U.S. Travel and Hospitality: Embracing a SMAC-Driven Future

U.S. Travel and Hospitality: Embracing a SMAC-Driven FutureA gradually improving economy and heightened consumer expectations for more personal and real-time interactions and transactions is driving airlines, hotels and travel agents to holistically embrace social, mobile, advanced analytics and cloud to boost business performance and retain share of wallet.

Executive SummaryFor an industry hampered by the weak global economy, 2012 was a good one for the global travel and hospitality (T&H) industry, as a record-breaking one billion tourists traveled outside their home countries. Domestically, the U.S. T&H industry is experiencing a genuine revival. Real spending on tourism has increased in the past two years, and U.S. citizens are expected to travel more frequently this year than last, indicating a return to “travel as usual” in both the business and leisure segments.

The boost bodes well for leading players in the travel and hospitality value chain, namely, hotels, travel agents and airlines. However, a wave of technological advances is flooding the industry, creating opportunities to boost operational effi-ciencies and customer satisfaction, as well as combat the threat of displacement by more inno-vative, technology-savvy competitors. The wave comprises four foundational elements: social media, mobile, analytics and cloud computing, or the SMAC Stack.TM (For more on the SMAC Stack, read Cognizant’s paper, “Don't Get SMACked:

How Social, Mobile, Analytics and Cloud Tech-nologies are Reshaping the Enterprise, Cognizant Technology Solutions.”)

T&H is among several service industries feeling the disruptive impact these technologies can have on business, spurring forward-thinking players to begin consolidating their offerings and technol-ogy backbones around them.

The rise of mobile and social media has impacted customer behavior significantly. Consumers now use mobile devices to not just research their options but also book travel. While on vacation, they use social media to connect to their friends and share pictures. By doing so, they add to the voluminous business data generated each and every day. This data can and should be leveraged to create efficiencies and develop insights into customer behavior through the use of advanced analytics. Similarly, cloud computing holds the promise of reducing capital expenditures for companies looking to boost their business capa-bilities by paying only for the IT services they use from more flexible operating budgets.

cognizant reports | april 2013

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Industry leaders are ahead on the adoption curve, and second-tier players will soon follow suit. Nevertheless, many T&H companies are in a state of flux regarding the best way forward, with many adopting a wait-and-watch approach, prefer-ring to hold off until SMAC technologies mature and reach mainstream status. Yet, unless they act now, T&H companies might find themselves outmaneuvered by nimble-footed, technology-driven competitors that reach customers via mobile apps and optimized Web sites, impacting their revenues or, worse, enabling travelers to completely bypass them. Owning the customer (i.e., transacting directly with the traveler) is a critical battle that each and every industry player must fight and win.

We believe the key imperatives for T&H industry players include:

• Take an integrated approach to the emerging SMAC Stack, as these technologies perform optimally when deployed holistically rather than in silos.

• Use cloud computing to provide customers all travel-related services in one place.

• Use social media as a cornerstone for marketing and communication with custom-ers, as social media and travel are consid-ered to be a natural fit. The channel is ideal for spreading the message directly to the customer, using tools such as videos, personal-ized offers and contests. Social channels can also provide feedback for all other channels.

• Develop high-quality content, such as vid-eos of services or destinations being offered,

accompanied by customer testimonials to dif-ferentiate offerings and build customer trust.

• Analyze customer data to understand their behavior and preferences and build stronger relationships.

• Leverage personalization to meet traveler expectations. Analytics, in combination with mobile and social, is an ideal platform for cre-ating an individualized experience. Analytics is being used to match offers, provide plans based on a customer’s previous choices and deliver personalized offers on consumers’ social media pages.

• Integrate new technologies such as mobile devices into legacy systems on a priority basis. Companies should invest in new technolo-gies that help legacy systems work with emerg-ing technologies. Alternatively, they can build technology layers (middleware) that interoper-ate with cloud-delivered third-party solutions.

A Slow, Steady ComebackThe current optimism in the T&H industry is well-founded. During the past few years, there has been a steady rise in the industry’s key economic indicators (see Figure 1). This is further corrobo-rated by surveys indicating that both leisure and business travel are set to make a strong come-back in the coming years. For instance, the Global Business Travel Association found that a pent-up need for face-to-face conversations with clients, coupled with spending on international trips, is expected to boost travel spending in the U.S. by 4.6%, to $266.7 billion in 2013. Similarly, the members of the U.S. Tour Operators Association expect higher sales in 2013 over 2012.

