Facebook and the future of travel
The company’s Lee McCabe explains how the travel-industry
landscape is shifting—and why mobile apps are the way forward.
As Facebook’s first-ever global head of
travel and education strategy, Lee McCabe helps hotels, airlines, online travel
agencies (OTAs), and other travel companies connect with the more than 1.5
billion people worldwide who use Facebook. McCabe, a former marketing leader at
Expedia, recently spoke with McKinsey’s Alex Dichter and Nathan Seitzman about
the increasing importance of mobile, what makes a winning app, and how travel
companies can organize themselves for digital success.
McKinsey: When people think of Facebook, they don’t
immediately think of travel. What role do companies like Facebook play in the
travel industry?
Lee McCabe: Sites like Facebook are affecting
consumer travel decisions at every stage because travel choices are heavily
influenced by recommendations from other people. That’s always been the case,
but in the past, travel recommendations would have been passed along in person,
at a family gathering, or when friends got together at a bar or restaurant, for
example. Now it happens in real time and at scale on digital platforms, many of
which are social in nature. And, of course, seeing your friends’ vacation
photos—that’s definitely something that makes people start dreaming about
travel.
Five
years ago, most people used social-networking sites to share text. But more and
more, people are using photos and videos to communicate and to share stories
and recommendations, and that includes their experiences with travel. In five
years, we’ll see even more videos, and after that, we’ll probably see more
immersive content, like virtual and augmented reality. So the way people are
communicating on these platforms is changing. But large, people-based platforms
will continue to create a catalyst for travel.
These
platforms are social in nature and can provide the kind of personalization and
scale that marketers have wanted for a long time. And now that the world has
shifted to mobile, the opportunities for personalized marketing through digital
platforms will only increase.
McKinsey: What does that kind of marketing look
like for travel companies specifically?
Lee McCabe: It means targeting the right people, at
the right time, in the right place, on the right device, and with the level of
personalization that people have come to expect from businesses. We’ve been
talking about the approach of mobile for a long time. Well, now it’s here—it’s
happened. In August 2015 one billion people logged onto Facebook in a single
day, and about 84 percent of them were on mobile.
It’s
also important to understand that people are looking for more structured, more
centralized ways to communicate with businesses, so travel companies have an
opportunity to interact with their customers in a far more personal way. They
can create deeper relationships and have real conversations. They can keep
those conversations going. Interactions with customers don’t have to be about
ads anymore; it can be the ongoing dialogue that drives results.
Let’s
look at travel suppliers specifically. If I book an airline ticket or a hotel
room, I’ll probably get several text messages. I will also get a few emails. I
might download the company’s app, and I might interact with the website as
well. I think right now there’s a lot of friction in that communication, and
not a lot of continuity. What people want is to have all the communication in
one place. Travelers want to be able to respond to messages, look at special
offers, or download their tickets in a central spot. When there’s a single
string for the conversation, there’s no need to dig through a bunch of text
messages or emails. Users just go to one place for the history of their full
communication, and it’s interactive. If people want to ask the airline or the
OTA a question or talk to customer service, they just reply in that thread.
McKinsey: What other trends are you seeing in
mobile and in the industry more broadly? And what do those shifts mean for
travel companies?
Lee McCabe: People are now spending about 8 hours a
day consuming some kind of media. Among adults in the United States, that
number is even higher—they consume 12 hours a day of media, and nearly 25
percent of that time is spent on a mobile device. We’re on our phones all the
time—as we commute to and from work, as we’re standing in line. And we’re
multiscreening: so, for instance, we’re watching TV with our mobile devices in
hand. In a way, mobile is actually giving people more time. You could say
consumption is stacking, not shifting.
Most of
the big shifts in the industry are a by-product of mobile. Take unbundling. If
you look at US hotels, ancillary revenue has remained flat for the past seven
years, and I think that’s thanks to mobile. Here’s why: telecommunications was
for a long time a decent source of ancillary revenue. Well, nobody’s using the
hotel phone anymore; almost everyone has a smartphone. In-room entertainment
was once a decent revenue stream, too. Not anymore. A lot of people are using
mobile devices instead. People used to consider these types of amenities—free
calls, access to movie channels—when booking a hotel. Now those services are
offered by a third party on a mobile device. You can order takeout from a local
restaurant instead of ordering room service or use your ClassPass to find a
great gym a block away instead of relying on the two or three treadmills
offered by the hotel. You can send your laundry and dry cleaning outside the
hotel, too. So really, all the hotel is left with is Wi-Fi, a bed, and a bath.
All I want is a great room in a great location. For everything else, I can
still get four- or five-star service, but I get it by using apps on my
smartphone.
Another
thing that’s changing because of mobile is measurement. Cookies worked back
when everyone was on a desktop, but they definitely don’t work now. In the
United Kingdom, for instance, 60 percent of people use two or more devices a
day, and more than 20 percent of people use three or more devices a day: it’s
impossible to use cookies to track people’s usage across devices. Businesses
have to be far more sophisticated with both their tracking and data analysis.
For apps, attribution windows—the amount of time between the first click on a
product and the purchase of it—have to be increased. If I download an OTA app
today, I may not even open it for another six months. Attribution windows like
that sound absolutely incredible to sophisticated marketers, who are probably
used to working with something closer to a 24-hour window of attribution.
