Business Insights Series 2011/2012 January 2012

Transcription

1 Business Insights Series 2011/2012

2 TOURISM AND TECHNOLOGY 1. Introduction Setting the scene Fact Finding Booking Technologies for the tourist Technologies for providers Some suggestions Conclusion... 8

3 1. Introduction This article examines some of the technology trends that are impacting on the tourism sector worldwide, and their implications for tourism in NI. It will review how technology is influencing tourists and tourist operators, sorting out short term fads from developments with real long-term potential to enhance visitor experiences. Specifically this article examines key trends in online technologies, and how consumers have responded to them. These include online search engines, booking systems, social media, and how these can be leveraged to enhance the tourism offer for individual operators and for the NI tourism industry as a whole. This article also examines more novel innovations and technologies which are being employed by individual operators and by tourists, from Global Positioning Systems (GPS) to green technologies which are aiding the development of the sustainable tourism agenda. Providing an inventory of all technological advances in the tourism industry would be a difficult task, but this paper aims to highlight some examples to highlight how technology has been leveraged by the tourism sector and by tourists, and some of the advantages and pitfalls that these bring. The aim of this article is to help tourism providers assess how technology can impact them and what types of questions they should ask before deciding to adopt such technologies. 2. Setting the scene The use of internet has become an increasingly integral part of everyday life for consumers in Ireland and across the world. Some 60% of NI and 73% of RoI consumers have a broadband connection in 2011, with penetration increasing from 8% in NI and 21% in RoI in 2005 (Mintel/TGI). By comparison, around 69% of GB consumers have a broadband connection (Mintel/TGI, 2011). This makes the internet one of the, if not the, strongest channel for tourism companies to reach consumers and potential visitors. There are many related trends which are affecting the way in which we reach consumers. One of the most prominent of these is social networking. The technologies which consumers are embracing are also changing the way in which we reach potential visitors. For example, desktop and laptop computers are still the most popular way for consumers to access the internet in 2011 with some 62% of NI consumers and 76% of RoI consumers using a computer to access the internet (Mintel/TGI, 2011). However, consumers now have more options and increased mobility when it comes to browsing. For example 17% of NI and 18% of RoI consumers access the internet via their mobile phones (Mintel/TGI, 2011). This can involve areas such as browsing online maps, researching holiday destinations and downloading apps while on the go, while also helping tourists already on their trip find out more information about their destination. How tourism operators leverage these trends to maximise their visibility is a key question. From the point of view of the tourism provider there are a whole other range of technological issues. Much of the technological developments have opened up new channels for reaching consumers. These include the growth of online booking sites and in-house booking management systems. There are also technology options which offer potential new efficiencies for tourism providers. These involve everything from investment in green technologies to inventory management systems. With the economic downturn creating a relatively challenging period for the NI tourism sector, it is necessary to examine whether investing in new technology is worth it and if they will yield a sufficient return in a short enough period of time. All of these developments present a myriad of challenges and opportunities for the tourism sector. It is in this context that we examine some of the technological developments related to the tourism sector, and assess their potential importance and longevity of impact on the tourism sector.

