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Page 1: Digital Services in the Area of Barnes.pdf6. HRG North America ($16Bn) 7. FC USA ($13Bn) 8. American Express ($5Bn) 9. Travel Leaders ($4Bn) 10. Fareportal/Travelong ($4Bn) 1. American

Digital Services in the Area ofAccommodation and TransportationEconomic and Legal Aspects

Prof. Dr. Stuart J. Barnes, Director of CODA Research CentreKing’s College London

Presentation prepared for Policy Department A on request of IMCO Committee

Page 2: Digital Services in the Area of Barnes.pdf6. HRG North America ($16Bn) 7. FC USA ($13Bn) 8. American Express ($5Bn) 9. Travel Leaders ($4Bn) 10. Fareportal/Travelong ($4Bn) 1. American

Schedule

• Significance of the online travel market• Business model transformation and typology• Collaborative consumption: benefits and issues• Informing policy: data-driven solutions

Page 3: Digital Services in the Area of Barnes.pdf6. HRG North America ($16Bn) 7. FC USA ($13Bn) 8. American Express ($5Bn) 9. Travel Leaders ($4Bn) 10. Fareportal/Travelong ($4Bn) 1. American

Significance of Online Travel Market• European travel market growing significantly Revenue €264Bn in 2015 to €282Bn in 2017 (Phocuswright) 918m air passengers in EU in 2015 (Eurostat, 2017)

• Online travel booking is becoming dominant 47% of revenue in 2015 to >50% in 2017 (Phocuswright) Online travel agents and direct flight booking >75%

• Recent growth of European sharing economy 17% of all EU adults use sharing services (EU, 2016) Accommodation worth €15.1Bn in transactions (PwC, 2016)

Page 4: Digital Services in the Area of Barnes.pdf6. HRG North America ($16Bn) 7. FC USA ($13Bn) 8. American Express ($5Bn) 9. Travel Leaders ($4Bn) 10. Fareportal/Travelong ($4Bn) 1. American

Business Model TransformationTraditional BusinessModels

• Asset heavy• Inflexible• Linear• Operation-focused• Dyadic exchange• Industry competence• Push-based

TransformedBusiness Models

• Asset light• Flexible / Scalable• Network-based• Customer-focused• Multi-sided platform• Tech. competence• Ubiquitous• Immediate

Page 5: Digital Services in the Area of Barnes.pdf6. HRG North America ($16Bn) 7. FC USA ($13Bn) 8. American Express ($5Bn) 9. Travel Leaders ($4Bn) 10. Fareportal/Travelong ($4Bn) 1. American

Online Travel Industry Timeline

1996 1998 2000

2001

2004 20112010

2008Time

Page 6: Digital Services in the Area of Barnes.pdf6. HRG North America ($16Bn) 7. FC USA ($13Bn) 8. American Express ($5Bn) 9. Travel Leaders ($4Bn) 10. Fareportal/Travelong ($4Bn) 1. American

Basic Business Models

Product/Service

ProviderConsumer

A. DIRECTSALESMODEL

Intermediary

Product/Service

ProviderConsumer

B. INTERMEDIARYMODEL

Page 7: Digital Services in the Area of Barnes.pdf6. HRG North America ($16Bn) 7. FC USA ($13Bn) 8. American Express ($5Bn) 9. Travel Leaders ($4Bn) 10. Fareportal/Travelong ($4Bn) 1. American

Airline Travel Services Business ModelsOnline Travel Agent (Agency)

Online Travel Agent (Merchant)

Online Travel Agent (Infomediary)

Traditional Travel Agency

Price-Comparison Platform

Direct Sales

Page 8: Digital Services in the Area of Barnes.pdf6. HRG North America ($16Bn) 7. FC USA ($13Bn) 8. American Express ($5Bn) 9. Travel Leaders ($4Bn) 10. Fareportal/Travelong ($4Bn) 1. American

NotableBusiness

ModelFeatures

ProductRange Channels:

Reach, Speed& Availability

TransactionCosts

InformationSymmetry &Trust Metrics

NetworkEffects

PricingMechanisms

ValueProposition

RevenueStreams

CostStructure &Resources

Key Partners

Customers &RelationshipManagement

Page 9: Digital Services in the Area of Barnes.pdf6. HRG North America ($16Bn) 7. FC USA ($13Bn) 8. American Express ($5Bn) 9. Travel Leaders ($4Bn) 10. Fareportal/Travelong ($4Bn) 1. American

Top-10s in the Global Travel Industry

Travel Companies (2015) Airline (2016)** Accommodation (2016)

1. Expedia Inc. ($61Bn)2. Priceline Group ($56Bn)3. American Exp. GBT ($30Bn)4. Carlson Wagonlit ($24Bn)5. BCD Travel ($24Bn)6. HRG North America ($16Bn)7. FC USA ($13Bn)8. American Express ($5Bn)9. Travel Leaders ($4Bn)10. Fareportal/Travelong ($4Bn)

1. American ($40Bn)2. Delta ($40Bn)3. United Cont. ($37Bn)4. Lufthansa ($36Bn)5. Air France-KLM ($29Bn)6. IAG ($25Bn)7. Southwest ($20Bn)8. China Southern ($18Bn)9. China Eastern ($15Bn)10. All Nippon ($15Bn)

** Emirates not included

1. Marriott ($17Bn)2. Hilton ($12Bn)3. Accor ($7Bn)4. Wyndham ($6Bn)5. Host ($5Bn)*6. Hyatt ($4Bn)*7. Jin Jiang ($3Bn)8. Intercontinental ($2Bn)9. Airbnb ($2Bn)10. Extended Stay ($1Bn)*

*2015

Sources: Travelweekly (2016); Forbes(2017); annual reports; inter alia.

