INNOVATION REPORT 2015


SUPPLIERS GET SWITCHED ON


AIRLINES, CRUISE LINES AND HOTELS FIND THAT BY INVESTING TO AUTOMATE TASKSTHEY CANTRIM STAFF NUMBERSAND RESPOND TOCONSUMER DEMANDS


A


mong the three travel categories of product owners, hotels dominate in terms of size and scale with up to 14 times the number of enterprises as the air transport and water transport sectors. The disparity in staff numbers


between hotels and air transport is not so acute, with the former employing four times as many as the latter in 2014 (316,635 to 73,348). The smallest sector, water transport,


accounted for just 8,119 employees reflecting the small number of ferry and cruise operators based in the UK. However, what all three of these


sectors share is employee numbers declining or growing at a slower rate while technology spend rises and passenger or guest numbers go up. This points to greater productivity


and efficiency in the operations of firms in all three sectors, which at the same time are all facing increasing demands from tech-savvy customers. Nigel Pickford, director of market


insight and marketing operations at air transport technology specialist SITA, said: “In general terms what we have seen is there


“IT’SACHALLENGE


FORALL: YOU HAVE TO BALANCEREVENUE SPEND WITHCAPEX”


has been an edging up of IT spend over the last five or six years in absolute terms. “The actual percentage spent as a


percentage of revenue, however, from an operational spend point of view, is slightly declining.” Pickford said SITA’s research on the


global airline industry in 2014 found technology spend as a percentage of revenue (operational expenditure or Opex) was 1.43%, down from 1.57% in 2011. However, capital spend has been relatively more stable having recovered last year from a slight dip. In 2014 Capex (capital expenditure) was 0.83%, taking overall technology spend to 2.27% – returning to the level it was three years previously and in line with the long-term trend.


AIRLINE SPENDING In terms of size of carrier, SITA says larger, ‘tier one’ carriers’ Opex spend was around 1.31% in 2014, while the


smaller, ‘tier two’ airlines spent a slightly higher proportion at 1.59%. Low-cost carriers, due to their


modern, less complex and efficient technology, and because they do not operate a hub model, tend to spend less – 0.9% to 1% in 2014 – than legacy carriers, at just under 1.5%. “It’s a challenge for every company


– you have to balance revenue spend with Capex,” said Pickford. “The other challenge is to put all of


the pieces in place to be able to realise the objective of your investment does not necessarily happen quickly. Therefore justification and your return on investment analysis could be over a longer period than for an organisation with a simpler type of business.” Pickford said airlines have suffered


tough times over the last two decades during which not many have been able to drive consistent profits, although the outlook today is more promising. However, even in the lean times,


airlines were not able to cut their technology spend significantly because their IT systems are so core to their central operations. So while airlines must invest in


supporting their business-critical IT, they are also having to keep pace with the consumer and, for legacy


TRAVOLUTION.CO.UK — FEBRUARY 2015 — 31


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