Monday, 25 May 2015

Good and bad things of service integration in travelling

I'm not a true frequent traveller but I do complete my fair share of miles per year, mostly to destinations abroad. One of the things that I find particularly convenient, especially when I travel for work, is service integration across different companies. It is something that is usually meant to save time and money, often carrying the peace of mind bonus, too!
'Travel' by Vasile Hurghis
under a CC license

Service integration is not a truly novel thing but the steps we 've been seeing so far were rather timid. Some, such as the code-sharing flights of different airlines, are well established as a practice. Package holidays and all-inclusive resorts also have a long history in most places. Others, such as booking travel chains consisting of, say, airport parking - flight - car rental - hotel, are a bit newer.

Judging service integration as a practice depends on what vantage point one chooses. For the traveller, the emphasis is usually on the convenience factor. Things may seem differently, however, if one chooses to focus on value or the impact on the ecosystem of businesses (or the ecosystem in regions, including people and businesses) affected by this practice.

Let's start with a simple service integration chain: Flight code sharing. There different airlines manage seat booking on an airplane operate by a single airline, partner to the codesharing agreement. In some places, codesharing has been expanding to include travel legs involving the railway, as well.

For the involved airlines, codesharing seems to be a way of pooling resources and using them more efficiently, which is a good thing. Passengers tend to get better service through such agreements as they don't (normally) need to worry on catching the various legs of a flight, re-checking in luggage in each flight leg, talking to multiple companies in case of a complaint, etc. What is not always clear is whether passengers get the best price value for the distance they travel, i.e., whether codesharing is actually reducing the cost that would correspond to the minimum number of individual flights reaching the same destination. Taking into account the each of the codesharing partner airlines typical maintains its own seat marketing strategy, it is likely that not all passengers receive the optimum cost deal. One can support, of course, that this may be justified by the convenience factor.

A totally different example is package holidays in all-inclusive resorts. Typically, the emphasis there is to provide an attractive holiday package with complete peace of mind at a very low daily cost. Often, such packages are indeed a huge bargain; the cost of getting individually the various elements of the deal (flights, transport, hotel, leisure activities, food) would usually be considerably more expensive. For the businesses involved the holiday package deals facilitate the scheduling of activities and allow for sales to be made much in advance. Bulk sales of goods and services are often involved and this may be both good and bad for the businesses involved (e.g., a good thing may be the "secured" high turnover but a bad thing might be the lower unit cost).

Expanding the scope to the businesses of the resorts' regions, things may be grimmer. The companies participating in the "package" deals need to deliver what is needed at the optimum cost and local small enterprises, if faced with competition of "higher" level may not be able to compete successfully. One may argue that all-inclusive packages contribute to the competitiveness drive but this may not be entirely true, since the crowd (market) of the all-inclusive travellers is kept separately from the other travellers of the region. If one takes into consideration the footprint the people using all inclusive packages may leave on the region (e.g., environmental footprint, footprint onto natural "resources", such as beaches, etc.) the deal may be suboptimal for the region, in total. For the travellers, all-inclusive package holidays offer very good value for money but may restrict the options an independent traveller would have in the resort region. For instance, travellers - typically - are not really encouraged to "dive" in the local culture, taste the local food, wander around in the region, etc. That reduces the travel experience altogether.

Of course, not all package-holidays are created the same. In any case, adjusting the different services in a holiday package, one may find the ideal balance among cost, experience and ethics (e.g., environment, sustainable local development). Crediting the industry, such possibilities have began to emerge but the one-size-fits-all all-inclusive package approach is still alive in many places.

Contrary to what I would have expected, service integration for the business travellers has still much more to include. For instance, catching a flight that requires a night stop-over at a third stop (often in a country different to the countries of destination and origin) does not normally include a stay in a reasonable priced and conveniently situated hotel. One can browse at the various airport hotels, of course, but those may not always offer the best value (or, in the case of publicly funded business trips, may not be eligible for stay, at all). Similarly, offering in-flight WiFi is still rate and is considered as an extra service. It would have been much more convenient to have it included in the ticket price (they actual operating cost of the service is likely to be low, anyway).

Service integration can be a very convenient thing. In some cases, there is still more to be done. But businesses (and, perhaps, regulators) need to see further and also think on other issues, such as customer choice, business ethics and sustainability. There many different approaches that can lead to a better and fairer system. Possibly, the minimum businesses could do is offer to their client clear information and true alternatives for them to choose amongst.

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