The internet is just a world passing around notes in a classroom.¨
Why Has the Internet Made Such a Big Impact on the Travel Industry?
Until the late 1990s, planning a holiday usually involved visiting the local travel agent, consulting a well-used guidebook, or relying on friends’ word-of-mouth recommendations.
Today, thanks to smartphone apps and fast computer access, travelers:
- Book their flights, tours, activities, restaurants, and hotels online.
- Reserve stays in someone else’s home.
- Use apps to book taxis.
- Search online reviews to select restaurants, tours, and attractions.
The travel industry adapted to online sales more quickly and efficiently than most other industries. The first online hotel and airline bookings occurred in the early 1990s. At least five years before most other retailers.
The industry is also particularly well suited to the internet. Unlike buying a dress, consumers do not feel like they have to be in a store to try on a product before purchase. Plus, computerized bookings (made through travel agents) existed for several years before the internet became commonplace. (The transition to online booking was relatively easy technologically).
Unlike most other retail industries, most hotels, airlines, and car rentals purchases are made online. There has been a 12% increase in the volume of online bookings annually for over a decade. The total value of bookings made online in 2012 was over $500 billion.
Just look at some of the ways the internet changed the industry, including:
Changing Consumer Expectations
- By placing the ability to book services directly into the consumers’ hands, customers can play around with different times, dates, etc. for flights, etc. As a result, customers discovered that a little bit of flexibility could pay big dividends. After opening up this information, the average consumer expects to and does pay less than before. (Especially when adjusted for inflation).
- Before, travel agents and airlines were trained to ask consumers: “When do you want to leave?”. (I used to call this “the most dangerous question”). The airlines set up their fee schedules to reflect the most common answers to this question. If you wanted to travel at the same time as everyone else, you paid through the nose. If you had even a little flexibility, you saved megabucks. Airlines knew that businesspeople had little flexibility and thus used to charge them through the nose often with no corresponding increases in services.
- Technology has also allowed consumers worldwide to find little known options designed around their tastes and interests.
- Travelers can evaluate the quality of services through online review sites, social media, and businesses’ websites.
- Travel companies are increasingly able to suggest customized products based on their clients’ profiles and past behavior.
- Travelers have frequently formed online communities to discuss options with others with similar backgrounds, interests, and needs.
Changing the Travel Industry Business Model
- There were 50,000 fewer travel agents (around a 40% reduction) in the US in 2014 than in 2000. However, recently, the industry has stabilized as more travelers realize that agents can help them steer through the increasingly complex airline fare regulations.
- While the internet reduces the number of agents, many other parts of the industry, like tour operators, have survived by introducing online bookings.
- Online bookings have allowed the sharing economy to flourish. By making reservations easy and quick, travelers accept the idea of staying in other peoples’ homes through Airbnb. They also are willing to use private cars as a taxi through Uber. In fact, within five years after launching Airbnb, 9% of UK and US travelers rented space in a private home or apartment through Airbnb.
- The internet allows the travel industry to avoid a lot of costs, time, and personnel in almost every aspect of their operations. Probably the most essential cost-savings came from reducing the cost of issuing paper tickets. Airlines even save fuel costs, for example, by placing all of their employee briefings, regulations, etc. digitally instead of on paper.
Want to Learn More About the Internet’s Impact on the Travel Industry?
Check out this article from The Guardian.
Travel Economics 101 Posts
Here are several posts designed to give Fifty-Plus Nomads a basic idea of how Travel Economics works. Being armed with a better economics education should make you a better travel consumer. (These can be read in any order)
- Why Alliances are Essential to Travel Providers. Are they Good or Bad for Consumers?Travel industry alliances are essential to the business´s survival. However, alliances have both good and bad implications for consumers
- Extra Fees: What are Ancillary (Extra) Fees and Why Are They Increasingly Becoming A Travel Industry Lifeline?More and more the travel industry depends on the sale of other products to expand and maintain its profitability. Expect to be bombarded with hints to buy other things (ancillaries) on your next cruise, flight, etc.
- The Internet Has Changed the Face of the Travel Industry More than Any Other Major IndustryThe internet has changed the travel industry probably more than another industry. This article discusses how these changes affect the consumer.
- Travel Industry Cost Saving Techniques: The Good, the Bad, and the UglyThe travel industry has made several changes to save costs in recent times. Some like using more fuel-efficient planes do not affect consumers that much. Others like reducing staff have made the experience worse for consumers.
- Business Travelers Versus Leisure TravelersThe travel industry gets most of its clients from leisure travelers. However, it makes more money from business than leisure passengers. The airlines put up with us leisure travelers because they couldn’t survive without us. However, they don’t hide their preference for business travelers.
- Why Are There So Many Connecting Flights? A Discussion of Why Airlines Love the Hub-Spoke Model More than ConsumersUnbeknownst to most consumers, the cause of most of our airline-related complaints is the hub-spoke model. Unfortunately, however, the hub-spoke model is also essential to the airline industry’s financial viability.
- Airline Schedule Changes: Why Don’t Airlines Keep their Promises?Learn why airlines change their schedules after you buy your tickets and what you can do about it.
- How Many Taxes, Fees, and Other Charges Do Consumers Pay For Airfare, Hotels, and Other Travel Services?The amount and number of travel taxes, fees, and other charges added to your bill will probably surprise you. Many are hidden and like everything else, taxes keep going up.
- Airline Consolidation: What Are the Disadvantages and Advantages For the Consumer?The airlines have consolidated so fast in the USA and Canada that only 5 players dominate the market. Learn what this means for consumers.
- Travel Industry Consolidations (Non-Airlines): The Effect on Consumers (Negative or Positive)?Probably the most significant change in the travel industry in the past couple of decades has been the industry’s rapid consolidation. Read this post to discover how few travel players really exist in the market today. and how this rapid consolidation has affected consumers.
- Why the Sharing Economy Has Become So Popular in the Travel Industry?The sharing economy like Uber and Airbnb has made a major influence on the travel industry and will continue to affect the industry far into the future.
- Third World and Chinese Travelers: The Biggest Future Travel TrendThe biggest change affecting the travel industry is the gigantic increase in emerging countries and Chinese travelers. These travelers will change the future face of tourism more than anything else.
- The 3 Reasons Travel Prices Are So Radically Different than Other Products: Perishability, Capital Costs, and Yield ManagementHave you ever wondered why travel products seem to be priced so crazily? Learn the three economic factors that contribute to the pricing of travel products: perishability, high capital costs, and yield management.
- Travel Economics 101: Learn How the Industry Works and Save Yourself Money and HeadachesPaul Heller, the Fifty-Plus Nomad founder, has developed a series of posts about travel economics. Reading these posts will help Fifty-Plus Nomads deal with some of the problems with the travel industry they are likely to encounter during their long-term, round-the-world journeys.