AI in Travel: Commodity or Force for Upheaval?

Over the past two decades, my journey through the technological evolution of the travel industry has been marked by many, sometimes sobering, learning opportunities. Starting with my first investment in Knowledge Yard in 2011, exploring semantic search to enhance information accessibility, I've been excited as much as disappointed with the integration of AI in travel. Knowledge Yard eventually failed, yet the experience provided invaluable insights into the practical challenges and revolutionary potential of applying AI in travel applications.?

Today, we seem to be at a juncture, coined by 2 main theses:

• AI is changing travel, like any other industry or walk of life. (No one would disagree.)
• AI is becoming a commodity. (Hence investing into an AI-first travel company is incredibly risky.)?

Now, we are in the (generative) AI hype cycle. And almost every travel corporation tries to leverage AI in more of many ways. Some best practice stats:

• 57% of travel companies have implemented chatbots for customer service and bookings (Phocuswright), and chatbots can reduce customer service costs in the travel industry by up to 30% ( Juniper Research ).

• 68% of travelers have used a chatbot for travel-related purposes (Travel Daily Media) and 64% of travelers feel chatbots make booking travel easier ( TRAVELPORT DIGITAL (UK) LIMITED ).
• Chatbot interactions in the travel industry are expected to grow by over 110% next year (Juniper Research ).

• AI chatbots can recover 25%+ of lost sales. Average order value (AOV) can be boosted by as much as 45%+ when AI is involved in customer interactions ( Tidio ).
• Also, talking to machines can make people happier. Happy customers are likely to have a 15% higher lifetime value, emphasizing the role of AI in fostering long-term customer relationships ( Marketing Scoop ).

All very pretty numbers.?

Though, looking from further afield, implementing chatbots to boost OTA sales feels a bit like travel offices starting to sell through a 2000’s website, back in the days. The same product, distributed more efficiently (at best). Fundamentally none of the changes brought to the market by incumbents changes the product experience itself or the logic of how distribution is pursued. In that sense, AI is a commodity. Obviously. Ultimately, margin upside will be - zero. Except for the behemoths (OpenAI, Google) that build the underlying AI.

However, there are bigger bets out there: while most companies integrate AI to improve efficiencies and customer engagement, others try to entirely disrupt the market by fundamentally transforming how travel services are delivered and experienced. Let me share three examples:

TravelAI?, An UpNext Company , which we at ennea capital partners have recently joined as board observers. This Vancouver-based company has strategically acquired nearly 400 travel-specific websites, focusing on driving high-intent traffic to major Online Travel Agents (OTAs) such as Expedia Group and Booking.com . TravelAI uses AI to build the websites and applications within minutes and to optimize both paid and organic search traffic, turbo-charging Return on Ad Spend (ROAS). This doesn't come without human development power: Dozens of engineers keep the pace of progress (ahead of the market) up, partnering with the AI that provides the scale.

Raily , another innovator in the travel tech space, tries to employ AI and Blockchain to transform the traveling experience. The buzzwords are Social Travel Discovery, and the stakes are high. But Raily has forged partnerships with people like 华为 , Magic Leap or ElevenLabs to alter the way, (supposedly mostly young) people will travel tomorrow - in a hybrid world, whereby hardware, software and real-ware (the physical world) blend to an exciting, shared experience. Some ways AI comes into play, include

• Smart Ticketing: Raily integrates AI to streamline ticketing processes and conduct predictive maintenance, enhancing operational reliability and customer satisfaction.

• Personalization: Leveraging AI, Raily offers personalized travel itineraries, aiming to make rail travel more appealing and customized to individual preferences.
• Loyalty Reward: Raily’s blockchain-based loyalty system allows for instant updates and redemption.

Lastly, Chain4Travel , a Swiss-based startup, leverages Blockhain and AI to streamline the $11 trillion travel industry by addressing high distribution costs and system fragmentation. Its products include a tool reducing the effort and cost of API integrations and now Chain4Travel has announced TRAV3L, a super-app for bookings and payments using AI components. The company, profitable from day one, already partners with over 190 industry leaders from TUI to 汉莎航空 to Juniper Group .

Now, ultimately all of these startups may succeed or fail, like many Travel (AI) startups have before. Yet they exemplify the profound impact AI can have on the travel industry's economic and operational fundamentals. These companies’ use of AI sets a benchmark for innovation in the travel sector. Eventually this will mean that the entire product experience and distribution chain will look fundamentally different than today - and formerly “digital-first” plays will look like travel offices of the 1990s.