Tourism 4.0

Trends and Data-driven Transformation of the Tourism Industry: qualitative and quantitative insights

The tourism industry underwent significant transformations due to the Internet and mobile technologies several decades ago. However, recent developments such as the need for increased competitiveness, affordability of digital technologies, and macro-economic factors like COVID-19 have accelerated a new wave of changes. Within this context, three transformations stand out as particularly important for the goals of DATES:
  1. Digitalization of the sector: The tourism industry has embraced digital technologies, starting with online booking platforms and mobile applications. This has been followed by the emergence of IoT systems, social media, and the resulting explosion of data. Technologies like data analytics and AI are now being used to leverage this data, improving efficiency, generating new revenue sources, and enhancing customer satisfaction through personalized services. Additionally, the advent of digital twins and the metaverse are introducing disruptive elements to tourism through advanced reality applications.

  2. Sustainability: There is a pressing need to protect the environment and support local communities, given the exploitation of resources without limits in previous years. Reducing carbon emissions, minimizing waste, and promoting local businesses and communities have become shared priorities among stakeholders in the tourism value chain. Conscious travelers also consider sustainability as a crucial factor when choosing a product.

  3. Shift in consumer behavior: Traditional tour packages offered by operators are evolving to cater to diverse preferences and habits. Niche tourism markets, such as adventure, gastronomy and wine, culture, and health, have emerged. This shift has opened avenues for collaboration with players from other industries, creating opportunities for mutual benefit. It also highlights the importance of creating synergies with datasets from domains beyond tourism itself.

Within the realm of digital transformation in the tourism sector, several enablers of change are worth noting. These include online bookings, personalization, mobility through mobile applications, social media for brand awareness and customer satisfaction, and big data analytics for informed decision-making. Data plays a crucial role, and its availability and accessibility in machine-readable formats are essential for the development of AI-based applications.

The benefits of data sharing in the tourism industry are numerous. Improved collaboration leads to a better understanding of the market, identification of new opportunities, and data-driven decision-making. Enhanced customer experiences can be achieved through personalized and seamless services, akin to what hotels and airlines currently offer. Sharing data also improves overall efficiency by reducing duplication of effort and contributes to sustainability. Furthermore, comprehensive market insights help identify trends, opportunities, and challenges, enabling timely reactions.

Current trends in data sharing within the tourism industry include open data initiatives, collaborative platforms, real-time data sharing (particularly in transport and accommodation), and the use of AI and machine learning to analyze customer reviews and sentiment. Personalization, based on customer preferences and past experiences, is also a key focus. The deployment of AI solutions, including chatbots, virtual assistants, personalized recommendations, revenue management, marketing, advertising, and translation services, is prevalent in the industry.

What do numbers say? Quantification of the Digital Transformation in Tourism

According to IDC data, worldwide total ICT spending for the travel industry was estimated to be $90.7B in 2020 and is expected to grow to ~113B in 2025. 63% of hospitality and travel organizations are very concerned with the growing amount of technology investments required to remain competitive. In fact, generally speaking, sharing investments in infrastructure and technology is one of the motivations that has been pointed out by companies to invest in data spaces. 38% of hospitality and travel organizations say they have a longer-term investment plan in place and the enterprise strategy is to use DX to transform markets and customers by creating new business.

Reasons for IT budget increases; Source: Hospitality and Travel Survey, IDC, August 2021, Total n=192

If we look at the top challenges faced by industry, the figure below shows that there is a wide range of them, with some directly associated to the potential benefits of data spaces, such as availability of data across the value chain or compliance with security standards and regulations; many others could be highly impacted by the suitable use of data for internal and external processes. The picture showcases challenges for different sub-sectors in tourism like dining, hospitality and travel and for different geographies.

Top challenges; Source: Hospitality and Travel Survey, IDC, August, 2021, Total n=603, Dining n=270, Hospitality n=272, Travel n=61

The DATES project is monitoring the evolution of the Tourism industry to get insights on which use cases could be highly benefited by data spaces and to understand the positioning of organizations with respect to investments so that a credible roadmap towards a fully fledged Data Space for Tourism can be implemented. If you are interested in getting additional market insights and data-driven business models, get involved in DATES and stay tuned!