22 July, 2018

Digitization in Tourism – Hold your breath and focus!

Digitization is a multi-layered development in which one easily can lose the overview. However, there are a few clear avenues for entrepreneurial tourism practice that need to be reconsidered, with the primary objective of increasing productivity and earning more revenue: (1) business model configuration (macro level), (2) process design (micro level) and (3) dealing with data (resource level).

Let me describe these avenues with the help of specific entrepreneurial questions. Since the process design is one of the many consequence of the business modelling, we start with the business models.

(1) Business model configuration: What business am I in – when I abstract from the obvious as much as I can? Are there any approaches that I can use - based on precisely identifiable market needs (service chains) and my own abilities - to configure my "business" as a whole and with regard to all relevant processes in such a way that I earn more? What "pain" in terms of hardships, which a guest must accept, could I reduce with the help of digital technology? Which "gains" could I provide? What services do I bring into a jointly operated/ common service system with others (e.g. hotel accommodation in an integral resort service with others, maybe even including transport to and from the destination) or which services can be integrated virtually instead of stationary (e.g. F & B in hotels: stationary today, tomorrow virtually in a network with neighboring restaurants, such as for dine around). Essentially, business modelling is - first - about identifying potential service chains from a guest perspective (!). Then - second - about deciding which part of that service chain to manage alone or together with others. And -  third - to decide what one produces by oneself, together with others, or through third parties (essentially asking the outsourcing question). Digitization - through its inherent standardization - contributes significantly to reducing the cost of such collaborations and related financial and non-financial transactions.

(2) Process design: In the domain of process design, further questions arise: How do I reconfigure individual processes (e.g. information, booking, check-in, check-out, etc.) with the help of self-service technology (SST) and in the future also robotics, not only for my benefit by reducing my costs but also for the benefit of my guests (e.g. providing time advantage, lower price)? This question arises in particular, since many tourist services are still produced in a labor intensive way. I do not argue for the hasty replacement of humans by machines. Rather, it must be clarified in which processes the benefits and thus the marginal willingness to pay on the part of the guests for a process execution by humans are higher than the corresponding marginal costs for the enterprise compared to SST or robotics. If there is even a time advantage due to SST process execution and the guests do not benefit from the interaction with the employee in such a way that they would even be willing to pay, I can have a self- (guest) or machine executed process. And staff can do what they are best in: interact with the guests without having to execute tedious repetitive and mostly routinized processes.

(3) Dealing with data: How do I deal with the new resource «data» in the future? The new General Data Protection Regulation in the EU - for instance - is propelling the development, according to which guests can use their data - in addition to money - as a means of payment. So, data becomes a new currency. Businesses as a counter party will have to pay for the use of such data, whether through discounts, extra special services, etc. So, I need to think quickly about how I deal with this advanced economic resource logic.

All points are ultimately closely related. Thinking about data-driven business models opens new logics for performance design. If, for example, I know in a consortium of transport and overnight accommodation providers where a given guest is at a given moment, I can make use of that knowledge to tap into potentials for new additional business (e.g. advertising restaurants). Or if I have a relationship with a guest and this person books an overnight stay, I can use his existing data, for example, to automate the check-in process.

Answers to all the questions related to digitization arise in the daily practice.
The learning curve is steep for everyone, however there are rewards luring us to overcome the challenges.

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