4 3. Fact Finding Internet sources have become a core aspect when visitors are planning their holidays, and planning visits to NI is no exception. According to the NITB Visitor Attitudes Survey (2009) 79% of visitors used the internet to plan their holiday to NI, making it a more popular source of information than guide books, personal recommendations and even travel agents. The same survey found that tourist board operated websites were the most important sources of information when using the internet, including Discovernorthernireland.com and Discoverireland.com. Some 47% and 37% of visitors to NI used these respective websites to plan their holidays in Airline websites, hotel websites, and online travel agents/booking sites also saw high usage among visitors to NI. Contrary to expectations, the social network Facebook was only used by 2% of visitors in planning their holiday. However, as noted further on in this article, social networking sites have an important role to play in getting noticed and promoting tourism enterprises. 3.1 All publicity is good publicity? Online reviews are a highly utilised method for visitors to plan their holiday with 73% of visitors to NI who read online reviews citing these as very important or quite important when deciding on accommodation. High numbers of visitors also regarded reviews as important for deciding on sites and attractions (Visitor Attitudes Survey, 2009). One of the key websites for tourists planning their holiday is TripAdvisor, with 19% of NI visitors using this to plan their trip. In fact Alexa (a leading web ranking company) rank TripAdvisor as the second most popular travel website in the world (January, 2012). This website allows visitors to review their experiences of accommodation providers, activities and restaurants and rank them on a five point scale from Excellent to Terrible. It also allows visitors to post photos of their room/experience. An average rating is shown for each hotel and website visitors can go straight to reviews of hotels to explore the detail highlighted by the visitor. This offers opportunities for NI to highlight its key tourism assets. For example, the Black Cab Tours of Belfast are ranked as NI s top tour attraction (out of 40) on the website, achieving 158 excellent reviews out of 168, with no reviewers rating it as poor or terrible (correct as of ). Though this website brings with it many advantages for the tourists and for operators, it can lead to visitors posting negative reviews. However, the website does allow providers to respond to individual comments which can also be seen by those visiting the website. With internet enabled, and high quality camera phones reviewers can post reviews during their stay so being alert to new reviews is imperative. 3.2 Social Networking Word of mouth is as important for the tourism industry as ever, but it is how the word is spread which has changed. Social networking is a key aspect of this. The two websites which have had the greatest impact in this area are Facebook and Twitter. According to Alexa, Facebook is the second most popular website in the world, only topped by search engine Google (January, 2012). According to the Mintel report Online Social Networking Ireland (October, 2011) Facebook is the most popular social networking site among NI and RoI consumers, with 77% and 86% of internet users accessing the site, respectively. This compares to 73% for GB (Mintel UK, 2011). According to Mintel Ireland the most popular feature of social network sites is to keep in touch with friends and family and reconnect with old friends. Following this the most popular feature is posting photos, which is used by 39% of NI and 50% of RoI consumers respectively. This can often involve posting photos of places visited and can be used to spread word of tourist amenities and providers. How consumers access these social networks is also important. According to Mintel s Online Social Networking Ireland (October, 2011) report some 40% of NI and 38% of RoI internet users access social networks via their mobile phone. A feature of Facebook which ties in with this is checking in. Users of the network who also have a smart phone can log their position using their smart phone and it will post to their profile page on Facebook, to let their friends know where they are. This can often be accompanied by photos or posts. Some tourism providers have taken the initiative and used this to their advantage to gain publicity. For example, US low cost airline JetBlue offers loyalty points to those who check in to their Facebook page when at an airport that they serve.

5 Novel uses of social networks, as highlighted above, may have some impact, but advertising can have negative impacts. For example according to the Mintel report Online Social Networking Ireland (October, 2011) some 38% of NI and 44% of RoI internet users claim that they never pay attention to advertising on social networks, while 32% of NI and 39% of RoI internet users claim that advertising on Social Networks annoys them. By comparison 17% of NI and 27% of RoI internet users have visited a company s website as a result of social network advertising, while 11% of NI and 23% of RoI internet users are friends with a corporation/brand on a social network site. Undoubtedly social network provides many unique opportunities to engage with consumers and potential visitors, but how this is done may influence its effectiveness. Further information on Social Networking and Tourism is available in the NITB article The importance of social media in tourism from the 2010/11 Insight Series. 4. Booking The proliferation of the internet has not only opened up opportunities for promotion and information sharing, but also for sales. According to the NITB Visitor Attitudes Survey (2009) some 60% of NI visitors used online channels to book accommodation. According to the Mintel report Online Retailing (June, 2011) some 60% of NI internet users have booked flights/travel online while 54% have booked accommodation online (Toluna 2011), making these the third and fourth most popular categories for online shopping. This was topped by books/cds/dvds (71%) and clothing/footwear/accessories (67%) By comparison, travel and accommodation these were the first and second most popular categories for RoI consumers (65% and 58% respectively). Much of the popularity of this has been due to the growth of Online Travel Agents (OTAs) and booking websites. Previously, accommodation providers were quite limited in selling their offer online due to not having the technology to do so. This was not as much of an issue for large chains (for example Hilton Group) or consortia (such as Best Western), but was for smaller independent hotels which could not afford to invest in technologies such as Central Reservation Systems. However, OTAs have acted as new channels for independent accommodation providers and these have proved highly popular with tourists. For example booking.com is the most popular travel website in the world (Source: Alexa, ). There is quite a high level of competition among OTAs, and many have adopted different operating models, as highlighted below. FIGURE 1: OTA BUSINESS MODELS, 2011 Model Description Typical example Typical cost to hotel Agent Merchant Packaged Opaque Club OTA sells supplier product in return for commission Supplier provides allocation of product at net rates, which are subsequently marked up by OTA and sold publicly Supplier provides allocation of product at net rates, which are subsequently incorporated into packages by the OTA Supplier s product is sold by OTA with one element of the product (eg the hotel name) hidden until sale is complete Product is offered for a limited time to a closed user group Booking.com Hotels.com ThomasCook.co m Priceline.com GroupOn 10-15% of gross revenues 25-30% of gross revenues 35-40% of gross revenues 60-70% of gross revenues 75% of gross revenues SOURCE: MINTEL (THE FUTURE OF TECHNOLOGY IN TRAVEL INTERNATIONAL JUNE 2011)

