Phocuswright estimates
global travel gross bookings will reach nearly $1.5 trillion this year and more
than $1.6 trillion by 2021.
While the majority of that spending is made on air and accommodations, ground
transportation is accelerating as a category for activity, innovation and
investment.
Whereas a few years ago, car rental, rail, bus, taxi and shuttles were the
primary subsets of this sector, now the lexicon has expanded to include
ride-hailing, ride-sharing, carpooling, bikes, scooters and more.
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These newer entrants have entered the market digital-first, forcing existing
players to innovate to keep up with consumers’ expectation for fast, frictionless,
intuitive solutions.
While this growth creates more choice than ever before for travelers, the
category’s high fragmentation also creates more potential for confusion.
In its 2019 U.S. Travel and Hospitality Outlook report,
Deloitte analysts write: “Even the most diligent of travel planners can get it
wrong - particularly those navigating unfamiliar cities or making spontaneous
trip decisions.
But what if consumers can leave the navigation – and even the itinerary-planning
– to the car itself?
Autonomous vehicles have the potential to do this. In the process,
not only will these driverless cars revolutionize the way people get from point
A to point B for business and pleasure, but they may also change other fundamental
aspects of travel as we know it.
For the third entry in our series on ground transportation, we explore
the possible impact of autonomous vehicles on the travel industry, including
tours and activities, hospitality and air.
Background
When it comes to driverless cars, the future
is now. What was once considered a far-out fantasy is very much reality.
It’s been ten years since Google launched
its self-driving cars project – now known as Waymo and a subsidiary of parent
company Alphabet.
Today nearly every major car
manufacturer as well as companies such as Uber, Amazon, Baidu, Didi, Apple,
Samsung and hundreds of startups are investing in research and development of
hardware, software and services related to autonomous vehicles.
Allied Market Research estimates the autonomous
vehicle market is around $54 billion this year and will grow to $557 billion in
2026.
Consider this sample of recent news regarding driverless cars:
To create
some structure around this emerging category of technology, SAE International
(formerly the Society of Automotive Engineers) has defined six levels that are
the accepted classification system for autonomous vehicles. The levels range
from zero (no automation - the human driver controls all aspects of driving) to
five (full automation - the vehicle performs all driving tasks).
Ford says that
by 2021 it will have level four vehicles – operating “without a steering wheel,
gas pedal or brake pedal within geo-fenced areas as part of a ride sharing or
ride hailing experience.” And other companies are operating on similar
timelines.
“These cars
are anticipated to be on the mass market as soon as 2025 and could become the dominant
means of transport globally by the 2040s,” says Scott Cohen, professor and head
of the department of tourism and transport at the University of Surrey.
Much
of the analysis of driverless cars has focused on their impact on commuting. But
the scope of disruption is much broader than that.
A transformation in
tours
In
January, Cohen co-authored a report, Autonomous
vehicles and the future of urban tourism, writing in the introduction, “Given
the potentially short timeline until CAVs [connected and autonomous vehicles]
enter the mass market, it is surprising that no research to date has considered
in depth the potential future widespread implications of CAVs for the tourism
industry.”
One area where he expects to see significant disruption is
in what he calls “vehicle-based guided urban sightseeing” in the form of
hop-on, hop-off buses and other types of group sightseeing models.
The car can begin to define what is considered authentic or real in a city. What’s the real New York? What should you be seeing? he says.
Scott Cohen - University of Surrey
Vehicles at full automation eliminate the need for both a driver
and a guide, since in-car media systems would provide content about where
passengers are going and what they are seeing.
Removing the cost of a driver would change the business
model for these services, creating opportunities for smaller, personalized,
on-demand experiences.
“With autonomous vehicles, it will be much more like YouTube
and Netflix – there’s literally going to be unlimited routes. You might have a
deep interest in a certain topic, and people will be able to create that as a
route and attract customers to it,” says Alex Bainbridge, founder, CEO and
chief technology officer of Autoura, which is creating technology to power autonomous
vehicle-based sightseeing.
“And maybe they only attract 50 customers per year and that’s
still good. Whereas today in tours and activities, because there’s so much
overhead in managing content, connecting with reservation systems, etc., if you
don’t have 500 bookings a year you would delist that tour from your platform.”
One question, though, is how does the car decide where to go?
Cohen says itineraries could be determined by algorithms
that give preferential treatment to certain sites – attractions, restaurants,
retail outlets – that pay to be included, creating what he calls “algorithmic
favoritism.”
