The nature of competition in the travel market is evolving rapidly. To survive and thrive, incumbent businesses must understand the nature of these changes and formulate actionable strategies to respond.

Our first paper in this series identified three key imperatives for change:

  • High levels of growth: Travel and tourism outperformed the global economy for the sixth year running in 2016.1
  • Increased competition: Digitisation has increased the level of competition in the industry. The World Economic Forum predicts a shift of $100 billion from traditional players to new competitors.2
  • Changing expectations: Customer expectations are changing rapidly. Technology innovation is empowering customers and they are becoming more discerning.

Digital readiness is about more than technology. It’s about new business models and processes, company mind-set and culture. To be ready for the next decade a businesses’ operational processes – as well as technical systems – need to evolve. This includes the way businesses learn, make decisions and develop products.

Those leading the field are streamlining and accelerating their systems to increase the rate of customer feedback and product iteration. Online Travel Agencies are reaching customers through apps, websites, social media and voice-activated search. New business models in the sharing economy, such as Airbnb, have made a virtue of their people-powered platforms and are seeing significant growth; 49% said they had replaced a traditional hotel stay with an Airbnb stay in 2016.3

This paper examines the ways in which incumbent businesses in travel and hospitality can most successfully compete in the current market.

Download the PDF here


1. Challenges for incumbent businesses


i. Reliance on existing lines of business

Where existing revenue streams remain strong it is tempting to ignore the imperative for change and continue with business as usual.

Figure 1 shows the rise and fall of individual business models over time. Noticing and responding to disruption at the early stages allows time to develop alternative lines of business, which will later overtake the existing model.Graph showing business performance over time, and the need to reinvent business modelsExisting business structures can obstruct the path to digital development. Success comes not from ‘adding on’ the digital component, but from re-evaluating the core business function and redesigning to compete now and in the immediate future.

“Technology enables a business; it shouldn’t be the driver for the business. You need to understand what you’re trying to achieve and then look to the technology to try to achieve those goals, rather than the other way around.”4

John Seaton
Managing Director, Cendyn


ii. The “me-too” approach

It is common for incumbent businesses to try to replicate new entrants or disruptor strategies. This can succeed where the strategy is tailored to fit existing business strengths, but risks failure where business strengths and strategy are misaligned.

Figure 2 shows how the effects of a good fast-follower strategy coupled with exemplary execution can counterbalance lost revenue as a result of digitisation. The crucial point here is that exemplary execution constitutes the largest part of success. For a replication or “fast follower”5 strategy to be successful, the necessary digital capabilities need to be in place.

Chart showing the effects of digitisation on revenue and the counterbalancing effects of a fast-follower strategy and great execution

2. New strategies for success

For digital development strategies to be successful, an “all-in” approach is essential. Digital strategy should be tied to an overall growth or development strategy, rather than isolated as a separate business function. It is important not to underestimate the cultural shifts that go with digital expansion, including openness to experimentation and a more rapid pace of development. This may challenge existing organisational structures.

Core to success is a deep understanding of your target customers. This should include psychographic profiling of interests, preferences, attitudes and expectations as well as online behaviour. Digital development should be led by a clear vision of value for your customers.

“Hoteliers are going to have to learn to accommodate multiple segments of consumers who want to interact with the property and technologies in different ways.”6

Alex Alt
Past President, Sabre Hospitality Solutions


i. Define a distinctive vision

A distinctive vision should:

  • Build off existing business or brand strengths
  • Solve a problem that is significant for a large number of consumers
  • Focus on specific customer segments to better understand their needs

Brands can establish a strong vision by focusing on the needs of valuable customer segments where the company has most relevance. By focusing on penetration rather than scale there is the opportunity to develop a product that serves a designated consumer niche better than any other providers. Large hotel companies already do this through the use of smaller brands that correspond to particular customer groups.

