What is COST, or Undeveloped Niches in the Online Travel Market
Last year, McKinsey shared its vision of the future, or rather, new types of companies that will grow rapidly on the world stage in the next 20 years.
These are a variety of businesses: from integrated solutions of “smart home” that combine security, utilities and media services (in the research terminology - HOUSE, HOme Unified SErvices), to new methods of high-quality water purification for drinking and agriculture (WADE, WAter DElight) . What unites these new types of companies (and there are twelve of them, according to McKinsey ) is that their creation becomes possible only now, when the necessary infrastructure, technologies and demand come together at one point.
Do not forget in this list of companies about the evolution of the travel industry. Services that McKinsey called COST should play a significant role in it. The abbreviation stands for Convenient Organizer Service for Travel, that is, a convenient service for organizing travel. It is assumed that such a service will offer the user a trip as a finished finished product, taking on an effective assessment and selection of all its components: flights / relocations, accommodation, plans for visiting attractions, etc.
OTA, meta, COST
To better understand how COST will integrate into the current landscape of the travel market and how this service differs from existing ones, let's recall how the industry developed. The market is based on the final service providers: airlines (for example, Aeroflot and Lufthansa) and hotels (for example, Marriott and Hilton).
For a long time before the advent of the Internet and a little after the only "add-on" over these companies were tour operators. The person had a choice: spend a lot of time looking for a profitable flight and accommodation, studying the offers of dozens of airlines and hotels, or delegate the organization to a tour operator and incur additional costs. At the same time, the choice was rather conditional: tour operators work with certain directions and with a limited range of hotels and airlines.
The process of finding and buying tickets on a pre-planned route has become easier with the advent of online travel agencies (OTA). These include, for example, Expedia, Kayak, Anywayanyday or OneTwoTrip. Their task is to provide an opportunity to choose between offers of the same service from different suppliers.
The next stage in the development of the travel market was meta-search systems such as Mamondo, Skyscanner or Aviasales. They aggregate offers from different OTAs to select a cheap / convenient option from a larger number of offers.
Each year, according to eMarketer, the shares of OTA and metasearch systems in the market are growing by 2-3%, that is, customers are gradually moving away from direct service providers to these companies.
Traveling as a Whole Product
Thus, in recent years, the industry has come a long way to make travelers' lives more comfortable, simplifying the process of finding the best deals on tickets and hotels for the right date. However, another key and time-consuming step has practically not changed - travel planning.
Often we do not know when and for how many days it is better to go on vacation in terms of the optimal total costs for flights, accommodation and rest. If, for example, you can fly away on any day of September, then manually sorting through all the options is almost impossible. The task is many times more complicated if you want to visit several cities or countries at a time.
In addition, travel is not only road and housing. The completed plan should include both car rental and personal recommendations (or orders) for places of interest, such as attractions or cultural events and ready-made offers for restaurants and cafes.
Thus, while the task of purchasing a particular type of service (hotel, flight, etc.) has already been quite qualitatively solved, the first decisions in the field of travel planning are still rare and fragmentary. And COST can be attributed to companies that will do this in the coming years.
The solution to this problem is worth it. The world market for online travel today is estimated at $ 408 billion. Let's start from the fact that “travel as a product” is needed first of all for advanced travelers, for whom the problem of travel planning is especially acute. Surely, they will be the first users of new services, the so-called early adopters. Complex travel today accounts for 5% of the market, that is, about $ 20 billion a year.
If the service will earn on commissions from suppliers of all services that are present in the proposed plans (flights, hotels, car rentals, excursions, etc.), even with a commission of 2%, a piece of cake for COST already today amounts to $ 400 million.
Forecast instead of queries
Actually, it is for this market that we want to compete. Our IQPlanner service has to overcome a number of obstacles, some of which run into existing ticket booking services.
This is, first of all, the relatively long processing of the request to global reservation systems (GDS) and the complexity of evaluating the results.
For example, we have a plan to go by plane from Moscow to Paris and back, stay there in a 4-star hotel for 5-7 days depending on the budget, which should not exceed 60 thousand rubles. And, of course, 7 days would be ideal. We are ready to go on a trip any day during September, that is, thirty days.
To make such a plan, you need to make 90 requests to search for a hotel: 3 requests for each day of September, but with different lengths of stay: 5, 6 and 7 days. Add to this 90 flight search queries. We get 180 requests, which even if processed by a system that sequentially does on demand in GDS, would be processed for more than 15 minutes. Then the obtained data still needs to be analyzed to find the optimal combination. Doing it manually is an extremely difficult task.
Our team of mathematicians and developers at IQPlanner has made significant progress in this direction. Over the past two years, we have been working on creating our own price forecasting function, which would allow us to reliably predict the price of a ticket over long time periods. The function is based on machine learning algorithms; accordingly, the accuracy of its results will increase as the number of users grows. Using this function, we can reduce the query processing time by evaluating and selecting as quickly as possible (from a few seconds to a couple of minutes) for the user.
Such “overcoming the time barrier” opens up qualitatively new conditions for automated travel planning.
The most obvious example is the opportunity to determine the ideal day to start the trip and / or duration (for example, from 10 to 14 days), indicating intervals of up to a month or more as possible departure dates. IQPlanner will predict changes in ticket prices and hotels during this time period and determine the most profitable day in terms of total costs.
To achieve this result manually, you would first have to write down the prices for the cheapest air tickets for all possible combinations of round-trip dates. Then you would have to go in the same way according to the offers of hotels - find and record the minimum cost of accommodation in the hotels of the city for each date of arrival and possible time of stay. And finally, the third step is to summarize the flight and hotel options for each option of the day / duration of stay, in order to finally find out when and how much it is more profitable to fly.
And this is the simplest application of IQPlanner. There are more complicated tasks that are almost impossible to cope on your own. For example, with the service you can determine in which order it is more convenient and profitable to visit the planned cities, how long to stay in each of them, taking into account the changing prices of tickets and hotels, and where it is better to use which transport.
The result of IQPlanner is a ready travel plan, as well as prepared booking requests to our partners. We are already working with Rome2Rio, Anywayanyday and Ostrovok.ru and we plan to connect a number of new partners who will cover other segments of travel, such as car rental and booking excursions. By the way, if you work in such a company, or just have a great idea, we are open to suggestions and discussions.
This week, beta testing of our service began. We will be grateful if you try to make a travel plan of your dreams in IQPlanner and share your ideas, comments or bugs that have not yet been caught here in the comments or on our forum .
In addition to our huge gratitude, all beta test participants can count on a special status - we are already preparing various bonuses.
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