Scoot’s Wilson on distribution: “Use the opportunity to recalibrate and build back better” while Pan Pacific’s Choe says, “The Netflix culture is coming”
Globalisation and OTA power are the two sacred cows that have been killed by Covid, as far as Campbell Wilson, CEO of Scoot, and Choe Peng Sum, CEO of Pan Pacific Hotels Group, are concerned.
Speaking at this week’s HICAP conference during a panel on “Where are we heading?”, Wilson said, “We were all presuming that globalisation would lead to the end of nationalism and I don’t think anyone expected borders to close as they have.”
Choe said the breakout of other platforms and channels during the past few months means hoteliers no longer have to live in a world dominated by OTAs. He cited the example of food delivery where a host of service providers emerged during lockdown periods “and with that loss of monopoly, we will start to see the drop in demands for rate parity, and we will be able to go after loyal customers with different pricing”.
Wilson said that pre-Covid, technology had already democratised access to the airline product “which were previously constrained by GDSes and travel agents”. With tools such as NDC and API connectivity, he said API distribution is the future. “A few monopolistic rent seekers cannot control the pipes anymore.”
Choe said consumers would force the change. “They will demand more choices. They don’t want to be stuck with monopolies and many jurisdictions are now dealing with monopolies in their markets.”
Wilson believes that another trend that will drive change in customer behavior and thus how suppliers distribute is that low cost carriers will lead the recovery. “We are point-to-point, shorthaul, lower operating costs thus lower prices and fewer touch points – you can see from the pent-up demand that low cost airlines will be the first to recover.
“So the distribution will move towards leisure and low cost and the majority of leisure travellers in their home markets book direct – 70-75% of customers book direct. This is different from corporate travel where direct is lower. If you don’t have intermediaries, it’s an opportunity for suppliers to work together.
“The hotel industry got a bit snookered by aggregators and platforms before the consequences were realised – fortunately the airline industry didn’t get into that position. We shouldn’t waste the opportunity to recalibrate and, as Joe Biden said, build back better and not build back to be in the parasitic relationships that existed before.”
The rise of hybrid meetings: An opportunity for TMCs
The impact on corporate travel and meetings has been harder with Sanghamitra Bose, American Express Global Business Travel (GBT), acknowledging that some business trips will not come back as remote meetings technology improves.
“We see the rise of hybrid meetings as interesting. You can do that nicely with small groups, but when the scale grows it gets complex, and this is an area where companies like ours that provide events services could play a role.”
Wilson, who spoke at and attended the hybrid WiT Experience Week on October 1 at Marina Bay Sands’ Hybrid Broadcasting Studio, said it lacked the full impact of a physical conference, and it was like going to a broadcasting studio, speaking and then leaving. “I don’t think the model will last long after Covid. We all know web seminars do not offer the same value as the real thing. The substitutes are imperfect, but they are somewhat acceptable and will take a slice out of business and conference travel. It’s less of a concern to me as a low cost airline than if I were running a full service carrier.”
Choe said there was an opportunity for hotels to create the “third place”, a term coined by sociologist Ray Oldenburg and embraced by companies like Starbucks. “We have a very good setup for the third place – the club lounge, lobby, pool side, suites with Herman Miller chairs. We are ideal for workcations – we have started offering that and getting good pick-up.”
He said the group was repurposing its Parkroyal Collection hotels to create more “third places”, and he sees this as a new lifeline going forward.
SIA building specialist gateways to a platform of services
The convergence of data, fintech and loyalty was also singled out as a trend that’s transforming business models. Citing the example of the Singapore Airlines Group, Wilson said, “Airlines have poor margins, as a consequence we look for things that can yield better returns and thankfully, we have useful core assets.
“We have 40 million customers a year (pre-Covid) and loyalty currency with a redemption value of half a billion dollars. We have a trusted brand that attracts quality suppliers. This gives us an opportunity to build a platform for consumers to enter an ecosystem – whether it’s through KrisFlyer, KrisPay or Pelago (its new experience site) – to access our services.
“Will it move the needle? We’re not sure, but given the amount of investment needed to buy an aircraft versus investing in this, I think it’s worth a punt. Whether it’s a market story or potential diversification, it’s worth a try, that’s my opinion.”
Wilson said the jury’s still out on the superapp concept as to whether it will work. “Our model is using specialist gateways and each of those gateways get you into all the functions of the ecosystem. You use the entry point you want and by that daily use, it becomes part of your normal life.”
Wilson was less bullish about subscription models for airlines. “I acknowledge a segment that will buy an amount of tickets for a significant discount, but it doesn’t eliminate the fundamental challenge of a perishable product and revenue management. Every airline that has tried to build a model on it has failed. Unless it’s for a niche market or a cash grab for liquidity purpose, I don’t think it will be a significant model for airlines.”
“The Netflix culture is coming”
Choe, however, believes that hoteliers have not fully tapped into subscription models. “People want value, value add, and they want to belong. I can see us building a community with a footprint of hotels and restaurants. We are looking at restaurants first, and it could work very well. The Netflix culture is coming up and we might not be able to ignore it. We can build community through subscriptions.”
Bose also sees corporate travel moving to subscriptions or a SaaS model. “That’s coming,” she said.
“In the past, TMCs were very transaction-dependent. You book a ticket, you pay a fee. Now in this changed environment, a lot of the requirements are for services that are non-transactional – such as up-to-date information, pre- and post-travel requirements, fares with flexibility and huge need for duty of care and disruption management.”
For her, the most exciting thing coming out of Covid is technology and how it could change her sector. “We launched an information repository – Travel Vitals – real-time information on pre-and post travel requirements, tests needed, pulling in content from airlines and hotels. This is very exciting and the repository will go a long way towards restoring traveller confidence.”
Wilson wishes that technology would solve the physical traveller journey – “from arrival at the airport to airport at the destination, there are too many unnecessary interactions. It can be solved and should be solved.”
For all the panellists’ excitement about the future, it is clear they are raring to get back on the road, with Bose yearning to return to India to visit her family and Choe wishing for a holiday in Japan.
Wilson said his hundreds of Scoot aircraft and thousands of staff are ready to take to the skies, but acknowledges the challenges in the opening of locked doors. Having said that, the bilateral no-restriction Singapore-Hong Kong corridor recently announced by both governments has given hope that more such safe corridors will be opened shortly.
“Let the skies open right now,” declared Choe when asked what he would want to rewrite about travel.