“So what gets included and what gets left out? This will be
the battle of being heard in those spaces,” he says.
“You definitely look at that picture and you don’t think
that the mom and pop, small independents will win this battle for the
algorithms. It’s those that are already powerful becoming more powerful unless
there is something to stop them.”
Cohen says many decisions around route management are yet to
be determined – might there be a role for destination marketing organizations to
define sightseeing routes? Would large hotel chains create branded tours?
“The car can begin to define what is considered authentic or
real in a city. What’s the real New York? What should you be seeing?” he says.
“It requires some complex governance, and the thing is the
technology is always ahead of the governance.”
Bainbridge takes a different view – that autonomous
vehicle-led tours will create a “massive push to the long tail and local experiences
and away from mainstream experiences” since they are digitally-, not driver-,
delivered.
With Autoura, Bainbridge is building a technology platform
to distribute sightseeing experiences and content through autonomous vehicles
via one of two options: an API that provides route data to driverless car
companies and other mobility providers and a franchise model of Autoura-branded
autonomous vehicles. In both cases, income would be generated via commissions
on bookings for attraction entry, activities, restaurants, etc.
This model, he says, could fix one of the existing issues
with peer-to-peer tour and activity marketplaces: the current “led-by-locals”
options put the burden on those individuals to be available to deliver those experiences
in person.
“That’s where the whole model of P2P has fallen down,” he
says.
“Now those people who’ve got a passion about being local can
just create content, and the car will do the delivery.”
And Bainbridge also sees opportunities for brands, such as hotel chains, to create new
channels for guest engagement.
“It
enables them to continue the brand experience from the hotel into the city itself,”
he says.
“A
top-end hotel chain may do a deal with a Jaguar autonomous car, for example.
You get a high-end experience and high-end vehicles, and it all acts as a kind
of singular brand experience, which is good.”
Other opportunities
Sightseeing
may be the first area of travel impacted by driverless technology - Bainbridge
predicts every existing vehicle-based sightseeing company will have
transitioned to autonomous vehicles by 2025 – but it is certainly not the only area
that faces disruption.
We are going to end up with all these car companies in the travel industry
Alex Bainbridge -Autoura
The
business of airport transfers will be change when the cost of the driver is
removed, potentially reducing fares in autonomous taxis and shuttles.
This
is another area where Bainbridge says hotels could step in, for example to
offer transfers in branded autonomous vehicles that could function as mobile
offices for business travelers (or again, brief tour guides for leisure travelers)
that may have excess time between hotel check-out and a flight’s departure.
And
both the hospitality and air industries could face competition if autonomous
vehicles offer a way to sleep, eat, work and relax while traveling.
Cohen
writes, “For instance, a shift in transport mode away from both intercity
trains and short-haul aviation is likely, as CAVs reduce the burden of train
stations and airports.
"The current trend towards low-cost airlines entering
long-haul routes is therefore likely to continue, as low-cost airlines will
eventually face increasing competition in short-haul routes from CAV travel.”
When
Volvo revealed its 360c all-electric, autonomous concept car in September, it
took direct aim at domestic air travel.
The
carmaker’s website for the vehicle says: “Imagine you have an early morning
meeting in a neighboring city. You have two options to get there – a short-hop
flight from your local airport, or a fully autonomous pure electric travel
solution that can deliver you directly to your meeting place, having avoided
check-in, queuing, flight delays, security checks and everything else that is
part of air travel. Which would you choose?”
The 360c
can be configured in a variety of ways – as a relaxing lounge, a mobile
conference room or a bed.
The
potential for these vehicles to become “hotels by the hour,” says Cohen, may
create new challenges around alcohol consumption, partying and even
prostitution.
“In
the same way that you might visit Tokyo and on the bucket list might be to
sleep in a pod hotel, the first city that has autonomous vehicles to sleep in
by the hour, this will be used for tourism and novelty as well.”
Regardless
of the which of these potential applications gains the most traction,
Bainbridge says its clear the lines are blurring between the travel and
automotive industries.
“We are going to end up with all these car companies in the
travel industry,” he says.
“They are all shifting to services rather than selling cars.
We are used to having Booking, Ctrip, TripAdvisor, Expedia as the big companies
in our sector. Turns out the car companies are bigger.
Volvo's Vision of the Future: The 360c