Spending on U.S. Tourism Returning to Normal

Figure 1

Source: U.S. Bureau of Economic Analysis

-16.0

-12.0

-8.0

-4.0

0.0

4.0

8.0

2005 2006 2007 2008 2009 2010 2011 2012

%

Quarterly Growth in Real Tourism Spending

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In addition, the expected growth in foreign tour-ists to the U.S., led by travelers from China, is expected to result in one million incoming travel-ers this year. This demand, coupled with the slow growth in supply, is expected to work in favor of U.S. airlines and hotels. In particular, hotels are expected to outperform other travel industry players. Airlines, hampered by high fuel and oper-ational costs, express tempered optimism. Ongo-ing industry-wide consolidation is also expected to accelerate. Moreover, industry players are seeking regulatory relief to help them better control costs.

HotelsFueled by strong fundamentals, the U.S. hospi-tality industry is expecting a boom in the next four years. In 2012, the occupancy rate grew by 2.4% (see Figure 2), whereas the daily rate1 grew 3.8%, to $108.53, and revenue per available room (RevPAR) increased 6.3%, to $66.77.2 Supply has grown slowly in the U.S. hotel industry — 0.6% in 20113 — while demand has grown at a healthy 5% clip in the same period, which points to a favorable pricing environment for hotels.

Revenue and profitability have improved over the past two years (see Figure 3, next page). Simul-taneously, hotels have maintained tight cost con-trols to improve productivity without adding new resources. This has added to the bottom line as occupancy rates bounced back. Net operating income (NOI) per available room, which fell to a low of $10,483 during the weakest phase of the

recession in 2009, is expected to surpass the 2007 peak of $16,868 and reach $18,216 in 2014, according to research firm PKF.4

Large U.S. hotels have rapidly expanded into developing markets, such as China. For exam-ple, 60% of the additions to Hilton Worldwide’s hotel portfolio over the past few years have been overseas.5 Expansion into developing countries will also improve providers’ chances of attract-ing tourists from these countries. The growing number of tourists will trigger domestic compe-tition, allowing new players to enter the market. These developments highlight the importance for hotels to revisit their marketing strategies and find ways to boost customer loyalty.

Travel AgenciesU.S. travel agents are currently enjoying the fruits of a growing travel market. Online leisure/unman-aged business travel outperformed the industry, growing 11% in 2012.6 During the recession, travel agents bore the brunt of the weak economy, including travel cancellations and deferments. As bookings rebound and employment levels increase, business is expected to bounce back. Research firm IbisWorld expects the domestic travel market to grow at 3.3% annually between 2012 and 2017, while international arrivals are expected to grow 5.4% during the same period. The sector’s 2013 revenues are expected to grow 6.7% and reach $20.7 billion in 2013, as compared with $19.5 billion in 2012.

Rise in Hotel Occupancy Rates in 2012

Figure 2

Source: Smith Travel Research, HotelNewsNow.com

75%

70%

65%

60%

55%

50%

45%

40%1 4 7 10 13 16 19 22 25 28 31 34 37 40 43 46 49 52

2009

Week of Year

Median (2000-2007)20132012

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Nevertheless, revenue growth is expected to slow over the next few years (see Figure 4). The pres-sure on revenues will come from multiple sources, chiefly from lower commissions, which form the bulk of travel agents’ income. As travel grows, hotels will, in all likelihood, cut their commissions to travel agents. Airlines, which struggle with high costs, may do the same. Moreover, as hotels up the ante on the online hotel booking front, com-petition will heat up, further affecting revenues.

According to reseacher PhoCusWright, growth at supplier Web sites (hotels and airlines) is outpacing online travel agencies, with total online supplier bookings jumping 14% in 2012 compared with 6% growth for online travel agents (OTAs).7 Two-thirds of online bookings in

2014 are expected to be made via supplier Web sites. Travel agency heavyweights such as Carl-son Cos., American Express, Expedia and Price-line.com, which together hold more than 75% of the market, will need to sharpen their market-ing efforts to retain customers.8 Agencies will also need to look at ways to create efficiencies and customize offerings to the needs of various demographics, such as the millennial generation, baby boomers, etc.

AirlinesThere seems to be no end in sight to the airline industry’s (global and domestic) woes. Factors such as high fuel prices and the economic slow-down have affected the industry’s financial performance. Consequently, the industry has

