Is the travel industry keeping up with emerging tech?

Emerging technologies have undoubtedly revolutionized many industries, yet the travel industry has not full unleashed all their potential.

Phocuswright's latest travel research report At a Crossroads: Underappreciated Tech in Travel breaks down this critical juncture in travel, discussing why some technologies that have received a lot of publicity – specifically virtual and augmented reality (VR/AR), Web3 and the Internet of Things (IoT) – remain underappreciated in the industry. It aims to reveal how these technologies can be better leveraged for travel based on specific use cases and examples from outside the industry.

While the travel sector has invested significantly in startups, most recently focusing on hospitality and business travel companies, the scale and diversity of investment appear to be less extensive compared with other industries.

Over the past 15 years the travel and tourism industry received around 1% of funding for startups across all industries, according to a McKinsey analysis of Phocuswright and Pitchbook data.  

Moreover, players within travel are rightly pushing forward with key tech innovations, especially in aviation and hospitality. Yet they lag in testing and adopting new technologies, mainly due to the following:    

• First, the capital investment of implementing and maintaining advanced external technologies leads to slower internal adoption rates, especially compared with other sectors where technology is a core part of the growth strategy. 
• Second, the complexity of integrating emerging technologies in a way that enhances rather than complicates the travel experience can also hinder widespread implementation. 
• Furthermore, the sector has traditionally been cautious in embracing new technologies due to concerns about disrupting the established human touch – a core element of hospitality and travel. 

The last point is significant, often stemming from how these developments are initially touted. For example, the metaverse is advertised as offering consumers the ability to live a virtual second life, and artificial intelligence is presented as capable of replacing much human work and expertise.

Why does travel need to catch up? Emerging technologies are crucial for the travel industry to adapt to and address the evolving consumer demands of global travel. The importance of technology investment ties directly to the following trends that are shaping the future of travel:

• Environmental, social and cultural sustainability remain a cornerstone of contemporary travel, forcing travel providers to reduce their carbon footprints. 
• The desire for seamless journeys is becoming as important as the destination itself, requiring travel providers to enhance their customer relationship systems. 
• The demand for hyper-personalized travel continues to grow, with travelers seeking itineraries and activities that reflect their individual preferences and lifestyles. 

Universally, travelers are becoming increasingly digitally savvy. With Gen Z and Gen Alpha consumers growing up in a world where tech-enabled personalization, convenience and sustainability are the norm, expectations to provide extraordinary travel experiences are rapidly rising. In this environment, it is vital for the travel businesses to leverage new technologies and pinpoint growth opportunities.

While emerging technologies like VR/AR, Web3 and IoT hold transformative potential for the travel industry, their underutilization stems from a combination of high entry barriers, complexity and concerns about eradicating the human element that is central to the travel experience.

Nevertheless, these developments offer unparalleled opportunities for personalization, efficiency, sustainability and enhancement of the traveler’s journey.

As the industry stands at yet another crossroad, it is imperative for companies to move beyond the fanfare and carefully integrate modern technologies in ways that complement the human touch, rather than replace it. 

Embracing these innovations thoughtfully can not only address evolving consumer demands, but also facilitate a future in which travel is more immersive, responsive and conscious of its impact on the world. The path forward requires a strategic balance of technological integration and preservation of the natural experiences that define travel, ensuring that the industry remains relevant and resilient in an increasingly digital future.