A company vision must hold weight for both customers and staff. Kurt Ekert recently led the digital transformation of Carlson Wagonlit Travel to add value through an improved user experience. He highlights the importance of client and staff investment:

“The interesting thing is it’s relatively intellectually simple to develop a new strategy, but winning the hearts and minds of the customers, the market, and especially the employees is the hardest thing.”7

Kurt Ekert
President and CEO, Carlson Wagonlit Travel


ii. Build defendable strengths

Understanding your ‘core strengths’ or areas of advantage over other businesses is the crucial starting point. Mapping these areas of excellence against the attributes your target customers most value helps clarify the areas for focus and development. By targeting those strengths that are more difficult for others to replicate it is possible to build a more resilient business model.

Examples of defendable strengths include:

Infographic showing examples of defendable business strengths

“Hotels worry about how they can beat their competitors at what their competitors are best at. It’s very unlikely that you’ll provide a better booking experience than; it’s very unlikely that you’ll provide more choice than Expedia. Success is about identifying where your real strengths lie. For hotels this is in the guest experience and level of service”8

Maarten Plesman
CRO, Revinate


iii. Design for scalable growth

Fifteen years ago the top five hospitality groups used to own and operate their hotels. Now practically all have sold their properties, have divested hotel operations and are focusing on growing brands through representation, franchise or management. This is a scalable model for growth and companies like Hilton, Marriott and IHG have moved from representing hundreds to thousands of hotels.

Scalable businesses can attain exponential growth with incremental increases in resources. An asset-light structure has enabled digital challengers like Airbnb and to quickly aggregate huge pools of inventory with no stake in the properties themselves. Similarly Software as a Service (SaaS) delivery through cloud computing has enabled high adoption rates and wide accessibility.

Core to scalable growth are a few key factors:

Centrally accessible assets

Business intelligence, intellectual property, capabilities and core assets including distribution, online retailing, loyalty and advocacy programmes that can be translated across multiple channels.

Synergies for scale

Investing in one kind of activity to grow the businesses that has a ‘halo effect’ on growing another element. This can include promoting additional services, upselling and cross-selling. Expedia’s platform makes money from travel bookings but additionally gathers market insights and sells advertising.

Repeatable processes

Automating product search, discovery and purchase pathways allows for rapid scaling through repetition. Global Distribution Systems enable multiple concurrent transactions, rapidly accelerating the booking process.

Rapid data processing

Gathering and utilising meaningful data to improve existing purchase pathways and build reliable insights about customer behaviour to inform future business direction.

“A guest touches multiple systems, from searching on Google to booking on the hotel website or an OTA, followed by the check-in system. It’s vital to aggregate this data and create a single version of truth about that guest so that you can engage with them on a meaningful level through the right channels, at the right time.”9

John Seaton
Managing Director, Cendyn


iv. Become a market maker

Google, Expedia, TripAdvisor, Priceline and major hotel groups hold significant power because they aggregate both customers and suppliers.

The market-maker strategy places the business at the centre of all transactions. The business is no longer the source of the supply, but polarises demand between suppliers and consumers. Brand value rests on providing choice and immediate availability to customers, and distribution channels to suppliers. By contrast hotel owners, car rental companies and airlines produce and sell in a linear fashion, without the aggregation function.Illustration of market maker strategyThe emphasis on aggregation has changed the nature of competition in the travel industry. Any business that takes a cut of the total revenue is now an indirect competitor. This includes payment providers along with media, distribution and advertising channels. The definition of the travel industry is blurring, allowing for disruptive strategies to provide value to customers.


v. Platforms vs. solutions

Platform business models facilitate the exchange of goods or services between producers and consumers. In this sense they can be considered an extension of the market maker strategy.

Platforms create value by curating an ecosystem of producers and consumers, offering an interconnected suite of services or providing the foundation to build new products. Platforms give rise to organic network effects in which the platform becomes more valuable as more people use it and begins a cycle of self-reinforcing growth. As of 2015, 70% of ‘unicorn’ startups valued over $1bn were platform businesses10. Average market cap valuations for platform companies stood at $2,560,902 as of 2015, compared with $16,752 for internet companies in 1995 (see Fig. 4).Graph showing comparison of market cap valuations for Internet companies (1995) and Platform companies (2015)

Platforms add value in three ways:

Transactional platforms

Facilitating transactions between individuals and organisations. These platforms add value predominantly by aggregating relevant providers and suppliers, aiding discoverability (through search, recommendation algorithms or pairings of suppliers and consumers) and reducing transactional friction.

