Travel Industry Environment and Competition

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Table of Contents

Introduction
Competitive Environment
Industry Environment
Financial Aspects
Standards
Trends and Innovation
Conclusion
References

Introduction

It is crucial for every new company to examine the industry to figure out its strengths and weaknesses. Such investigation is needed to analyze competitors, see if there are available positions on the market, and how hard it is to gain customers. Based on the results of the research, a company may develop a list of needed resources that are necessary for the success of chosen strategy.

This kind of investigation allows a company to research technologies and methods that are being used by the competitors, and their effectiveness. The travel industry is as a set of various enterprises and organizations that provide numerous services.

Competitive Environment

The growth rate of the travel industry in the last few years has been extremely rapid. Currently, The United States and China are two leading countries in this business. The travel industry has directly contributed $2,364.8B to the world’s GDP, and its total contribution was $7,580.9B in 2014 (Ali, 2015). These numbers are enormous and make travel business play a huge role in the global economy.

This industry has supported 105,408,000 job spots, and it has invested $814,4B in 2014 (Ali, 2015). It is necessary for the industry to keep developing, so new jobs are created. Travel contributes to total GDP through such commodities as transportation and entertainment (Ali, 2015). This business is impacted by seasonality, and it is one of the core issues of this industry.

There are so called high season and low season. Travel companies gain the most profit during the high season, and tickets are rarely bought during the low season. This happens because travelling is extremely dependent on changes in climate. Summer is often the most profitable season because of holidays and vacations. Some customers prefer to visit certain countries during a particular time of year.

The economic situation is also crucial because this industry is extremely sensitive to economic changes. Schoinas and O’Connell (2011) state that “the global economic recession has had a severe impact on the air transport industry” (p. 354). This claim signifies that this industry still suffers from the consequences of the recession just like the others.

There are sub-industries such as hotel chains, trade and transportation companies, travel agencies and others. The hospitality industry is one of the biggest sub-industries. It provides transportation, lodging, and other services. Some enterprises in the travel business develop technologies, some provide services, and some offer support to other companies.

Alliances and partnerships are often formed on beneficial terms to provide each other with a range of services. Overall, this industry is developing at an extremely fast rate, and it should not stop anytime soon. Expedia is the leader of this industry in the United States. Currently, it holds about 26% of the market share thanks to the acquisition of an innovative search engine (Trefis Team, 2014).

The biggest competitor for Expedia is Orbitz Worldwide, and it holds 21 percents of market share based on the available data (Trefis Team, 2014). The next biggest competitors are Priceline and Travelocity. Their combined market share is around 95 percents, and it allows them to set the standards for other firms.

Industry Environment

Every single company in the travel industry chooses a primary group of clients and continues to focus on that group. Some prefer to offer their services to leisure travelers and others focus on business passengers. It is necessary for every company to select and focus on the particular target market. The determination of the target group is one of the biggest problems.

The primary customers are those with average or high income. Every travelling company focuses on a selected group of clients and picks the position in the market. Robinson (2009) states that “a review of its internal resources and competencies can enable the business to determine its future strategic direction” (p. 114). Differently put, it is necessary to investigate the available resources for a company in the travel industry.

The key suppliers are travel agencies. Currently, the market is stable because of new technologies. However, it is extremely prone to changes in the environment because it is extremely complex and not stable. Xiang and Formica (2007) state that “the environment changes constantly and generates uncertainty for decision makers in the organizations that are responsible for identifying external opportunities and threats” (p. 1194).

This means that it is relatively hard for managers to develop strategies based on analyzed data, and because of this environmental scanning is often used. Key issues of this industry are problems with registration and problems with excessive emission. The whole industry is regulated by the government.

The United States Environmental Protection Agency plans to set new emission standards because currently it is not controlled that well. Such regulations have a huge impact on the industry because travel companies may need to develop new technologies to meet the standards.

Financial Aspects

Total travel expenditures in the United States were $136,700B in 2014 (The World Bank, 2015). Average annual costs for information technologies are $20B each year. The average annual expenditures are ten percents of revenue. Schinasi (2003) claims that the market is stable if there is an “absence of the kind of volatility that could have severe economic consequences” (p. 4).

In other words, the market stability is dependent on how prices vary. Multimodal Transport System, Hadoop tools, Mobile Retail Solution, Fully-Integrated Inflight Entertainment and Connectivity System, and Real Time Content are often deployed. Such systems are different, but they are implemented to enhance the experience of customers. The number of travel applications is enormous.

Most of them are available on iOS, Android, and Windows Phone. The most popular applications are entirely free, and paid applications often have better functionality. Such applications like Uber allow users to take a taxi from the phone in foreign countries (Talty, 2015). Similarly, Waze is an extremely useful GPS navigator that lets one to read traffic reports that were submitted by other users.

WeatherPro is a great travel application for those interested in weather reports. A user is able to get detailed information about flight paths with FlightTrack. XE Currency is the leading application for currency conversion. Similarly, Converter Plus allows other types of operations besides the standard one. Entrain is a quite innovative applications that can help one to beat the jet lag.