U.S. Hotel Revenue Returns to Pre-crisis Levels

Figure 3

* GOP % = Gross Operating Profit / Total Revenue

Source: Smith Travel Research, HotelNewsNow.com

Total U.S. estimated revenue and profitability

Total Revenue ($B) Pre-Tax Income ($B) GOP %*

103.5 102.6 105.3113.7

122.7133.4 139.4 140.6

127.2 127.7137.5

16.2 14.2 12.8 16.7 22.6 26.6 28.0 25.816.0 18.0 21.6

37.1% 35.7% 35.0% 36.6% 38.8% 41.3% 41.3%38.2%

34.0% 35.3% 36.1%

0

20

40

60

80

100

120

140

160

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

$ B

illio

ns

Travel Agents See Grounded Growth Ahead

Figure 4

Source: www.ibisworld.com

11.7%10.4%

14.1%16.7%

-1.1%

-13.5%

11.2%8.8% 8.8%

6.1%4.6%

1.8% 1.6% 1.6%

-15

-10

-5

0

5

10

15

20

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

% R

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to adopt social and mobile technologies, analyt-ics and cloud allow enterprises to leverage the voluminous data generated all around them via the power of on-demand computing. The new master corporate IT archi-tecture involves taking an inte-grated approach to these tech-nologies by tying the individual components to core knowledge processes. This new architec-ture will not only improve T&H players’ abilities to reach consumers consistently across channels, but it will also drive enterprise-wide efficiencies.

Advanced data analytics, for instance, can help companies proactively identify areas to reduce waste, such as supply chain optimization. Cloud computing can provide on-demand access to the latest software tools, storage and processes across departments and geographies. At a time when T&H players must meet changing customer expectations while reining in costs, taking a holis-tic approach to implementing SMAC technologies is a smart way forward.

MobileAdvances in consumer-facing mobile technolo-gies, in combination with the rise of social media as a channel, offer a glimpse of the future play-ing field for marketing and communication strat-egies. For T&H players, mobile is considered the best medium for reaching travelers before, during and after their travel.

Smartphones have moved beyond the hardcore business traveler segment into the wider con-sumer electronics market, thanks to Apple’s iPhone, which was launched in 2007. Indeed, the same year that the world travel industry recorded one billion international travelers (2012), smart-phone sales hit the one billion mark.12 These devices accounted for 40% of worldwide shipments in 2012, with the U.S. leading the way in smartphone usage, at close to 165 million13 iOS- or Android-enabled devices. However, the fastest growth in smartphone adoption is in overseas markets such as China (see Figure 5, next page).

Available for mass consumption only two years ago, tablets have recorded an even faster rate of growth. According to comScore, one in four smartphone owners uses a tablet.14

witnessed frequent bankruptcies and large-scale consolidation, the most recent being the merger between American Airlines and US Airways.9 This leaves three large network players competing for market share, even as low-cost airlines make inroads into the market.

The most obvious benefit of a well-managed merger is the streamlining of operations that could potentially lead to lower costs. However, this will not be easy, as even the best intended mergers and acquisitions often encounter tur-bulence. An example is the United Airlines and Continental merger, where customers had to endure technical glitches, including dropped reservations, lost loyalty points and five-hour phone wait times.10 For an industry that relies heavily on customer choice, such a situation can significantly erode loyalty.

Such crises can be better handled by using social media tools to listen for early signs of customer dissatisfaction, communicating with customers on remedies and next steps, and providing enhanced customer support when required. With customer analytics, moreover, airlines can identify seg-ments that need special attention and generate tailored offers to assuage high-value customers.

The U.S. airline industry remains the global leader, with almost 30% of the installed commercial fleet based in the country; China, the second largest in this measure, stands at 9%. Yet, China’s market grew 11% in 2011 compared with just 1.3% for the U.S.

A strong outlook for travel will benefit the airlines as they try to retain customers through innova-tive services and improve efficiencies. Cost-cutting is expected to remain a major source of profit. U.S. airlines have led the way in cutting back on non-profitable flights,11 and many carriers have “rightsized” their fleets by purchasing more fuel-efficient aircraft. Embracing green initiatives also helps airlines meet customers’ rising expectations.

Forces Driving SMAC AdoptionBy adopting SMAC technologies, the T&H indus-try can drive down costs and support revenues through more innovative offerings that help retain existing customers and attract new ones.

SMAC technologies are transforming business models by redefining corporate IT infrastruc-tures. While consumers are driving businesses

SMAC technologies are transforming business models by redefining corporate IT infrastructures.

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Smartphones and tablets offer consumers a tool to research and plan their travel while on the go. The fight for customer attention will, therefore, play out on the touchscreens of these devices. Although the PC is still the favored medium for travel booking, travel searches and bookings on mobile devices have steadily increased over the past couple of years (see Figure 6). The number of Americans booking travel via mobile is expected to more than double from an estimated 16 million in 2012 to 36.7 million in 2016.