Examples: Uber, Airbnb, Google Search, Amazon Marketplace, Ebay, OTAs, major hotel brand websites and other online booking applications offering more than one product.Graph showing Airbnb vs public competitors: valuations over time

“Airbnb has affected the hotel trade in a number of different ways. It is going to act as a brake on RevPAR in the hotel trade, because supply and demand will balance in a different place.”11

David Roche
Chairman, Guestline
Past SVP Expedia

Service platforms

Provide a collection of connected products or solutions that can function together or separately. Integration with other applications is a key advantage. Established service platforms can become the commonplace standard with other companies providing complementary services and integrations.

Examples: Amadeus provides a suite of travel services that can function in concert or in isolation; SalesForce provides a platform of cloud-based CRM services.

Innovation platforms

Provides the technical building blocks as a foundation on which innovators can build complementary products and services. This involves an open access approach, providing the tools and connectivity for others to build and add to the platform. The platform provides value through an evolving ecosystem of related products and services relevant to one or more core user groups.

Examples: The Apple App Store and Google Play allow independent developers to create apps for their platforms; Sabre Platform Services allows web developers to access applications and transaction data to build new travel tools.12


vi. Decompose multi-faceted businesses

Package holiday providers like TUI benefit from a multifaceted business that bundles products and services for customers. For other companies there are benefits to separating and scaling separate business elements.

Established businesses often have several lines of revenue. While there can be beneficial synergies to this, decomposing strands of business is preferable where growth has slowed and the market has reached maturity. Particularly where other businesses stand to outcompete you, the wiser move may be to separate and scale independently.

One example is the launch of UberEats as a separate offering to Uber rides. This diversification enabled UberEats to compete directly with other food delivery apps including GrubHub and Deliveroo. Similarly as Google has grown it has separated multiple different strands of the businesses, some far afield of Google itself, which are now housed under the holding company Alphabet Inc.13 This allows for the independent focus and scaling of business lines that are largely unrelated or independent of each other.

In the case of hospitality, restaurants of established hotel brands can be scaled independently to reach expanded markets while exploiting their existing strengths.

Independently scaling each line of business opens opportunities to target and differentiate customer groups. In a market crowded with competition this specificity in targeting is crucial to creating a differentiated brand.


vii. Carve out and commercialise

The digital economy has increased the level of competition. With this is has become harder to succeed in many different fields at once. Those companies that succeed in the current climate focus their efforts on being exceptional in a core field.

Where a business process or service is not core to a company’s overall business strategy, a carve-out can be advantageous. In a study of professionals involved in carve-outs or divestitures, 81% said that one of their two main reasons for divesting was that the entity was considered non-core to the business.14 Separate management and distinct areas of focus can lead to better performance for both entities.Graph showing most important reasons for divesting a businessIn some instances it can be preferable to outsource non-core functions. This was the case for IHG who outsourced the development of their new reservations system in a partnership with Amadeus. Matt Luscombe, who was CCO at the time of the deal, explains how IHG was able to retain a competitive advantage:

“It’s all about competitive advantage. We have intellectual property rights over the components that we think of as being differentiating in terms of guest experience, so they can’t be reused or sold to a competitor. That’s an example of trying to ring-fence the elements which are core when we’re outsourcing.”15

Matt Luscombe


3. Develop essential capabilities to compete

The existing capabilities of incumbent businesses need to change in order to keep pace with the evolution of the digital economy. This isn’t simply about adding new skills, but reviewing and updating existing structures.

In the current market incumbents are competing with “born digital” businesses. While incumbent businesses should not necessarily look to copy such ventures, it is essential to identify the skills and expertise that will determine the future success of the business.

