Digital transformation is here to stay—how travel and hospitality companies can get started
The concept of digital transformation has been around for quite some time, having achieved buzzword status in most corporate circles. In the hospitality and travel industry, executives have been talking about it for nearly 10 years, but many are still trying to understand what it really means. One thing I have learned by working with leading brands is that digital transformation is here to stay and continuously evolving. It’s not a switch that can just get flipped on to “set and forget.”
The third annual Skift and Amazon Web Services (AWS) Digital Transformation study once again confirmed what we have been experiencing in our interactions with customers. We surveyed 951 travel and hospitality industry leaders in 12 markets across the world to learn how they are prioritizing and investing in digital strategies. The 2022 Digital Transformation Report explores how travel and hospitality businesses can use technology to respond more nimbly to what’s happening now and prepare more thoughtfully and strategically for what’s next.
Digital transformation has become an even more appealing value proposition for travel companies in the past 3 years. This year, 72.3 percent of travel executives said that digital transformation is “very important” to their businesses, compared to 67 percent last year. And in 2021, 51.6 percent of travel executives said that it was “much more important” to proceed with digital transformation activities compared to 43.4 percent the year before.
Travel companies are putting their money where their mouths are. This year, 65 percent of travel executives said that their digital transformation budgets have increased by more than 6 percent since 2019. (The global average, according to Gartner, is 4 percent.) After experiencing the COVID-19 pandemic, the industry now understands what it means to scale both up and down smoothly in very short periods; they can never imagine going back to what it used to be like, and they want to maintain that level of scalability going forward.
Even so, more travel leaders say that digital transformation is very important to the business, and they’ve been bolstering their budgets accordingly; 43 percent continue to invest in maintaining legacy systems. Many execs know these aging systems are a drag on productivity and profits—one-third of respondents said that these systems were their biggest concern for business disruptions.
The truth is that there’s no reason why you have to leave a 30-year-old legacy system in place forever. I’ve seen more than a few companies try to keep them afloat only to endure mounting costs, reduced employee productivity, and slowing product-development cycles.
Both business and technology specialists tell me that if companies want to unleash innovation, they must find ways to eliminate the delicate or vulnerable aspects of their systems. Although many are making tremendous strides to innovate, improve operations, and enhance the customer experience, there’s still room to continue to transform the industry.
To outpace the competition, the most forward-thinking travel companies are moving to the cloud—or have already—and the lion’s share of digital investments in the travel industry centers on cloud technology. A prime example is the Airline Tariff Publishing Company (ATPCO), a provider of technology, pricing, and shopping to airlines, travel agencies, and tech companies. The company has undergone a wholesale migration to the cloud within the past several years, and by the end of this year, it will no longer own and operate any data center facilities or infrastructure gear. The switch to a flexible cloud solution facilitated the company in prototyping solutions faster and uncovering customer preferences without having to buy expensive hardware.
Industry leaders have been climbing the cloud learning curve in a hurry. In the Skift and AWS survey, 51 percent of travel executives this year said that they were “very familiar” with the concept of cloud computing, a big increase over the 35 percent who held that view just 2 years ago. The cloud’s elasticity and pay-as-you-go pricing model is attracting companies, like Melia Hotels, which saved 40 percent by moving to the cloud during the COVID-19 pandemic and is saving even more today by scaling down during periods of lower demand. A host of other travel companies are integrating artificial intelligence (AI) and machine learning (ML) solutions to analyze customer sentiment, optimize revenue management, and craft personalized marketing offers.
While technology is at the core of any digital transformation, the most successful companies recognize that people and process come first. That’s why cultural and structural initiatives should be a major part of any transformation project. We need to understand that digital transformation is not only an IT problem—it’s not even just a business problem—this is a true organizational challenge.
“Many times your business is arranged around systems,” says Pieter Jordaan, group chief technology officer at TUI, one of the world’s leading tourism groups. “But unless you actually provide a new way of thinking to businesses so that they can rapidly evolve their processes, you’ll continue to just be patching what you do.”
A smart way to start your transformation is with a proof of concept, a test to see if technology will help you achieve your end goal before making massive changes. After chalking up early successes, you can continue to test and migrate apps, data, or infrastructure to the cloud. We know from a lot of other project methodologies, like agile software development methodologies, that the best thing to do is to learn lessons quickly and apply them in your next iteration.
Don’t hesitate to lean on experienced industry specialists for help. Though the average travel and hospitality company is likely to do a modernization or cloud migration only once in a lifetime, there are companies like AWS and our Travel and Hospitality Competency Partners that help hundreds of thousands of customers navigate this transition every year. Using their perspective can help accelerate your transformation and enhance your business outcomes.
To learn more about how travel and hospitality companies are planning to invest in and implement digital strategies, download the 2022 Digital Transformation Report: Investing in the Traveler Experience of the Future or join AWS and Expedia at Skift Global Forum on September 20.