Packing Pro is extremely helpful because it suggests a list of items that you may want to pack for a vacation. Perfect World Clock is a great addition to the arsenal of applications for those who travel a lot, and it is hard for them to keep track of time zones. Skyscanner is a leader among booking applications. It allows its users to have a quick access to detailed information about price changes.

Similarly, Hostelworld helps users to book cheap hotels and read customer reviews. Stayful lets one to find a hotel based on the budget and also helps with the process of negotiation. Google, MeteoGroup and Uber are the leading developers of this kind of applications. Overall, there are all kinds of travel applications, and they make visits to other countries much more comfortable for the customers while being extremely profitable.

Standards

Standards are crucial for this industry because the safety of customers is of utmost importance. There are companies that focus on raising the standards in the travel business such as ABTA that functions for 65 years already. There are two standard bodies in this industry.

International Air Transportation Association provides a range of protocols and other information that may be purchased. OnepTravel Alliance is another standard body that transfers information and supports various standards. NDC Program creates standards for communication for the whole industry.

Trends and Innovation

Currently, there are four technology trends in the travel industry: cloud enablement, social media explosion, the mobile revolution, and analytics (Peterson, 2014). The first trend allows companies to interact with the customers in entirely different ways because of changes in the way the data is accessed.

Social media is a great way for travel companies to promote themselves, and it is an extremely useful when gathering information about the clients. The mobile revolution has led to dramatic changes in the way travelling is perceived. The positioning of the relatives is no longer a matter of concern because of new mobile services.

New technologies allow customers to share their travelling experience with others via photos or blogs, and the profit of travel companies is increased as a result. The last trend is so important because it allows companies to have a better understanding of the recorded information. Predictions and strategies are developed based on the received data. New models of aircraft should also have an enormous impact on the industry.

However, some companies like Southwest Airlines prefer to use only one type of jet airliners because fleet commonality has numerous advantages from the logistic and economic standpoint. Aircraft of the same kind is much easier to repair, and standard parts are easier to attain. Another important aspect that should be noted is that there is no need for additional training of employees if only a single type of aircraft is being used.

However, there are limited opportunities for progression and development when the airline does not offer long range flights. Maintenance costs are enormous and hard to manage because of a number of flights that take place each day. Mobile and Internet services are game changers for this industry. Smartphones allow customers to order tickets at last possible minutes.

There are mobile applications that guide users through a country in the way a human guide would. Web sites offer travel suggestions that are personalized based on the collected and analyzed data. All the information about travelling is available in real-time and can be easily accessed, and many customers find it extremely convenient.

New technologies also allow companies to advertise their services in different, previously not possible ways. There are organizations that specialize in the development of new technologies for this industry. Google is one of the leaders because it offers a number of services such as the Google Maps and Google Now.

Google Glass and Smartwatches are going to become a future of this business if they become more affordable for an average customer. Geolocation services also have changed the industry. These services help users with keeping track of their positioning not just outside but even indoors. Visited locations are also remembered, and it is helpful in case of emergency.

A possibility of space tourism should also significantly impact the industry. However, it is still in the relatively early stage of development. Tours to Europe are becoming increasingly more popular. There are such hot spots as Netherland, Iceland, Switzerland, Austria, Spain, Germany, France and Slovakia. Also, there are countries that were always popular with tourists such as India, Japan and Costa Rica among others.

Conclusion

In conclusion, the travel industry is enormous, and there is always room for competition. It is paramount for the global economy because of its contribution to the world’s GDP and the number of job spots it currently supports. This business continues to grow at incredibly fast rates thanks to the introduction of new technologies and continuous increase in the interest of customers.

Travelling is relatively affordable nowadays, and not the way it used to be years ago. Companies in this industry always develop new strategies and methods to make sure that the customers are satisfied. Clients of travelling companies prefer to stay loyal, and it is necessary to keep such customers.

However, the industry’s economic sensitivity and the fact that it is so hugely impacted by seasonality prevent this industry from even further development. Nevertheless, the travel industry is huge, and it is the future of entertainment.

References

Ali, R. (2015). Five charts that explain the size of the global travel industry in 2015. Web.

Peterson, S. (2014). Four ways technology is reinventing the travel industry. Web.

Robinson, P. (2009). Operations management in the travel industry. Wallingford, UK: CABI.

Schinasi, G. (2003). Responsibility of Central banks for stability in financial markets. Washington, DC.: International Monetary Fund.

Schoinas, D., & O’Connell, J. (2011). The airline retail industry: a customer’s perspective. World Review of Intermodal Transportation Research, 3(4), 353-375.

Talty, A. (2015). Best Travel Apps for 2015. Web.

The World Bank. (2015). International tourism, expenditures (current US$). Web.

Trefis Team (2014). Competitive landscape of the U.S. online travel market is transforming. Web.

Xiang, Z., & Formica, S. (2007). Mapping environmental change in tourism: A study of the incentive travel industry. Tourism Management, 28(5), 1193-1202.

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