These devices have embedded themselves deeply in travelers’ daily routines. Price alerts and reminders are slowly moving from PCs to mobile devices. With emerging technologies such as con-text- and location-aware services, mobile devices

and tablets are set to take the travel experience to a different level. Not surprisingly, T&H indus-try players are upping the ante in their efforts to create a strong presence on this chan-nel. Hotels, for example, are increasing their spending on mobile marketing as a percent-age of their digital marketing budgets. According to a survey by Hospitality eBusiness Strat-egies, the percentage of digital marketing budgets allocated to mobile was 10% in 2012 and is expected to rise to 15% in 2013. The focus of these initiatives is likely to include activities such as enhancing mobile Web

With emerging technologies such as context- and location-aware services, mobile devices and tablets are set to take the travel experience to a different level.

Travel Research and Booking Move to Mobile

Figure 6

Notes: Ages 18+; researchers defined as travelers who researched information prior to a trip via mobile Internetor app services at least once in the past year but did not necessarily book; bookers defined as those who booked travel via mobile Internet or app services at least once in the past year.

Source: eMarketer

U.S. mobile travel researchers and bookers by device (millions)

Smartphone users Nonsmartphone users

16.6

3.119.7

7.7

1.0

8.7

Researchers Bookers

21.3

3.324.6

10.7

1.1

11.8

Researchers Bookers

26.2

3.529.7

13.9

1.2

15.1

Researchers Bookers

2010 2011 2012

Developing Markets Drive Smartphone Growth

Figure 5

Source: Flurry Analytics

Note: Year-on-year growth 2011 — 2012

Fastest growing iOS and Android markets by active devices

401%

279%

220% 217%196% 193% 193% 189% 185% 171%

China Chile Brazil Argentina Iran Vietnam Mexico Russia Turkey India

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sites and display advertisements (see Figure 7). Airlines also provide flight information and vari-ous other ancillary services, such as hotel booking and travel insurance via mobile apps, which could boost their revenues.

Social NetworkingAs smartphones become ubiquitous, social net-working has emerged as the most important cog in the communication wheel for most ser-vice industries. Travel and social are considered a natural fit, and with good reason. From updat-ing their Facebook status to checking into a hotel, many individuals actively indulge in social net-working, even when on vacation. Perhaps more importantly, social has influenced the way con-sumers plan, book and experience travel.15

The notion that an agent knows the customer best is being challenged by algorithms that comb

members’ Facebook interac-tions to make personalized recommendations.16 TripAd-visor, a leading online travel review site, managed to boost its membership by more than 100% year-on-year in 2012 by acquiring members (domes-tic and international) through Facebook.17 In fact, users log-ging into the site to shop for hotels increased by 30%. As a result, the site was able to drive revenues through tar-

geted click-based advertisements generated by insights extracted from travel reviews gleaned from members’ Facebook updates.

For travel industry players, there is a clear incen-tive to provide services that generate positive social networking feedback. In a survey by VFM Leonardo, 92% of respondents said they trust the opinions of people they know above all other advertising.18 This makes mastering social media a key imperative. Social spend by travel compa-nies is on the rise, driven by videos and images used in advertising and content-based direct marketing initiatives. However, social can be a double-edged sword, as negative publicity tends to spread faster than praise on social networks.

For this reason, T&H players need to approach social media strategically and place it at the heart of their marketing and public relations efforts. This can be done by embedding a social component in their communications strategy, directing users to the company’s social media page and employing PR-savvy customer relations executives to help create a responsive and personalized experi-ence. Given the propensity of social media users to share their experience with friends, this chan-nel holds much promise for attracting potential customers, with no marketing effort on the com-pany’s part. However, the key differentiator for T&H players will be the social content generated, either by the company or by their guests. This content, in the form of videos or photos, is emerg-ing as a key promotional tool for T&H players.

The notion that an agent knows the customer best is being challenged

by algorithms that comb members’

Facebook interactions to

make personalized recommendations.

Hotels Investing in Improving the Mobile Experience

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10%

20%

30%

40%

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37.5

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50%

Mobile site Mobilebookingengine

SMStext

marketing

Mobilebanner

advertising

iPhone app Mobilesearch

I am notplanning any

mobile marketinginitiatives

for the year2010 2011 2012

Figure 7

Source: 6th Annual Benchmark Survey on Hotel Digital Marketing Budget Planning, HeBS Digital, 2012

Which mobile marketing initiatives are you planning for? (Percent of respondents)

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Quick Take

Big Data, Analytics and Cloud ComputingJust as mobile and social have become crucial to how T&H companies interact with custom-

ers, data analytics and cloud computing have emerged as the backbone of a digital marketing strategy. Travel companies have traditionally stored volumes of data about everything from pricing mod-els to customer relationships. But today, the focus has shifted to deriving insights from this data. Thanks to increasing digiti-zation, companies find them-selves at the center of a data deluge, in which the volume,

velocity and variety of data are growing faster than ever before. Flights, for example, generate terabytes of data on every journey, and travel agents and hotels have access to crucial personal information on their clients.

