Embracing Horizontalisation: Unravelling The Driving Forces Behind The Travel Industries Conversion

In recent years, the travel industry has witnessed a remarkable transformation. Airlines, hotels, online travel agencies (OTAs), and even brands outside of the conventional travel sphere are no longer tied to their traditional boundaries. Instead, they are moving beyond their existing specialisations in an attempt to generate deeper customer relationships that are more valuable to both travellers and the businesses that serve them.

At Holibob , we call this phenomenon Horizontalisation - and we’ve built our business to enable it for brands, destinations, and travel companies looking to take advantage of the in-destination nature of the experiences sector. Taking advantage of this opportunity will deliver value across three key areas:

1. Unlocking Incremental Revenue Streams

Over the course of the last few years, the travel industry has been subject to various macroeconomic factors that have put unique pressures on the industry. You don’t have to look too far back to remember one major event that we’re still feeling the impact of. We’re also seeing stiffer competition and a more challenging economic environment, so it’s no surprise that brands across the travel ecosystem are looking to tap into more of their consumer's spend.

Take budget airlines as a prime example. The level of competition in Europe and low prices have made air travel accessible to vast numbers of potential travellers. Rates are so low – especially in Europe, with flights starting at ￡10 – that you wonder how these airlines are turning a profit. Is it fair to say that the flight itself is becoming the loss leader for the multitude of different ancillaries an airline could up-sell to travellers before, during, and after their flight?

Many low-cost carriers (lcc’s) are driving 30% of total revenue from ancillaries, and for some, this is as high as 50%. What is likely for all, is that this proportion will be on the rise. For a long time, 'ancillaries' such as baggage holding and extra legroom etc have been owned by the airline. They are the low-hanging fruit that drives value for the airline, but does relatively little to improve the customer experience. But increasingly airlines are broadening their horizons, offering insurance, data packages, mobility, in-destination experiences, and more. These additions combine to provide deeper brand engagement and added value for customers.

At Holibob, we believe this last category - in destination experiences - is particularly relevant to helping airlines increase loyalty and revenue.

For the majority of travellers, a flight within Europe is transitory – simply a way of getting from A to B – and the main motivations for travellers are to explore new destinations and try new things. Peoples’ budget-consciousness is high at the point of booking their flight, then diminishes in destination as they're happy to spend their hard-earned money on creating memories.?

2. Personalisation And Data Usage

Data has become a priceless asset for businesses in the digital era - particular as Generative AI and large language models become readily available. Travel companies are well positioned to capitalise on this data boom, providing personalised recommendations for various trip-enhancing offerings across the user journey to maximise ancillary revenue.

Travel brands at the top of the value chain have built-in advantages to do this. For example, a hotel leveraging data on a specific trip AND from prior bookings, has a far greater ability to put a relevant experiences in front of their consumer than a traditional OTA where a customer arrives from Google.?

Revolut recently entered the experiences vertical, offering 300,000 experiences to their travellers, and have stated their intent to add car rental and flights in efforts to become a travel super-app. From processing such a colossal volume of transactions for Europeans at home and abroad, we can only imagine the number of data points they have available – undoubtedly giving them the advantage when recommending ancillaries to travellers. Adding ‘things to do to’ to every shop transaction, restaurant bill, and bar tab puts Revolut in a hugely desirable strategic position – with the potential to capture more overall travel data than any European travel stalwart.

The data Revolut attains from travellers purchasing experiences is inherently valuable, but could actually be even more valuable than the revenue driven from it. With the data they have to hand, Revolut can build a clear picture of travellers’ in-destination behaviour, and can use that to their financial and strategic advantage.?

3. Lowering Acquisition Costs

One of the biggest headaches facing the travel industry is the high cost of customer acquisition. The cost of paid advertising – fueled by intense competition – is enormous, and eats into profitability. For example, in the experiences industry, OTAs?pay upwards of $40 to acquire a single customer. Even the biggest OTAs, like Expedia and Booking, continue to spend hundreds of millions a year on customer acquisition.

Across travel, low customer loyalty and short lifetime value mean that travel brands are often pay for clicks from customers they recently served. Yet their offering, overall experience, and brand has not been compelling enough to make the consumer go directly to their website.

So, how can travel brands drive loyalty, extend lifetime value, and lower acquisition costs? Embracing horizontalisation enables travel companies to maximise the value of each trip, and foster loyalty among their customers by offering a comprehensive range of reliable and seamlessly bookable products and services tailored to the traveller. Customers are more likely to stay within the ecosystem of a brand they trust and find value in - ultimately driving repeat bookings and reducing customer acquisition costs.

Horizontalisation is here - and will continue travel’s boom

Travel has undergone a significant transformation since COVID, as people crave a return to the road (or skies) and all the new experiences they can engage in wherever they go. This has driven a golden age for many travel brands, as their core business has returned to pre-2019 levels. But that is no reason to rest on laurels.

In fact, it’s the perfect time to invest in delivering more value to customers. With that in mind, we believe more travel brands will move horizontally in efforts to drive greater loyalty and revenue, and organisations outside of the travel sphere will undoubtably make their bids to cash in on the value that different travel products can deliver. As for experiences specifically, you only need to look to Amex’s recent trends report highlighting the increase in demand from Gen-Z and millennials for experiences over things.

No matter the type of organisation, tapping into consumer spending in-destination when travellers are less price sensitive and willing to spend more is a massive opportunity. And to do that whilst making it easy to create incredible memories from experiences… well, that is an opportunity that no brand should pass up.?