What if I told you that taxis are still taking reservations just by phone or on the streets?
You would probably think that we went back in time…
When thinking about tech-forward B2C startups in this modern age, we usually associate the competitive edge with innovations in AI, clouds, or even smart commerce features.
We assume that most consumers are online shoppers and that almost any product or service is available and accessible online.
From a business perspective, we assume that if we find an untapped niche, build a platform with great UI & UX, have a strong product and development team, raise money and have the right marketing tactics to get the return, that will be our path to success. Shifting from offline to online seems like an innovation of the past. But before we bury digitalization, let's go on a journey to an untraveled path - travel transportation.
In the travel industry, specifically in global transportation, the technology efforts are very different and, more so, behind. The travel industry is commonly broken down into sectors- hotels, flights, car rentals, activities, and transportation. 80% of flights and 60% of hotels are booked online, but the sector that has been left behind is intercity transportation - buses, trains, and ferries.
A $157 Billion TAM from $1.5+ Trillion TAM of travel is very much untapped by digitalization and modern OTA’s (online travel agencies). Data shows that only 10% of bookings for this sector are done online. If you are an entrepreneur or an opportunist, that must scream ‘opportunity’.
Before we talk about the opportunity, let’s first understand the problem. Why would this sector be so far off? About 40 years behind flights. Customers, geographic regions, and technology are all the same. Well, this is where it gets interesting. On the demand side, we have savvy, modern travellers who are used to a seamless purchase experience. On the other hand, we have transportation suppliers.
We are talking about many family-owned or small companies that are still booking with pen and paper and crossing people off a list as they board a ferry or bus. For example, just on the route from Hanoi to Sapa, there are 45 providers, all selling almost the same service at the local terminal or in booths around the area.
In Thailand, for example, the official train does not accept any method of payment other than cash for most routes. Yes, in 2023, you can only pay with cash. Getting these suppliers, both large and small, to adopt technology is one of the harder tasks.
Mapping them out, reaching out in local languages across the world, and convincing them to connect to an API, connect to an online inventory system, and sell globally is not an easy mission.
Going back to the opportunity, achieving this at scale will give any online transportation booking company an edge to become the leader in this sector, the ”Booking.com” of ground and sea transportation if you will.
On the travellers' side, when purchasing intercity transportation tickets on vacation, they are usually far away from home, mostly in less developed countries where the behaviour and experience are very different from their day-to-day.
They find themselves around locals with a lot of uncertainty, currency and language barriers, a lack of trust, and a lack of knowledge. It would make sense that if they were exposed to an online booking provider from a trusted global brand, in their native language with 24/7 customer support, that would be a preferred option.
There are far too many accounts of people who believed they had purchased a 12-hour premium bus ticket only to discover that they were in a bus with no air conditioning or next to a cage with chickens. If it weren't so uncomfortable, it would be amusing.
According to reports, half of all travellers worldwide (50%) want to undergo total culture shock in 2023, whether it be by visiting a place with entirely different languages and cultural experiences (51%).
This data makes the case for providing travellers with more routes to less travelled destinations. The destinations that can’t be reached by flights.
This is also consistent with our data, which shows a 10x increase in ticket sales after COVID.
So while technology is key in providing a seamless purchase experience, onboarding all the transportation providers is actually what will enable shifting this industry online. When we look at the ground and sea transportation technology barriers, we see the role of education in bridging the gaps between a backward industry and modern travellers. At the end of the day, what makes a company successful is its ability to create real value in its domain, the penetration of technology is a key enabler in ours.
Written by Noam Toister, CEO, Bookaway Group