“We have to transition in our skills, capabilities and mindsets to deliver a great experience physically, along with creating great experiences digitally.”16

Chris Silcock
EVP & CCO, Hilton


The following capabilities are core to future development in travel and hospitality:

i. Customer-centricity

It is now possible to orchestrate 1-1 customer engagement on a mass scale. Personalised marketing and responsive user experiences are key differentiators in the crowded consumer market. Success relies on up-to-the-minute, meaningful consumer insights to inform action.

Customer profiling that relies on demographics alone is now outdated. Psychographic profiling reveals personality, interests, habits and opinions, while behavioural targeting responds to customers’ online actions. Understanding these characteristics, along with the purpose of travel, provides a meaningful basis for segmentation.


ii. Iterative learning at pace and scale

89% of business leaders believe that customer experience is already becoming their main point of competition.17 Tracking digital behaviour over time and at scale enables sound decision-making based on statistically significant user data. This allows teams to iteratively improve on existing customer insights. A-B testing accelerates the learning and improvement process.

“We see customer experience, personalisation and our hotel offering, along with data, as unique or differentiating opportunities for this company. So we’re investing very aggressively in those specific areas.”18

Kurt Ekert
President and CEO, Carlson Wagonlit Travel


iii. Design and innovate at speed

The product innovation process is a good example of how digital capabilities extend into culture and operational strategy. Implementing agile organisational processes along with a company culture equipped for rapid innovation can help incumbent businesses keep pace with competitors.

In practice, an agile process means an incremental, iterative approach allowing for change and evolution during the project, rather than a single heavy planning stage at the start. For many incumbent businesses this is a significant change from processes that demand signoff on detailed plans before work can begin.

“What truly distinguishes and gives a digital enterprise its competitive advantage is its culture, strategy and way of operating.”19

Digital Transformation of Industries
World Economic Forum


iv. Dynamic distribution management

Businesses need to be able to segment costs and revenues by channel, customer group and market in order to accurately assess and manage profit contribution.

Most hotels currently measure the bookings they receive and the revenue from bookings, but can’t accurately measure the cost elements in bringing that booking into the hotel. They structure costs by departments, rather than by channel.

Moving to an attribution system in which revenue and costs are allocated by channel will enable more profitable distribution management, coordinating pricing and availability based on direct profit contribution.

“It’s one thing to know in real time that a guest has certain preferences but the ability to actually act on that at the guest level is much more difficult. There’s a lot of great technology, but operationalizing is going to be the challenge.”20

Alex Alt
Past President, Sabre Hospitality Solutions


v. Revenue productivity

Advanced data gathering coupled with artificial intelligence is already a differentiator for predicting and responding to demand. Machine learning and natural language processing enable direct responses to consumers in real time. Many companies, including Kayak,21 are already using this technology.

Dynamic pricing and fare forecasting is not new, but more advanced and precise means of analysing and responding to market changes and consumer behaviour have made significant improvements. With techniques like Expected Marginal Seat Revenue (EMSR) airfares are optimised in real time, factoring in not only the given route but including revenue-generating opportunities across the airline network.22

Airfare checker Hopper takes the reverse approach, using data science to help customers book the cheapest flights using predictive analysis. The app has already gained popularity, raising $104m in funding and selling $1m in flights per day.23


vi. Build and shape brand reputation

88% of consumers say they trust online reviews as much as personal recommendations.24 Brand reputations are made and broken online. Harnessing customer support and motivating advocacy through peer reviews and social media activity are now core to brand building.

With the wealth of choice available, consumers are increasingly motivated and able to search out better deals and better experiences. In this context loyalty takes on a new shape; it is not just the price of the room or flight that matters, but the process and customer engagement involved. 59% of people are likely to recommend a brand if it delivers a frictionless experience across channels25 and 65% of TripAdvisor users are more likely to book a hotel that responds to traveller reviews.26 Successfully orchestrating this level of engagement and frictionless experience across channels will continue to differentiate the industry leaders in the coming years.

“TripAdvisor’s consumer reviews, whether they’re for hotels or restaurants or attractions, have been fundamental to changing and improving the consumer experience.”27

David Scowsill
Past President & CEO, World Travel & Tourism Council


vii. Business intelligence

Having a full view of essential commercial data puts businesses in a position of strength to make the swift and accurate decisions demanded in the current market.

