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Artificial intelligence has massive potential to disrupt the travel industry — but not necessarily in the ways you might expect, said Alan Lewis and Dan McKone of L.E.K. Consulting. “It’d be a mistake to think that AI is just going to do what you currently do in a more efficient fashion,” said McKone, “It can empower new forms of competition.”
And while that’s true across industries, “we see tectonic shifts happening in travel in particular,” said McKone.
The pair, both of whom are managing directors at L.E.K. Consulting, conducted dozens of industry interviews as well as a rigorous market analysis to synthesize three major trend lines to watch in the coming months.
The biggest change is best thought of as The Goldilocks Opportunity, Lewis said. “Often new technology and innovation impacts the top of the market first — think cars, consumer electronics, or fashion where the newest features come at the highest price points. In travel, we’ll see a different dynamic, where it’s the middle that’s the most affected,” he said. With AI tools that yield more personalized and high-touch service, “the budget traveler may trade up to the middle — and you could see high-end suppliers having to justify their price premium in a different way,” McKone added.
The second important shift is The Netflix Effect, Lewis said. “As we see in other industries, the player that has the most data can often be the most powerful,” he said, drawing parallels to media, search, and e-commerce giants Netflix, Google, and Amazon, which use huge data sets to deliver personalized recommendations — and in turn capture even more data after consumers make purchases. While those huge companies hold a powerful advantage, online travel agencies could also use AI to harness valuable customer data, McKone said. Firms that “follow the guest across the entire travel journey have a huge opportunity to collect the richest data set of all,” he added.
A final trend to watch is Travel-as-a-Service, McKone said, riffing on the traditional software-as-a-service business model. We may soon see “AI travel agents” that take into account a guest’s preferences for trips — including dates, budgets, and so on — and then supply a steady stream of offers along with ancillary products and services, like camping or hiking gear for those interested in adventure travel. These sorts of travel clubs represent a significant business opportunity for challenger brands, both Lewis and McKone said.
Negotiating the AI-powered future “isn’t a question of good or bad,” Lewis said. “It’s a question of new opportunities and new competitive structures you’re going to have to contend with as these trends impact the industry.”
Check out L.E.K. Consulting’s new research, which offers more insight into these trends, here.