disruptors. But is it just a new way of doing what has always been done? Myles Stedman attempts to unwrap the enigma that is travel industry disruption.
The definition of a disruptor can change depending on the industry and who is being asked. The concept is so recent it is still hard to pin down and when it comes to the travel industry, it is even less understood.
Most can point to the creation of a new market and value proposition as the first signs of a disruptor’s rise — not to mention the future displacement of existing business practices. But not all innovations end up being disruptive — even if they are revolutionary.
WHAT ARE DISRUPTORS AND WHY DO THEY EXIST?
When it comes to disruptors in the travel industry, there are several Australian businesses who have been given this label, including such brands as TripADeal, Ignite Travel Group, Luxury Escapes, Webjet Exclusives and Inspiring Vacations.
Whether these businesses wear the disruptor tag as a badge of pride or not, Australian Federation of Travel Agents (AFTA) Chief Executive Jayson Westbury is not sure it exists at all. “I’m not big on that term”, he says, “I think the word disruptor is pass, and we’re well past it in the travel industry.
“A disruptor is someone who has got a unique, fresh, innovative concept who inserts into the tradition of an industry something that is so amazing that everyone else is caught with their pants down. I don’t think there’s anything like that in the travel industry in Australia now, or anywhere. The internet is no longer a disruptor.
“The Bestjet collapse… I don’t think they were ever disruptors, but they were always disruptive because they were in a race to the bottom based on price — they were supplementing pricing, they were facing to consumers with other incentives, supplementing it from elsewhere, it was clearly unsustainable. And that’s why they’re broke and not welcome.
“Airbnb was a disruptor in the way we accessed and booked holiday apartments, but arguably, you could say they weren’t really a disruptor at all, they were just better at it. We’ve been booking holiday apartments online for decades through Stayz, and most regional tourism associations have had booking portals where you can book any holiday apartment online since the 1990s,” said Westbury.
On the flip side, Randall Deer, founder and Managing Director of Ignite Travel Group, believes that the term ‘disruptor’ is an accurate moniker for his business, but believes it’s about how customers are viewed, as well as the way products are presented.
“Disruptors are more about how the customer is handled rather than what they’re seeing,” he said. “I view disruption as a no confusion, readymade, holiday-in-a-box-type industry, and we kicked that off back in 2009 with MyFiji. We assumed what other people didn’t, which is that the biggest untapped market is those who don’t know where they’re going yet.
“I do see us as a disruptor, because disruptors have to do with a change in how [the product] is presented. So many people who buy from us didn’t know they wanted that product until we showed it to them.
“Before we came along, consumers were presented with a lot of ‘flights from, routes from, tours from,’ and didn’t really have the whole solution presented to them, so what we said was, let’s show them the best holiday or destination package possible from each budget, and let’s present the finished product instead of part of a holiday.
“There’s a lot of people in this space, they all operate a bit differently — some of them make their money upfront, others make their money after the transaction — but we were the first to offer the ‘less choices are easier for decisions’ model… so, all they’re asking is when can they have it. Customers are presented with something they either like or don’t, and they book or they don’t.
“A flight from $799 is just a whole range of problems and decisions, they don’t know when they can go, how long they can go for, or where they can stay.”
Deer sees this simplification of the decision-making process for customers as a disruption to the traditional model and is happy to wear the label. However, other businesses who are doing similar packaging wouldn’t necessarily define what they do the same way. In fact TripADeal’s co-founder Norm Black would agree more with Westbury’s assessment of the industry.
“It’s a word that gets thrown at me a lot, and I don’t see us as a disruptor, I see us as having offered an alternative to how people have consumed their travel and how their travel options are delivered to them.
“Certainly, we’ve disrupted the traditional method of walking up Main Street and doing it this way, we’ve taken it to sitting on an iPad on your couch and calling us up on the phone and talking to your travel manager.
“We knew there were a number of layers in travel in this country, so we stripped them out straight away to pass on the price point to the consumer,” Black said.
Much of the friction between traditional operators in the travel industry and these ‘new school’ companies comes from the way that many deals are promoted to consumers. In some quarters these so-called disruptors are seen as maintaining Australia’s print newspaper industry, filling weekend pages with full page ads and cover wraps.
But TripADeal’s Black just sees this as another example of doing things differently.
“If you want to build brand, you need to look at alternative methods as to how you get your name out there,” Black says.
“When we started in newspapers, no-one wanted to touch them. We made a website where our phone number was bigger than everything else on the home page, which is the opposite of what everyone else was doing; at what point did we decide the customer wasn’t human?