McKinsey: What you’re describing is disruption in
the truest form. How can hotels start to use mobile as part of the solution to
this disruption? And what does mobile success look like for hotels and other
travel players?
Lee McCabe: When you drill down on mobile usage, you
see that most people are spending their time in apps—they’re not using their
phones to browse the web. In the United States, for example, 86 percent of time
on mobile is spent in apps. Those same users access only about 27 of their apps
each month, so at best only a very small number of them will be travel apps.
Mobile users might have one metasearch engine, or an OTA, and maybe one app for
a hotel or an airline they’re loyal to. If I were a travel company, I would be
racing to develop the best app possible, and I’d be working with other
companies that are doing well on mobile.
Of
course, it’s not easy to develop a great app and then to become—and remain—1 of
the 27 apps people use regularly. I think in general hotels and airlines have
to move faster, while this window of opportunity is open. The travel companies
that are approaching this well are laser focused. They’re trying to do one
thing in their app and do it well.
McKinsey: Is that what makes a good travel app?
Lee McCabe: Yes. The marketing landscape is
changing, but what people want stays the same. People want three things. First,
they want connection with a company. Right now, mobile is absolutely the best
way to make that happen. You can connect with somebody in a targeted way, more
efficiently and more effectively than ever before. Second, people want context.
Meaning, they want a personalized experience. And finally they want
convenience, which might be the most important element. The dynamic of mobile
is completely different from desktop. On mobile, people expect things to be
easy. They expect to reach their objective with just a few clicks. I think
app-based travel companies are already doing this well. There are apps that
allow you to book a hotel with three or four clicks and a swipe. It’s just
easy.
The
ultimate goal for travel companies that are now building their apps is to meet
people’s core needs. But it’s not easy. It’s best for companies to start by
creating an app that can do one thing well. For hotels and airlines, that’s
probably booking. Having too many objectives for an app just increases the
friction. And I think speed and convenience are most important to customers.
Having those two things in place will likely increase the chances that the app
will be retained.
McKinsey: Does that mean the mobile investments
some traditional travel suppliers are making—such as keyless room entry or the
ability to track your bag on a mobile app—are not necessarily worthwhile?
Lee McCabe: Time will tell. They’re good ideas, but
putting too much into one app doesn’t work—it creates too much friction. Ease
of access is important, and Facebook has learned from that. Facebook started
off as a multipurpose website. But a few years ago, the company made a major
pivot to mobile, and we later created a multipurpose app. It worked well, but
we learned over time that people wanted to meet their objectives quickly.
People wanted to use Messenger without clicking two or three times to get
there. So we spun off Messenger and Groups as separate apps. So “do one thing
and do it well” has been a big lesson for us, too.
McKinsey: Are there other lessons Facebook learned
along the way about mobile and apps—things that could help travel companies as
they start their own digital journeys?
Lee McCabe: There are two things to keep in mind.
First, you need a test-and-learn mentality. A lot of OTAs have that already
because they’re digital natives. But most traditional travel companies like
hotels and airlines don’t, or at least not to the same extent. So a
test-and-learn environment and culture is important, especially in this new
mobile world. The second is the importance of data science. To build a great
app, you need to put a lot of resources toward measuring absolutely everything
you can and then learning from it. Again, that’s something that OTAs and
digital natives have done from the beginning, but I don’t think most
traditional travel companies have caught up yet.
McKinsey: Can you expand on that? More broadly,
how should traditional players think about organizing for mobile success?
Lee McCabe: Well, first I should say that I
understand it’s not easy. It won’t happen overnight. For the first time,
technological capability is actually exceeding organizational capability.
Companies now have the technological capabilities required to take better
advantage of big data, which really just means better targeting. But
organizationally it’s challenging because most traditional players are siloed.
And then there’s the issue of data science. If a big travel company—an airline
or a cruise company or a hotel—doesn’t have a really good data-science
department, it’s missing out.
If you
look at a typical OTA, it has a pretty clean organizational structure. There’s
one department looking at supply data and one department looking at demand.
These two departments work together very closely, and mobile is now the
backdrop for everything they do. The groups talk to each other every day, and
they are constantly looking to decrease friction. But in typical travel
suppliers, there’s far more ambiguity in the organizational structure. They
often have multiple brands, and those brands are split into different regions,
and those regions have different departments. Sometimes there are several
people with the same title—head of commerce or head of mobile, for instance. It
can become ambiguous and cumbersome. So a clean organizational structure is
paramount. You need to be able to move fast and build things and move things
around because the mobile environment itself is fast.
McKinsey: Travel companies certainly have a lot of
opportunity right now, and a lot of challenges, too. What is the most important
piece of advice you would give a supplier or an OTA?
Lee McCabe: Invest in mobile and in data
science—otherwise, you’re missing out. Organize to move fast; it’s OK to
experiment. Make sure your organization is on a continuous test-and-learn loop.
Be clear about your objective—whether you’re building an app or working on a
marketing campaign, it’s easy to get lost in ambiguity. And perhaps the most
important thing—think about people first. Companies that can keep pace with
consumer expectations will have a better chance of being successful. And
bookings will follow.
About the authors
Alex
Dichter is a director in McKinsey’s London office, and Nathan
Seitzman is a consultant in the Dallas office.
http://www.mckinsey.com/insights/travel_transportation/Facebook_and_the_future_of_travel?cid=other-eml-alt-mip-mck-oth-1512
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