Making the right data immediately available can empower front line staff to take timely and relevant action.

Many businesses have strong financial reporting, but lack readily available insights into other business areas. Modern business intelligence should include: reporting on essential KPIs, customer intelligence, relevant market changes, and process improvement insights alongside costs and revenues by channel. Automated alerts and updates reduce time spent in spreadsheets and increase time available for decision-making.

“Hotel companies have to invest heavily in shifting from transactional-based data to event-based data, meaning that we understand what our customers do at every step in their journey and we collect that in order that we can learn about them, so that we can personalise in a relevant way”.28

Chris Silcock
EVP & CCO, Hilton


viii. Operational productivity

Existing forecasting processes are often slow and clunky, without options to increase efficiency using automation.

With end-to-end automation, pricing modifications can be made in minutes with low-level automated decisions occurring at regular intervals. To keep pace with “born digital” enterprises, incumbent businesses must evaluate end-to-end processes and find ways to streamline and automate.

“You want to create a skill level in your hotel that becomes an advantage. If you ask your people to do something, make sure they can focus on the content and results, and not on the mechanics. For hotels, the mechanics underlying are not a competitive advantage.”29

Maarten Plesman
CRO, Revinate


4. Conclusion

Successful competition in our digitally saturated age requires a holistic approach to clarify and establish business value for todays’ consumers. A relentless customer-focus goes hand in hand with digital strategy; evolving products from a place of deep consumer insight and implementing a process for iterative development is the only thing that will ensure lasting product-market coherence in a rapidly shifting market.

Digital capabilities are not a “bolt-on”, but a require deep strategy change. By understanding the nature of today’s competition, and the challenges on the horizon, incumbent businesses can prepare themselves for lasting success.

The final paper in this series will address the barriers to digital change for incumbent businesses in travel and hospitality.

Download this whitepaper as a PDF


  1. World Travel & Tourism Council. Travel & Tourism Global Economic Impact & Issues 2017.
  2. Digital transformation initiative: aviation, travel and tourism industry. WEF, January 2017
  3. Who will Airbnb hurt more – Hotels or OTAs? …One year later. Morgan Stanley, 2016.
  4. Pace Dimensions, independent research, July 2017.
  5. The case for digital reinvention. McKinsey, February 2017.
  6. Pace Dimensions, independent research, July 2017.
  7. Pace Dimensions, independent research, July 2017.
  8. Pace Dimensions, independent research, July 2017.
  9. Pace Dimensions, independent research, July 2017.
  10. The rise of the platform enterprise: A global survey. The Centre for Global Enterprise, January 2016.
  11. Pace Dimensions, independent research, July 2017.
  12. Sabre dev studio
  13. About Alphabet
  14. Deloitte Divestiture Survey Report, 2013.
  15. Pace Dimensions, independent research, July 2017.
  16. Pace Dimensions, independent research, July 2017.
  17. Top 10 Strategic Predictions for 2015 and Beyond: Digital Business is Driving ‘Big Change’. Gartner. October 4, 2014.
  18. Pace Dimensions, independent research, July 2017.
  19. World Economic Forum: Digital Transformation of Industries. January 2016.
  20. Pace Dimensions, independent research, July 2017.
  21. Kayak product news release, July 2017
  22. Airline pricing secrets: How carriers come up with fares. CNN, June 2017.
  23. Hopper closes $82M series C. Hopper, December 2015.
  24. BrightLocal Consumer review survey 2014/Think with Google. July 2016.
  25. Rising Expectations in Consumer Experiences. Google/Greenberg. March 2017.
  26. TripAdvisor network effect and the benefits of total engagement. January 2017.
  27. Pace Dimensions, independent research, July 2017.
  28. Pace Dimensions, independent research, July 2017.
  29. Pace Dimensions, independent research, July 2017.


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Wellington Partners
Battery Ventures
InterContinental Hotels Group
Rezidor Hotel Group
Hilton Hotels Corporation
Edwardian Hotel Group
Four Pillars Hotels
The Walt Disney Company
Jurys Inn