Integrating this data into a coherent whole, and then using advanced analytics to slice and dice it according to various parameters, can drive fact-based decision-making across all departments. This could lead to improved efficiencies, better marketing campaigns and more personalized customer relationships. Big data is already driv-ing innovations, such as Web sites that provide

travelers with better hotel deals and help them gauge providers’ reputation and service quality by crunching data from millions of Web pages.

An example is Hopper, which converts raw data from Web pages into structured information to create a better travel search and planning expe-rience. Olset, another big data startup, derives user information from sites such as Expedia and Facebook to identify user preferences and offer matching results in the travel planning stage.19 Going forward, big data and analytics will help travel providers better understand customers and create more personalized service offerings.

Cloud computing is gaining popularity across industries, and T&H is no exception. The benefits of cloud computing include cost reduction, scal-ability and access to the latest software. Cloud also allows companies to free up resources to focus on core business activities. Functions such as data storage, productivity tools and messaging are moving to the cloud in various service sector industries. For travel, cloud computing can create a low-cost but highly efficient platform to offer all customer-facing services that hitherto were offered separately.

Owning the CustomerAs mobile becomes the preferred channel for con-sumer engagement, airlines, hotels and agents will fight harder to “own the customer” by per-suading customers to transact directly with them.

A Changed Customer

The financial crisis brought about dramatic changes in customer behavior as consumers became more savings-oriented and pragmatic in their purchasing behavior. They became choosier and willing to spend time researching the products that they desire. This behavior is more visible among the millennial generation, who are more willing than previous generations to share their experiences on the Internet.

A survey by Boston Consulting Group found that 60% of the millennial population, compared with 46% of the non-millennial population, were willing to rate products and services on the Internet, while an equal percentage of millennials engage in uploading videos, images and blog entries to the Web (compared with 29% non-millennials).20

Technology has empowered individuals across generations. It has also made them more open minded about switching brands. Driven by their price sensitivity or feedback from friends, today’s consumers are more open to changing their minds. For T&H companies, which have traditionally relied on loyalty, it is important to consider the behavior patterns of these connected customers across channels if they are to make the most of the rise of mobile and social media.

Just as mobile and social have become crucial to how T&H companies interact

with customers, data analytics and

cloud computing have emerged as

the backbone of a digital marketing

strategy.

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Doing so will help them maximize revenues and obtain firsthand access to both transactional and interactional data. However, gaining and retain-ing customer loyalty is a far more challenging task in the age of mobilility, given the plethora of options that can be revealed through a simple online search. Moreover, customer behavior has changed dramatically following the financial crisis (see sidebar, previous page).

A SMAC-enabled strategy should focus on cre-ating a consistent and invigorating experience across channels. Mobile Internet users are set in 2013 to overtake fixed-network users.21 With the growing adoption of tablet and smartphones, tai-loring Web sites to fit the screens of these devices will be a step in the right direction.

But the key element of the mobile Web site experience will be content, in the form of blogs, photo-shar-ing, newsletters and video. Video, in fact, is expected to be a key vehicle for engaging with travelers on the mobile Web, whether

through reviews, demos or interviews. Travelers use video at almost every stage of travel plan-ning (see Figure 8). However, while 85% of the U.S. population watches video online, travel

advertisers reach just 3.5% of this audience.22 Online travel-related video viewing is expected to remain popular, especially among business travel-ers, according to an April-May 2012 Google travel study. Through high-quality, informative videos, providers can engage with travelers in the early planning stages and highlight the uniqueness of their offerings. Clearly, travel companies must focus on offering Web sites with quality content and optimize the site for mobile viewing, paying close attention to basic aspects such as readabil-ity and navigation.

But there is a lot more that mobile devices can do for T&H players. Hotels, for example, can smooth the customer journey by enabling them to check into a hotel without waiting at the reception desk. Mobile services such as these can help T&H players generate revenue. The Intercontinental Hotel Group, for example, generated $2 million in revenues from mobile booking in 2009, and this increased to $40 million in the first month of 2013, alone.23 The customer experience can be further enhanced by incorporating hotel loyalty programs into mobile apps.

The impact of social media on T&H providers can be gauged from the number of travelers who change their choice of hotels, agents or air-lines based on social media feedback.24 Surveys have also found travel companies generating direct revenues from social media.25 It is impera-tive for T&H players to treat social media as the

Video, in fact, is expected to be a key vehicle for engaging

with travelers on the mobile Web,

whether through reviews, demos or

interviews.

Travelers Use Video at all Stages of Travel

Figure 8

Source: “The Traveler’s Road to Decision,” Google and Ipsos MediaCT, July 2012.

