INNOVATION REPORT 2015
Travel’s biggest category spend,
Computer Services, is second in the All UK league table and is projected to top the £30 billion mark in 2015, a 5% increase on 2014. Hardware, travel’s fastest riser, is also forecast to see a significant leap among all UK firms of 8% in 2015, following a more modest 2% rise in 2014.
TECH SPEND BY COMPANY SIZE Does the size of your company have a bearing on technology budgets? The answer, according to our analysis, is yes, with data pointing to something of a polarised position. The split of IT spend in travel in 2014
reveals mid-sized firms (50-99 employees) account for less of the total spend than those in the 10-49 employee category (£87 million versus £114 million), which spends the least per employee. However, the largest firms dominate,
with 56% of all travel technology spend attributed to firms with 1,000-plus staff. In 2014 there were some 40 companies of that size out of a total of 15,000. When it comes to forecasting growth, only smaller organisations – those with fewer than 50 staff – are expected to accelerate their technology spend in 2015 compared with 2014. Smaller firms spend more per head
on telecom services than their larger counterparts. This is reflected in higher per capita spend (£2,291), meaning the smallest firms in the travel industry exceed the spend per employee of those with 10-999 staff. For the smallest passenger air
transport firms, above-average spend on telecom services is a major contribution to their high overall tech expenditure. Travel agencies show a marked
uniformity of spend per employee across all enterprise sizes. This is influenced by smaller firms being heavy users of computer services and the
spread of outlay per employee on telecom services being similar for all sizes of enterprise. Stewart Baird, chief executive of
Stone Adventures, a venture capitalist firm that set up Pebble Travel to target travel firms looking to grow, said: “A lot more innovative technology is deployed in smaller organisations but it’s the larger side where it is scalable. You see a lot of small to medium-sized companies that are profitable, but not that profitable to allow them to invest half a million pounds in technology. It’s much easier for smaller businesses to spend £20,000 to £30,000 and do something really innovative.” Baird said that while high-touch
smaller firms, typically operating in the luxury and tailor-made end of the market, are innovating, this is not the case in the super-efficient volume end. He believes this is due to
technologies enabling web booking with live availability, and the functionality to add products and services is lacking. Baird said: “You either spend a lot of
money or zero and not achieve it [online bookability], there’s no halfway house. Lots of people tell you you can do it cost-effectively, the reality is it’s very, very difficult. Consumers want all the functionality of
Booking.com but they are demanding it from small businesses. That’s a real barrier.”
PROPORTIONOF ALL IT SPEND BY SIZE OF COMPANY, 2014
Total IT Spend - 2014 Travel Industry
6% 10% 7% 56% 21%
Andy Speight, managing director of
travel systems supplier Digital Trip said: “With the cost of technology reducing, SMEs have the best opportunity for growth. They are not normally carrying expensive legacy systems, so their investment in new technology can be relatively small.”
TRAVOLUTION’S TAKE
At first glance the accelerating growth in hardware spend in travel looks odd against the backdrop of the trend for cloud- based, software-as-a-service solutions. But, as you will see in the next section of this report, it appears travel firms are playing catch-up on their hardware in preparation for this shift. Many of the customer-facing
services now possible due to cloud technology – such as free Wi-Fi, in-resort mobile services and virtual contact centres – require upfront investment. So capital expenditure remains
necessary, albeit as part of a long-term investment programme that will shift technology budget to an operational cost. The relatively low expenditure
on staff, and the over-indexing on computer services in travel to the UK average, suggests the sector is still wedded to third-party technology. Despite this, the most successful firms of recent times have built their systems in-house. Maybe this explains the perceived lack of innovation. Our analysis supports the
1-9 staff
10-49 55-99
100- 999
1,000+
theory that medium-sized firms face a quandary about investing. Once firms get beyond a certain headcount, investment per capita reduces, suggesting companies looking to take that next step of growth are being held back by technology.
24 — FEBRUARY 2015 —
TRAVOLUTION.CO.UK
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