By Transaction Value

Page 10: Digital Services in the Area of Barnes.pdf6. HRG North America ($16Bn) 7. FC USA ($13Bn) 8. American Express ($5Bn) 9. Travel Leaders ($4Bn) 10. Fareportal/Travelong ($4Bn) 1. American

European Travel Market – Share by Channel

Source: Phocuswright (2016)

Page 11: Digital Services in the Area of Barnes.pdf6. HRG North America ($16Bn) 7. FC USA ($13Bn) 8. American Express ($5Bn) 9. Travel Leaders ($4Bn) 10. Fareportal/Travelong ($4Bn) 1. American

Issues for Regulatory Scrutiny

• Airline consolidation and market power• Airline charges for indirect bookings

discriminate against neutral channels• Advanced technologies and big data analytics

provide new tools for discrimination Geo-blocking Profiling and personalised prices

Page 12: Digital Services in the Area of Barnes.pdf6. HRG North America ($16Bn) 7. FC USA ($13Bn) 8. American Express ($5Bn) 9. Travel Leaders ($4Bn) 10. Fareportal/Travelong ($4Bn) 1. American

Accommodation Services Business ModelsCollaborative Consumption Platform

Online Travel Agent (Agency)

Online Travel Agent (Merchant)

Online Travel Agent (Infomediary)

Traditional Travel Agency

Price-Comparison Platform

Direct Sales

Page 13: Digital Services in the Area of Barnes.pdf6. HRG North America ($16Bn) 7. FC USA ($13Bn) 8. American Express ($5Bn) 9. Travel Leaders ($4Bn) 10. Fareportal/Travelong ($4Bn) 1. American

Collaborative Consumption Business Model

DigitalPlatform

Peer AssetProviderConsumer

Rating/Review

Asset Sharing

Page 14: Digital Services in the Area of Barnes.pdf6. HRG North America ($16Bn) 7. FC USA ($13Bn) 8. American Express ($5Bn) 9. Travel Leaders ($4Bn) 10. Fareportal/Travelong ($4Bn) 1. American

Collaborative Consumption:Benefits in the Accommodation Sector

Employment &Income

Opportunities

Reduced Costof Services to

ConsumerFlexible Supply

ImprovedAsset

Utilisation

BetterCustomer

Service

EfficientAllocation

Mechanism

ReducedEnvironmental

ImpactEconomic

GrowthMarket

Innovation &Competition

Page 15: Digital Services in the Area of Barnes.pdf6. HRG North America ($16Bn) 7. FC USA ($13Bn) 8. American Express ($5Bn) 9. Travel Leaders ($4Bn) 10. Fareportal/Travelong ($4Bn) 1. American

Collaborative Consumption:Issues for Regulatory Scrutiny

Data Privacyand Use

PeerDiscrimination

InformationAsymmetry

Safety andLiability

NegativeExternalities in

LocalityPricing

Mechanisms

ProfessionalStatus ofSuppliers

Taxation Antitrust

Page 16: Digital Services in the Area of Barnes.pdf6. HRG North America ($16Bn) 7. FC USA ($13Bn) 8. American Express ($5Bn) 9. Travel Leaders ($4Bn) 10. Fareportal/Travelong ($4Bn) 1. American

Regulatory Approaches toAirBnb within Europe

Page 17: Digital Services in the Area of Barnes.pdf6. HRG North America ($16Bn) 7. FC USA ($13Bn) 8. American Express ($5Bn) 9. Travel Leaders ($4Bn) 10. Fareportal/Travelong ($4Bn) 1. American

Informing Policy: Data-Driven Solutions

Unfair Pricing

• Tax Conformity• Discrimination

Sales & Activity DataAnalytics / Automate

Audit of PricingAlgorithms

NegativeExternalities

Multisource DataAnalytics

InformationAsymmetry

Independent TrustPlatforms / Nudge

Data Privacy & Use Transparent Policy &Consumer Options

Page 18: Digital Services in the Area of Barnes.pdf6. HRG North America ($16Bn) 7. FC USA ($13Bn) 8. American Express ($5Bn) 9. Travel Leaders ($4Bn) 10. Fareportal/Travelong ($4Bn) 1. American

Conclusion• New collaborative services provide and promise

tremendous future benefits for Community Members

• Many aspects of the business models of the newservices are different and require scrutiny

• Airline ticket sales platforms are using tactics todiscriminate

• Technology, data and analytics underpin newbusiness models and provide a key tool for regulation


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