When choosing a destination

64%

When lookingfor activities

at a destination62%

When deciding on

accommodations at a particular

destination57%

When deciding on which

Web site to book34%

When thinking about taking

a trip66%

Respondents were asked which of the following they have performed online in the past six months.

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cornerstone for marketing and communication, and their social activities need to be backed by strong content, such as videos, photos, contests, etc., while dedicated teams respond to customer feedback and inquiries, behind the scenes.

T&H players have traditionally used analytics in areas such as campaign management, but the role is expanding, due to the amount of data generated today. For instance, travel agencies can deploy analytics on customer data across channels to create personalized offerings, and recommendations can be made based on demo-graphic data, such as younger baby boomers (aged 46 to 57) with strong spending power and a desire to reward themselves.26

Analytics can help airlines create a holistic view of customers, known as the customer composite vector, based on their travel frequency, spend per trip, non-travel spend, trip profitability, etc. (For more on this topic, see “Leveraging Advanced Analytics to Drive Customer Behavior in the Air-line Industry.”) This holistic approach is better than traditional customer scoring cards used by T&H providers, as these are less effective for pull-ing together disparate customer data. Developing a holistic picture can help airlines, for example, build targeted offerings and campaigns based on specific aspects of customer behavior. If internal resources are limited, providers can also look to cloud-based analytics solutions.

To effectively embrace the SMAC Stack, T&H com-panies must create systems of engagement that interoperate with their legacy systems. They can invest in new technologies that help legacy sys-tems work with emerging technologies, or they can deploy translation software, or middleware, to enable interoperability with external platforms to offer Web-based or mobile-based services. In fact, cloud computing has wider applications for the travel industry, as this platform can be used to internally provide software access to offices/franchises across the globe. An example of this is the choiceAdvantage platform offered by Choice Hotels in the U.S. This platform enables a cloud-based central reservation system for its franchi-sees, which no longer need to invest in new tech-nology, resulting in cost savings.27

Providers are also developing integrated customer-focused platforms that allow access to services across the travel and hospitality

spectrum. These cloud-based platforms allow travel providers to sell their products to consum-ers cost-effectively. Such a service will be a boon to industry players that may not want to invest in new technology.

Industry-wide SMAC Imperatives The combined forces of social, mobile, analyt-ics and cloud is causing T&H players to rethink their business models. As customers become more empowered, companies need to tune their offerings to meet new expectations. However, we believe that a gradually recovering economy will provide the impetus needed for T&H players to widely adopt these technologies. The following are key imperatives, opportunities and challenges for industry players.

Hotels

• Revive customer loyalty: Hotels are experiencing an unprecedented erosion in customer loyalty.28 Mobile Internet and social networking have changed the way customers plan their travel. To minimize further erosion, hotels need to revive their loyalty programs by integrating them with customer and social media analytics.

• Predict behavior: Combining analytics on historical data with future scenarios can allow hotels to anticipate changes in customer behavior and modify their offerings to maintain wallet share, if not increase it.

• Make CRM programs count: As smartphones, mobile Internet and social media become an integral part of travelers’ lives, they pro-vide hotels with critical touchpoints that can streamline and unify their CRM processes, something that was not easy to do in the era of newspapers and television.

• Boost productivity with real-time tools: Tools to monitor processes such as procure-ment on a real-time basis can reduce the cost of day-to-day operations. Such a tool could be deployed on a cloud-based platform to enable organization-wide access, supported by ana-lytics that can improve spending decisions.

• Create a culture of fact-based decision-making: In addition to adopting technologies that help cut costs, it is important to create a collaborative environment and initiate a cul-tural change toward fact-based decision-mak-ing. Such change needs to be driven by top management, with technology teams working hand-in-hand with users.

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Travel Agents

• Create enhanced offerings: Travel agents are well-placed to leverage location-based offer-ings. Based on a customer’s location, the travel app can send relevant location-based service coupons for restaurants, shopping, etc.

• Go beyond the Web site: As customers add new sources of information to their travel decision-making, travel companies risk being marginalized. To avoid this, they need to forge a connection with travelers through different channels such as social media, using content that customers want to see.

• Provide agents with cloud-enabled capabilities: A cloud-based communications system allows travel agents to work on the go, responding to urgent requirements from customers on a real-time basis using their smartphones or tablet devices.

Airlines

• Plan a cloud-based future: Airlines are saddled with high operating costs and other external factors, and their troubles will not vanish overnight. However, they can harness the power of cloud computing to cut costs further, while simultaneously pursuing a mobile and social strategy aimed at retaining customer mindshare and wallet-share.

• Enhance the passenger experience: Airlines can use the cloud to create services that allow technology-savvy passengers to utilize their in-flight time to the fullest. For example, Luf-thansa’s CloudStream service allows passen-gers to choose and store content that they can access on their tablet devices after take-off.29

• Use apps as a branding tool: Mobile apps allow airplanes to create a presence on the device that a customer is most likely to use while planning travel. This may or may not result in direct business from the consumer, but it will add to the possibility of gaining wal-let-share.