6 Some of the newer innovations in this area have seen the introduction of opaque selling. One of the key examples of this is the mystery hotels on lastminute.com which offers consumers heavily discounted rates on a hotel in a selected location. The name of the hotel is not revealed until the purchase is made. This has proved highly popular with North American travellers in particular (Source Euromonitor, 2011) Similarly coupons are also on the rise, driven by challenging economic conditions where consumer confidence is low. This has seen websites such as GroupOn and Pigsback.com perform well, and act as channels for providers willing to offer promotional rates. 5. Technologies for the tourist The rise of smart phones has been one of the biggest technological advances for the tourist. A significant proportion of Irish and UK consumers now own a smart phone. According to Silicon Republic (2010) approximately one fifth (600,000) RoI consumers have a Smart phone. By comparison, 27% of UK adults and 47% of UK teenagers also have a smartphone (Ofcom, 2011). As mentioned previously, features such as checking-in on social network websites provide opportunities for tourists to share their experiences. However there are many other features which are enriching the tourist experience. One of the most popular of categories of these is GPS (Global Positioning Systems) and maps. GPS on phones is growing in popularity and has almost become as standard as the integrated camera. This is highly important for the NI tourism sector in particular, given that the majority of domestic and RoI visitors use their own cars, while nearly half of international visitors use a hire car while visiting NI (NITB Visitor Attitude Survey, 2009). Furthermore, many of the most popular activities engaged in by visitors to NI include walking and cycling, both of which are complemented by GPS. There are many other mobile applications (apps) which are having an impact on tourists and travel. For example, translation apps are replacing the phrase book and allowing visitors to overcome language barriers. This also has benefits for those providers which may have felt obliged to provide menus and signs in multiple languages. Games are also highly popular and can help alleviate boredom in airports or while travelling. This may have more negative connotations for the tourist oriented retail sector, particularly in airside locations of airports. There are even apps for those who are environmentally conscious about their holidays. For example there is an app available on the iphone which calculates a user s carbon footprint based on distance travelled by air or by driving. Among the most popular app for use on smart phones however is one that allows consumers to access Facebook which, as previously mentioned, offers an opportunity for tourists to share their experiences, and potentially opportunity for NI tourism to benefit from word of mouth. Other technologies are also bring benefits to consumers. GPS for luggage is a relatively niche area, but some companies have brought out products to serve this market. One example is from GPS market leader Garmin. They produce a generic GPS device which can be used to track luggage (or other possessions). Users can also access a smart phone app that allows them to track their bags. This is just one example, however with a recommended retail price of this may not fit into the budget of many consumers. These advances have the potential to enrich the visitor experience, but their impact will depend on how much an area or the tourism sector engages with them. For example mobile apps which offer walking tours of cities or historic sites may be popular, but these need to be developed in the first place if they are to be adopted. Some have already been developed for the NI market. For example the Literary Belfast iphone app guides tourists around literary sites. As with many technological advances, there is potential to take business from some tourism operators. In the example of walking tour apps to guide tourists, this may take business from existing providers of this service. This may in turn place an emphasis on those providers to offer a more enriched, better value service or provide some sort of differentiation in their offer.

