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Travel Tech Essentialist #40: Thinking Illogically

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"It seems likely that the biggest progress in the next 50 years may come not from improvements in tec
 

Travel Tech Essentialist

October 29 · Issue #40 · View online
A short newsletter every two weeks with my pick of the top 10 Travel Tech stories and innovations shaping the world's largest and fastest growing industry.

It seems likely that the biggest progress in the next 50 years may come not from improvements in technology but in psychology and design thinking” - Rory Sutherland

1. It doesn’t pay to be logical when everybody else is being logical
Most of the greatest entrepreneurial successes started as completely illogical ideas that made no sense. In 2008, the year Airbnb was founded, the company was looking to raise $150,000 for 10% of the company. The founders approached seven prominent venture capital firms who all said no (actually, two didn’t even respond). You can’t blame these VCs for thinking that opening private homes to complete strangers was a weird and illogical idea. The biggest business opportunities are in the land of contrarians, by focusing on markets and models that are counter intuitive and go against the consensus. Intuition and consensus only leads to crowded markets with lots of competitors and pricing pressures. So, the big question is, how can we let go of logic so we can generate brilliant ideas? A good start is reading Rory Sutherland’s book, Alchemy. Here is a summary
2. The most valuable private firm in America is Airbnb
That, according to Scott Galloway, who thinks that this time next year, Airbnb will be the most valuable hospitality firm in the world, one of the world’s 10 strongest brands and will likely be worth more than the three largest hotel firms combined. Why? In short, because Airbnb is the only hospitality brand that has the global awareness to generate unrivaled demand. On the supply side, Airbnb has over 7 million listings worldwide vs a combined 4.3 million guest rooms from Hyatt, Marriott, Hilton Intercontinental and Wyndham. On the demand side, no travel brand commands the attention (and Google searches) that Airbnb across all markets. Read + Scott Galloway.
Source: Scott Galloway
Source: Scott Galloway
3. Jony Ive will design the next generation of Airbnb products
Airbnb’s value also resides in the attention that its founders have dedicated to designing and carefully crafting its products, services and overall customer experience. Airbnb’s design decisions not only made their service easy to use, but also how it helped millions of complete strangers trust each other. As Bryan Chesky states, “we approach many of our decisions as design problems”. Very Apple-like. The announcement of the multi-year relationship with Jony Ive (the former Chief Design Officer at Apple) to design the next generation of Airbnb products and services is very consistent with Airbnb’s brand. And also consistent with Rory Sutherland’s vision of the future shown in the introduction of this newsletter. Read + Airbnb.
4. United States vs Google
By now, we all know that the U.S. Department of Justice filed a lawsuit against Google. According to the DOJ, Google may have earned its position honestly, but it is maintaining it  by entering into “exclusionary agreements illegally including tying arrangements, and engaged in anticompetitive conduct to lock up distribution channels and block rivals”. It is surprising to read what some in the travel sector are saying about the case and its impact on travel companies, because some of their arguments have nothing to do with the actual case. The case is NOT focused on the Search Engine Results Pages, and it is NOT focused on Google’s ad business. What is the likely outcome? According to Ben Thomson, one of the smartest minds in tech, Google will win: “Apple and everyone else are free to enter into whatever contracts they wish, and consumers are free to undo the defaults that flow from those contracts”. He thinks this will be the outcome as long as the arguments are about legal and economic considerations. But he adds that the real question is a political one: ”are we as a society comfortable with a few big companies having such an outsized role in our lives? If the answer is no, the ultimate answer will not be through the courts, but through new laws for a new era. Anti-aggregation, not antitrust”. Read + Ben Thomson.
5. Weird, even by 2020 standards
  • Flights to nowhere. Flights in many Asian countries are being sold-out. But they are taking off and landing at the same airport. Or not taking off at all. And a lucky few might board a Hello Kitty-themed aircraft. Read +.
  • Singapore Air sold tickets to eat airline meals on a grounded A380. They sold out in 30 minutes. A meal in a suite cost $474, while seats in business class were going for $235, dropping to $70 for premium economy and $39 for economy. Read +.
  • Hotels.com began offering the chance to ‘hide under a rock’ as the 2020 US presidential election approaches in an unspecified, underground location in New Mexico with zero access to wi-fi, the news or TV. The property is available for $5 per night from November 2-7. Read +.
6. McKinsey’s tourism recovery model
McKinsey forecasts a cumulative drop between $3 trillion and $8 trillion before tourism expenditure returns to pre-COVID levels, which may be as late as 2024. Recovery will be slow and driven by the underlying dependencies countries have on domestic and non-air travel. The report shows the recovery speed, recovery year, cumulative change vs 2019, 2020 drop, and key drivers for a number of countries including USA, India, UK, France, Spain, Germany, Italy and Mexico. Read + McKinsey.
7. Google says COVID is boosting OTA usage in Asia
COVID has accelerated the desire of consumers in Asia Pacific to book through OTAs instead of direct with suppliers, according to Google’s travel lead in APAC. In China, consumers’ preference to book via OTAs has more than doubled this year, according to the Google executive. A research report by Expedia concludes that OTAs will drive economic recovery for the industry and that travelers are 57% more likely to book their travel through an OTA now than before COVID, and millennial and Gen X travelers are the most likely to book via an intermediary. 
8. Remote workers are in high demand
Hotels are having to find new revenue sources to compensate the slowdown of out of town overnight guests.   Targeting local remote workers and hyperlocal guests are two trends for hotels trying to extract value from their real estate assets. Two of the largest hotel chains in the world recently announced similar programs. Hilton launched Workspaces by Hilton, a work-from-hotel pilot program in the US and the UK. Marriott announced its new Work Anywhere initiative, with packages customized for guests that are seeking a 1 day stay, extended overnight stay or a multi-day work + play getaway.

9. Partnerships and product launches
  • Amadeus partnered with French startup Setoo to offer personalized insurance to travelers in nine markets (France, Spain, Italy, UK, Germany, Netherlands, Luxembourg, Belgium and Austria). +.
  • To address consumers’ increased desire for contactless experiences, Booking.com is partnering with Futurestay to provide online check-in for Futurestay partner properties booked through the OTA. +.
  • Barcelona-based TravelPerk introduced FlexiPerk. Customers sign up for the program and pay a 10% fee on every booking made, making every element within the trip (flight, hotel, car, train) eligible for a refund. No questions asked. +.
  • Booking.com launches flight search and booking in the US. The search, booking and payment of tickets is done fully on Booking.com, in contrast to how it operates in a number of European countries, where users are sent to a 3rd party. The flight inventory comes from Etraveli Group+.
10 Deals and funding
  • RV rental marketplace RVshare announced a $100+ million fundraising round led by KKR. +.
  • Amadeus invested in Journera, a software company focused on making frictionless travel experiences a reality. +.
  • GetYourGuide closed a $133 million convertible note, led by Searchlight Capital. +.
  • 3 years after Expedia bought SilverRail for $148 million, top executives of the UK-based rail aggregator have taken the company private in a management buyout.  +.
👍 If you like this newsletter, I would appreciate if you forward it to a friend/colleague or recommend it on social media. And hit reply to send me feedback, ideas or suggestions. Thank you!
Mauricio
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