• Use social to build trust: A strong social pres-ence can drive brand loyalty in the same way as frequent flyer programs. By being active on social networks, airlines can build customer trust. An example of this is Southwest Airline’s dedicated social media team that not only responds to comments and questions, but also

rebooks flights, tracks bags and issues travel vouchers.30

Ready for TakeoffA gradual return to pre-crisis levels of travel, com-bined with an increasingly mobile and informed consumer, make it imperative for T&H industry players to offer a personalized and consistent user experience across all phases of travel. Adopt-ing an emerging master IT architecture compris-ing social, mobile, analytics and the cloud will enable T&H players to meet this challenge and be rewarded with improved operational efficiencies. These technologies will not only transform com-munication with applicable customer segments, but they will also push companies toward a more collaborative work environment.

Hotels, travel agents and airlines face different challenges. Yet, whether it is about cutting operational costs, improving sourcing or increasing wallet-share and mindshare, the emerging SMAC-driven business model will be at the heart of these efforts. Success will hinge on how well organizations manage the transition to new technologies. While there is no one-size-fits-all approach, the effort must be driven from the top. Industry players should also look to partner with third-party providers with the necessary experience and wherewithal to not only build solutions based on these technologies but also deploy them holistically to unlock value and exert a mul-tiplying effect on business per-formance.

We believe that an integrated strategy for mobile, social media, analytics and cloud computing is the way forward for T&H players. Companies should look at these technologies as one inte-grated stack instead of embarking on isolated initiatives. Organizations that focus initially on eliminating data, process and operational silos will be positioned to reap early multiplier effects of the SMAC Stack.

Organizations that focus initially on eliminating data, process and operational silos will be positioned to reap early multiplier effects of the SMAC Stack.

cognizant reports 12

Footnotes1 Total guest room revenue for a given period divided by the total number of paid occupied rooms

during the same period.

2 David Barley, “The Americas Hotel Market Posts Positive Performance Growth in 2012,” World Prop-erty Channel, STR Global, Jan. 24, 2013, http://www.worldpropertychannel.com/north-america-vaca-tion-news/2012-hotel-report-los-angeles-hotels-str-global-san-juan-hotels-santiago-hotels-6476.php.

3 “2012 U.S. Hotel Valuation Index,” HVS, October 2012, http://www.hotelnewsresource.com/pdf11/HVS100312.pdf.

4 Patrick Mayock, “Hotel Profits Up; Growth Expected Through 2015,” HotelNewsNow.com, June 22, 2012, http://www.hotelnewsnow.com/articles.aspx/8446/Hotel-profits-up-growth-expected-through-2015.

5 Simon Hobbs, “Four-Year Boom Expected for the U.S. Hotel Industry,” CNBC, Jan. 22, 2013, http:// www.cnbc.com/id/100398330.

6 “Report Shows Murky Outlook for ’13 Travel,” MeetingsFocus, November 2012, http://www.meetingsfo-cus.com/ArticleDetails/tabid/162/ArticleID/19786/Default.aspx.

7 Ibid.

8 Johanna Jainchill, “Four Agencies Account for More Than 75% of Market,” Travel Weekly, June 4, 2012, http://www.travelweekly.com/Travel-News/Corporate-Travel/Study--Four-agencies-acco-unt-for-more-than-75--of-market/.

9 “AMR, U.S. Airways Predict Clear Skies,” Wall Street Journal, Feb. 14, 2013, http://online.wsj.com/ article/SB10001424127887323478004578303630011153910.html.

10 Ben Mutzabaugh, “Customers Vent on United-Continental Switchover,” USA Today, March 28, 2012, http://travel.usatoday.com/flights/post/2012/03/united-continental-airlines-switchover-com-plaints/648618/1.

11 “Airline Industry Stock Outlook — Dec. 2012,” Zacks Equity Research, Dec. 13, 2012, http://www.zacks.com/commentary/24969/.

12 Dan Rowinski, “Know What’s Cool? A Billion Smartphones. And They're Changing Everything,” Readwrite Mobile, Oct. 17, 2012, http://readwrite.com/2012/10/17/know-whats-cool-a-billion-smart-phones-and-theyre-changing-everything.

13 Ibid.

14 “Majority of Tablet Users Watch Video on their Device, 1 in Every 4 Viewers Pay to Watch,” comScore, June 8, 2012, http://www.comscore.com/Insights/Press_Releases/2012/6/Majority_of_Tablet_Users_Watch_Video_on_their_Device.