“Besides, I’ve got a few questions if I’m going to hand over $5,000 for my holiday.”
The advertising practices of some of these newcomers is where we begin to see the cracks in what is an otherwise healthy battle for the soul of the travel industry.
Dennis Bunnik, Council of Australian Tour Operators (CATO) Chairman, recently slammed the practices of unspecified disruptors, calling out “typically” or “valued at” advertising as “often so unrealistic it is laughable”, and “in breach of Australian Competition and Consumer Commission advertising standards”.
“Unfortunately, consumers are buying it, and do think that they are getting a $10,000 tour for just $5,000,” Bunnik said.
CATO is responding by working with ATAS and AFTA to develop an industry Advertising Code of Conduct.
“CATO is also working on an ‘Ethical Advertiser’ mark or stamp that can be used by all members to highlight their advertising as containing genuine pricing and savings.”
Bunnik finds an ally in Ignite’s Randall Deer, who is happy to spotlight how many of his contemporaries arrive at their quote.
“Most of the ‘valued-up-tos’ are lies, they’re not available. They’re misleading. The way some arrive at these prices is by asking for a rack rate, which isn’t a consumer price, they’re not even getting availability tied back to this.
“They’re not technically lying but they’re effectively subcontracting the liability out to the hotel, and the result is the consumer is misled; you can’t buy these holidays through any channel, under any circumstances, for the ‘valued up to’ price they list.
“I agree with what Bunnik says, there needs to be some sort of consistency around how you value things…the notional discount you see on offer is because of price engineering; this is becoming the rule because it’s too hard to compete against it.”
The Ignite boss explained how the company’s advertising strategy saw him bubble to the top without engaging in predatory promotional practices.
“The old way of thinking was to put lots of things on a page to get yield. However, if I was a consumer and I didn’t know where I was going to go, I just get confused by 30 choices on a page.
“We are instead going to present just one, and leave no problems for them.
“If you present too many options, you get no decision, if you leave too many decisions, that creates the need for research… [we present] a single proposition to the consumer that they can either dismiss or not.
“They may not book straight away, but maybe later they’ll be looking up something else online, and they’ll see our ad, and the Hawaii deal will suit where the Fiji one they saw earlier didn’t.”
COMPETITION AND CO-OPERATION
We found many examples of ‘mortar and bricks’ willing to work alongside ‘websites and clicks’, and importantly, recognising the benefits both can have when they work together. TripADeal offers product through Travellers Choice; Luxury Escapes works with TravelManagers and the Express Travel Group, while Ignite is even more closely aligned with traditional travel retailing through a 49% stake in the company held by Flight Centre.
“I think there’s certainly evidence they can work together,” said Christian Hunter, Managing Director at Travellers Choice, who joined forces with Norm Black’s business over 12 months ago.
“Initially there was a little bit of scepticism because the OTA sector is seen as the competitor, however when the phones started ringing, members changed their approach fairly rapidly.
“They saw themselves having the opportunity to promote the product and compete where they hadn’t before, and what it does for [TripADeal] is to expose them to a wider range, because they’ve been restricted with what OTAs can offer.”
Black spoke enthusiastically about the partnership as well.
“Everyone’s caught up in online being the only way to do business, but I go to stores where I feel like someone actually cares and values my business,” said Black.
“While we are doing an online transaction, we’re real, we care about the outcome of your holiday.”
Adam Schwab, co-founder and Chief Executive Officer of Luxury Escapes, has also recently started offering Qantas points on his company’s offerings thanks to its partnership with the Australian flag carrier.
“If you look at the brands we work with, they’re the best in the world, so we become trusted partners with these brands. We do sell packages for less than others, and we move our inventory well in advance. We give visibility and public relations benefits to our partners, it’s worth hundreds of thousands of dollars because we invest so much in making our partners look good.”
“In some ways you could look at Qantas as being a competitor of ours, but we’ve turned that into a relationship and a win-win for both of us. We’re really interested in generating win-win-win partnerships where the customer wins, the partner wins and we win, and that’s what we’ve always been about.”
Given the impact these new business models are making, it’s no wonder there’s such a groundswell of misconception, disinformation and fake news.
“I don’t think it matters what industry you’re in, there’s going to be disruption in some way, and the travel industry has been disrupted for decades, this is just the latest form,” said Hunter.
“From our point of view, it’s how we can work with the disruptor and make it work with us, and it’s an opportunity for our members to prosper in another space.
“If you’re not adapting or evolving, you’re going to get left behind.”