7 6. Technologies for providers There are many technological developments which are occurring in the tourism sector and existing technologies which have yet to be embraced in a mainstream way. The challenge for any provider is to assess what is essential, what will add value, and what is simply a fad or gimmick. For example, US company Linen Technology Tracking offers towels (and other linens) with integrated Radio Frequency Identification (RFID) tags. This allows accommodation providers to identify when a towel is being stolen and to prevent theft. According to the founder of the company, between 5% and 20% of linens in hotels go missing. With a RFID fitted linen costing approximately US$1 more than other linen, there is a potential to save on the cost of replacing up to a fifth of linens (USA Today, 2011). This is having particular savings for hotels with outdoor pools in the US where it is common for towels to be removed from rooms. Similarly, the previously mentioned GPS device which can be used on luggage, has also been used (in one anonymous UK example) by a bicycle rental company. The issue however is cost versus risk. For many smaller providers, such systems may not be feasible, and furthermore may be unnecessary. For example, Dublin City Council introduced the Dublinbikes scheme. This allowed visitors and local residents to rent bicycles from various locations around the city and has proven to be a popular attraction. Within the first year, these had been used for the 1 millionth time and out of the 450 bicycles, only two had been stolen (both of which were recovered). For higher value bikes and where there is a high degree of theft investment in GPS may yield a return, but in many cases this may be an unnecessary investment. Contrary to this, some green technologies offer the potential for a return to tourism providers, particularly those in the accommodation sector. Some of these have been highlighted in the NITB paper Sustainable Tourism and the Green Agenda (2010/11 Insight Series). Technologies range from switching to CFL (compact fluorescent lamp) light-bulbs, to more complex and expensive installations such as solar panels, wind turbines and rainwater collection systems. Providers of these systems and devices all claim that they offer savings over more conventional methods, albeit these savings are only typically realised in the long term. However, in this instance there is potentially more to be gained from promoting a providers use of green technologies. Sustainable tourism has become quite prominent. For example in the NITB Visitor Attitudes Survey (2009) visitors were asked if a Green Award would make accommodation more appealing. Some 28% agreed that it would make accommodation much more appealing, while a further 45% agreed that it would be slightly more appealing. Similar sentiment was echoed in the NITB paper Sustainable Tourism and the Green Agenda. 7. Some suggestions 7.1 Assessing need As already mentioned, some technologies introduced for the tourism sector may not be worth the investment, yet others may yield a return. It is important for providers to assess the true savings/benefits and if there are perhaps simpler solutions. For example gauging if a clear and simple sign in each room reading Guests will be charged for towels removed from the hotel be as effective as placing RFID tags in each piece of linen. However, the implications for the visitor must also be considered, and if there is any appeal that may be gained by a provider by investing in new technologies. 7.2 App development Apps are becoming increasingly prominent in almost every sector as smart phones grow in popularity. Developing apps is relatively inexpensive for those that are familiar with the process and have the technological know-how. However, it can be a tricky process for those that are not so technology-savvy. Regardless, these have the potential to enrich the visitor experience by offering features such as guides for individual attractions or for whole regions. Developing apps around clusters of particular activities (for example hillwalking or water-sports areas), for areas of historical or cultural interest (for example Belfast s Titanic heritage), foreign language guides for overseas visitors, or for other popular features such as shopping, have the potential to bring increased business to providers operating in these areas.

8 7.3 Match positioning with technologies As mentioned, investment in technology has the potential to save money and also appeal to tourists (for example Green technology). However, the benefits of these may not be fully realised by a provider if they do not position their product or service to highlight their environmental awareness to visitors. In the example of green technology, investing in energy efficiency and conservation may become redundant if some form of Green credentials/award are not applied for and received. Following on from this, further promotion is required to highlight this achievement to the visitor/potential visitor. 7.4 The best things in life are free Investing in technologies can be expensive but there are many ways of engaging in technological development at little to no cost. For example setting up a Facebook (or other social network page) is free of charge, while running competitions on these can be a cost effective way for a provider to get publicity. Other popular sites also allow for free uploading. For example a photo of a hotel, bar or other provider can be uploaded onto Google Maps, while promotional videos can be uploaded to YouTube also at no cost. 7.5 Rewarding technology use In this article the use of checking-in using a smart phone and Facebook was highlighted, and the uses of it as a promotional tool were used. This is a relatively simple process and can be adopted by operators of any size. For example, a restaurant could offer loyalty points, a free drink, side order or discount when a patron checks in. This would allow that customer s friends to see the name of the restaurant. Furthermore, the customer getting something for free may enhance their experience and encourage them to post something positive about the restaurant online. 7.6 Damage Limitation The posting of reviews by visitors has become more very prominent and is a strong influencer on future potential visitors. It is important for providers to monitor any postings and respond to any negative comments with some form of apology or mitigating statement, without sounding overly defensive or aggressive. On a more positive note, good reviews can be used to mitigate any potential negative response and furthermore could potentially be used in other promotional materials. On this latter point it is important to make any comments anonymous if re-posting/re-publishing to protect the privacy of the writer and also to avoid any negative publicity regarding privacy invasion. 8. Conclusion There are many ways that technology is impacting on both visitors and providers within the tourism sector. Some of these have already established themselves as integral part of peoples lives and have further potential to be an integral part of the tourism sector. Others have yet to take hold and may never form a core part of the tourism offer or the visitor experience. Just as MySpace was expected to maintain a strong share of the social network market, no-one can ever be entirely sure how technologies will take hold and how much longevity they will have, but keeping in touch with these developments can yield opportunities to grow businesses and attract new visitors. This report has been compiled by Mintel Ireland and OCO Global on behalf of NITB. Every care has been taken to ensure accuracy in the composition of this paper. NITB cannot accept responsibility for omission or errors but these will be rectified in future publications when brought to our attention. Please direct any queries to insights@nitb.com.