15 NewMedia TrendWatch, European Travel Commission, 2012, http://www.newmediatrendwatch.com/world-overview/34-world-usage-patterns-and-demographics.

16 Justin Bachman, “Can Social Media Lift Travel?” BloombergBusinessweek, Feb. 16, 2012, http://www.businessweek.com/articles/2012-02-16/can-social-media-lift-travel.

17 Trefis Team, “TripAdvisor’s Focus On Hotels, Social Media & Mobile Are Paying Off,” Forbes, Feb. 19, 2013, http://www.forbes.com/sites/greatspeculations/2013/02/19/tripadvisors-focus-on-hotels-social-media-mobile-are-paying-off/.

cognizant reports 13

18 “2013 Hotel Marketing Trends: From Standout Social Media to Marvelous Mobile Marketing,” VFM Leonardo, November 2012, http://vfmleonardo.com/sites/default/files/2013-Hotel-Marketing-Trends-vfmleonardo2012.pdf.

19 Kristen Bent, “10 Big Data Startups at Strata,” KDNuggets.com, Feb. 28, 2013, http://www.kdnuggets.com/2013/03/10-big-data-startups-at-strata.html.

20 Christine Barton, Jeff Fromm, Chris Egan, “The Millennial Consumer: Debunking Stereotypes,” The Boston Consulting Group, April 16, 2012, https://www.bcgperspectives.com/content/articles/ con-sumer_insight_marketing_millennial_consumer/.

21 “Mobile Internet Users will Overtake Fixed Users in 2013,” Hi-media Group, September 2011, http://blog.hi-media.com/mobile-internet-users-will-overtake-fixed-users-in-2013/.

22 Simon McDowell, “Online Video and the Travel Industry,” River Film Communication, Nov. 30, 2012, http://www.riverfc.com/online-video-and-the-travel-industry-statistics/.

23 Jessica Davies, “IHG’s Mobile Revenue Will Soon Outstrip Web, Says VP of Marketing Michael Menis,” The Drum, Feb. 26, 2013, http://www.thedrum.com/news/2013/02/26/ihg-s-mobile-revenue-will-soon-outstrip-web-says-vp-marketing-michael-menis.

24 “2012 Social Media and Tourism Industry Statistics,” Stkkymedia.com, 2012.

25 “Online Travel Statistics 2012,” Infographicsmania, October 2012, http://infographicsmania.com/online-travel-statistics-2012/.

26 Maria Lenhart, “6 Consumer Trends to Act on in 2013”, TravelMarketReport.com, January 17, 2013, http://www.travelmarketreport.com/articles/6-Consumer-Trends-to-Act-on-in-2013.

27 Dennis Schaal, “Choice Hotels Targets UK, France and Germany with Cloud-Based Property Manage-ment System,” Tnooz, June 8, 2011, http://www.tnooz.com/2011/06/08/news/choice-hotels-targets- uk-france-and-germany-with-cloud-based-property-management-system/.

28 “New Deloitte Survey Uncovers the Erosion of Travel Loyalty,” Deloitte, Jan. 22, 2013, http://www.deloitte.com/view/en_US/us/Industries/travel-hospitality-leisure/b8f3794f6d36c310VgnVC-M1000003256f70aRCRD.htm.

29 Sourya, “How Lufthansa Got Into the Clouds with CloudStream,” CloudTweaks, Oct. 25, 2011, http://www.cloudtweaks.com/2011/10/how-lufthansa-got-into-the-clouds-with-cloudstream/.

30 Jason Whitely, “Airlines Using Social Media to Change the Way You Fly,” WFAA, Feb. 1, 2013, http:// www.wfaa.com/news/business/Airlines-using-social-media-to-change-the-way-you-fly-189456191.html.

About Cognizant

Cognizant (NASDAQ: CTSH) is a leading provider of information technology, consulting, and business process outsourcing services, dedicated to helping the world’s leading companies build stronger businesses. Headquartered in Teaneck, New Jersey (U.S.), Cognizant combines a passion for client satisfaction, technology innovation, deep in-dustry and business process expertise, and a global, collaborative workforce that embodies the future of work. With over 50 delivery centers worldwide and approximately 156,700 employees as of December 31, 2012, Cognizant is a member of the NASDAQ-100, the S&P 500, the Forbes Global 2000, and the Fortune 500 and is ranked among the top performing and fastest growing companies in the world.

Visit us online at www.cognizant.com for more information.

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Credits

Author and AnalystAkhil Tandulwadikar, Senior Research Associate, Cognizant Research Center

Subject Matter ExpertSamrat Sen, Director, Cognizant Business Consulting’s Travel & Hospitality Practice

DesignHarleen Bhatia, Creative DirectorSuresh Sambandhan, Designer