Thousands of apps and other technologies are doing their best to shake up the sector says RatePunk’s Justin Albertynas
Do you remember the time before Spotify? Downloading music, searching for free Wi-Fi, or carrying your CDs. The problem is: the travel industry still doesn’t have its Spotify. Why can we still call one of the most significant industries old-fashioned or conservative in the 21st century? People travel more than ever, and the technologies have sky-rocketed, but the game rules don’t seem to change much.
According to the International Monetary Fund (IMF), before the Covid pandemic travel industry accounted for 10% of the GDP in the global economy and ensured 320 million jobs. Yet, despite that, there isn’t much news coming into this market: potential clients still book flights and hotels on the same Online Travel Agencies (OTAs), using the same websites, and trusting the old ways of search, and the OTAs are not that stimulated to be innovative if the methods seem effective & satisfy the customer’s criteria.
Major duopoly
A bunch of different names in the industry is not an assurance of perfect competition. For the last decade, only two names dominated the travel industry: Booking.com and Expedia. By sales generated in 2020, the Expedia Group took 31.2% ($99 billion) and Booking.com – 29.2% ($92.7 billion) of the market. These companies are the major chains and own separate groups of smaller companies that are often mistakenly held as independent (Priceline, Agoda, Hotwire,
etc.)
Top travel companies in the world by sales
This makes the competition enormous and the chances for innovations and technologies to enter the market very low.
Major industry breakthroughs
More like A breakthrough that brought some new winds into the hotel industry: Airbnb. Offering a new way of getting vacation accommodation became an example of thinking out of the box and the first serious threat to the leading hotel chains & OTAs. Started in 2007 and offering a cheaper stay & local experience, now it’s considered the 3rd & the most significant competitor for the major travel agencies.
But during the last decade or even two, there weren’t many other projects sweeping the market with alternatives to the primitive. It took 11 years for Airbnb to push through loads of travel agencies, and the others could not keep up.
Nevertheless, travel tech start-ups are persistently trying to break the ice. The pandemic negatively affected venture capital, but it’s returning to its primary state. In 2021 Lufthansa Innovation Hub’s Travel and Mobility Tech start-up investment report registered 2,800 start-ups in ground transportation, aviation, hospitality, and trip assistance to search, inspire & book. The funding for start-ups in 2021 jumped to about $44 billion, while in 2020, it only reached $23
billion.
That may still sound like an impressive investment for a good kick-off, but even though the industry is trying to stay up-to-date with the trends… The tendency of travel tech global deal share stats on CBInsights in 2013-2017 was evident: around 50% of start-ups never left the seed/angel stage of growth. Since the start-up funding & supply grew during the latest years, the percentage of higher stages reached should also be proportionately more elevated, but it’s clear that the obstacles in getting a new product into the preserved market are tremendous.
The habits
It would be naive to blame the industry’s conservatism only on the conditions set by the duopoly and the tense competition – it’s also about the user’s comfort zone. People do not tend to search any further after getting to know certain OTAs and other travel-related platforms perfectly well. An example from stats in 2018 – people in Europe are used to booking on Booking.com, and the 2nd place (which is Airbnb) had less than half of users compared with the first place, not even talking about other booking websites.
Thousands of apps, extensions, and other technologies are doing their best to shake up the industry and bring users a better experience by saving loads of money, but the tradition of leaning on travel agencies is still super strong.
So the question is: how can we get the travel industry its own Spotify, and how long do we have to wait for it?