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How AI transforms the travel value chain

๐ŸŒˆ Abstract

The article discusses the elusive search for 'The Perfect Trip' and the key ideas around rebundling travel in the age of AI. It explores the challenges of unbundling travel, the importance of rebundling, and how AI creates new opportunities for rebundling in both consumer and corporate travel. The article also discusses the transformation of travel workflows, the convergence between consumer and corporate travel, and the potential winners and losers in the future of AI-powered travel.

๐Ÿ™‹ Q&A

[01] Unbundling travel

1. What are the key problems with unbundling travel?

  • The internet unbundled trips into their constituent parts, shifting the cost of rebundling back to the traveler and increasing coordination costs.
  • Unbundling does not create scalable and defensible value pools, as there is no sustainable value capture in unbundling.
  • For most consumers, travel is both infrequent and seasonal, making it difficult for online travel players to retain customers and profitably acquire them through marketing.

2. What are the two ways to increase profits in travel?

  • Target a customer base that is not infrequent and seasonal, such as corporate travel.
  • Maximize capture of the entire trip so that you aid booking of not just one component of the trip but all trip components.

[02] Rebundling travel

1. Why is rebundling important?

  • Rebundling can help shift power in the direction of the intermediary and away from the producer if consumer attention skews towards the new bundle.
  • Owning the right to rebundle the trip for the consumer allows a player to act as a central hub into which all other travel providers integrate.

2. What are the key factors for winning the right to rebundle?

  • Effectively supporting key decisions during travel planning.
  • Minimizing coordination costs during travel execution.

3. How does AI create new opportunities for rebundling travel?

  • AI agents can help generate personalized travel plans, book accommodations and activities, and continuously learn to better meet the traveler's preferences and constraints.
  • Autonomous AI agents can operate with more complexity, call other agents, and coordinate across different aspects of the trip to create a more seamless and personalized travel experience.

[03] Transforming travel in the age of AI

1. How will AI transform consumer travel?

  • AI assistants can gain the right to the customer relationship by providing a conversational interface for travel booking, establishing themselves as a decision-making hub.
  • As the AI assistant gains this hub position, it can negotiate with other travel providers to open up their APIs and provision content and capabilities to the hub.

2. How will AI transform corporate travel?

  • Players that already provide workflow integration for corporate travel (e.g., expense management) are well-positioned to leverage their dominant hub position and bundle an AI agent on top of it.
  • The AI agent can be embedded into the existing travel planning and booking workflow, eventually absorbing more of the workflow as it improves and becomes the primary decision interface.

[04] Imagining an interoperable future for travel

1. What is needed for truly customer-centric AI agents in travel?

  • Travelers need to manage their own 'data passport' where multiple AI agents can compete to provide the best recommendations without compromising user privacy.
  • This would involve a perfectly competitive market of AI agents, all competing to create the perfect trip for the traveler.

[05] Winners and losers in the future of AI-powered travel

1. Who are the potential winners and losers?

  • Travel agents are likely to lose, as their sales commissions and ability to charge a premium will be eroded by AI assistants.
  • Travel providers (e.g., hotels, airlines) can win by engaging customers directly through AI assistants, reducing their cost of customer acquisition and retention.
  • AI travel plan assistant providers are well-positioned to win, but they will need to get industry stakeholders on board.
  • Corporate travel workflow incumbents can win by using AI to improve their positioning, but those who fail to address underserved decisions in their workflow may risk being displaced by AI-led challengers.
Shared by Daniel Chen ยท
ยฉ 2024 NewMotor Inc.