Del Ross, Senior Advisor, McKinsey
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A higher margin covering this paper out because at that rally boring. And roller because you on injury Dow realises New York Times which have a good it's already is feeling crack. It's mostly stage. Right. We still should read it. In effect I hope you read it yesterday they would to really good articles in you know yesterday wanna them. How many guys Iran. Are providers like digital star RB cannot provider of harvest you have me get a date. So you get a read this whole big spread from yesterday insurer timeline is in the seeing. Find half. Friends at Libor is is really great spread that you know everyone have a value. Talking about are these really incredible things led there's CEOS don't have built. In destroy his company. That user as a royalty raising here you Gary that the other one. Were tied more about today is it different yesterday's business sector was about cool and talking about. The yeah bowler of the surge Warren. Very few danys morally OK how many are intermediaries. No real market remaining under the as a couple you ironing out there it's OK I'm not end in there really just solution provider. Yeah now when actually you. Yeah. It would as a sitting here just soaking up info about trouble at school was fellow at their flow. It's good I'm so I may I I've been in the travel industry since 2001 before that the Dhaka Mike where. I was four I HG for many years built e-commerce business here rain distribution. Ultimately reign of revenue generation for the Americas for our. That hotel giant. Lefty a few years ago been doing consulting can accidentally or ascent of last bad Euro have been working hours that with McKinsey which is our find it to. Do you work across a sector in a work with airlines and end horse eurozone. Rail car companies and nab research project itself orator for cruises and the like with the cruise line. Industry down luggage stuffed its really fine. Really badly bacteria bag for travel spoken during the past month. All it did see some more friends did that I didn't callous around Europe coverages through fund. Nobody to a review queries in this as a stupid once adoring back through easy right. What that who is the world's biggest digital travel Brent. Come our. Who. Priceline. Expedia. Trip advisers limited who are right to refuse the arm. Driven riser. Too bad one point five billion last year down 1%. Interesting talk about why as a traffic was up. European be about one point seven billion due about two point eight billion issue C trip two point eight billion up probably about forward issue. It speedier eight point seven billion and Priceline at ten point seven billion pretty bit great. But predicts the biggest as was said its global last year they did twelve point two billion dollars and how for bad. Came from for the companies on this well at. There are the biggest company in in trouble in digital travel today. Interiors which really frustrating tapers off very Simon from Atlanta and the big braves for any great friends out here. He added why do we go good. So I am I going to brace ends Intel's Q that are grab team poster from the 1970s. When you gotta be games in everybody had their own venture disliked Tenet U you know it's really bad. India we had a good run here for a while we denied that it denied using 2000. Wonder things you waging no true braves fence is dead we heat. The yen keeps we heat the Yankees we yankees are the worst arm that where. You know the worst thing about being appraised fair hits the Yankees. Tell yankees fair and that now like a rocket. The job yeah. L here a short humiliating. Like how nice free. If you paid me joined the club whatever this is what it's like to for a Google to be the biggest in travel. Like whenever twelve point two billion how late free outlays for us. Is that they giving no ill clear snub their visit its case mob he said that it's the biggest small piece of the business but as a small piece of the business. How infuriating. In yet. Whether dual link to are less. Rate that's gonna all of will talk about it today somebody revolution rock it now this. Was pretty busy slide so the Kinsley we've known for rip ages in. In their mid to be where. Minty printed in doing due in Euro always going to be very impressed but in the mid to be present I apologise. Roy Roy as a speaker never gives showed slides of job are those for providers probably is really your when anyway. So just quickly history lesson. This really getting the drummer we start buying Google search ads back in 2000 wine. When I joined HG and you're actually up until 2000. We will reveal biggest travel out at your age gee whiz their rhetoric we were there third biggest travel. Should pretty big deal right. Now this is her thing release that. We were rubs that would who will about something that happened and we start off advertising with them for three weeks in 2008 through rates. The eight biggest. A hearing advertiser went dark. Car after three weeks from our account where edge at this. And said while doing fine but I'm Aaron just you know I'm glad you got goes out the out as a business devoted. We haven't gone finally wiped out many think is not just checking out at what you know we haven't been. Advertising we fumes and Dimon threw wheat US hard and what was up. You know it's. He did not disclose weight behind us where it surely other advertisers. The real insight didn't manner. If biggest ever treasury and it didn't matter how infuriate them during exhibit in travel space for a while that even in inning to beat. Strode doing more serious about this they he introduced hotel price so they buy ITA. Great eighty's that was less need for the move here at almost everybody uses ITA for their flight through which. Your T is I'll use ITO for their flights each. It's cool its inner intuitive. Get you know it's been made a lot of sense for them to have because its search and eroded search. Near the hotel finder. Our always swearing now we have no intention of being mayor ebony light Chertoff miners are what matter what are big blue really explain it was when Adam editor company. We have we just believe that everything is did in argued it can be organised and we're really good at the present going to do in the wider Kuwait based on the query. Right. That's our trade in stretching across states and let's med surge in Iowa and the stretch America. And then they license room 77 get this blocking software can't. Well in any large book on global. Which was pretty weird because they didn't. Giving the biggest appetites again a mostly you'd voting age and pharmaceutical companies end court lawyers join the biggest advertisers. N construe its biggest surge Peter Chandler things like as investors lost eight. Decide that these guys. The even while it did in that business it really didn't hear anyone you know booking business they're trying to do. Was solvent yeah. OK you know talk about that in the sector but beat the the Galley into flight hotel bookings you can complete a booking on global. Irrespective of who's doing by Ernst and Huron Google in in fights for urgent destination guides NN this continues now. On Google Maps when getting directions what are the options and an upgraded is right cheer. You can say active wakin ticket public transportation can drive. I can get right future rate from the global lap. Which is interesting and scary for a lifting over over you know they'll be p.s who report they've announced I don't know will bubbling debt. We'll probably have a right chip as the gonna have that they're using a win there are they doing it because they worried getting that business and take business way from over in the now they job here than I'm interested in who were there had initially will have direct interested. Hedge didn't any of us. On the supply actually know you're interested in reducing consumers'. Their relentless. In closing these experiential gaps that exist for consumers. When Bill Lawrence. In the last few years is that there's everyone shifting. To these small form factor devices. That everything you're doing wiser working. Conversion rates our is more one more board today the my letters each in Gabon marble is each dream. Everybody here should read the earnings trend scripts for certainly the Otis before trip advisory every quarter. Because trip advise you talked about the model mind position gap nobody asked part of that they talk about. This is wider debate is their volume is up in their revenues are down because everybody's coming games coming through more what devices in dole. Quake in by the way the did before said in a large book I'm who bought. A now. Bookings in terror packages in the UK in Germany. Dynamic package generation on global in do you get because there really should be getting into the booking business do because. Customers didn't wake clicking around like the deal nearest sitting down with its long best cut session minus mod device. They weren't doing it that way was inadequate experience so they had a close that gap in pulling it forward. OK this is a really important lesson. So talking about should adviser to revise drivers see is how do changes well they're perfectly happy being. Research site and we're a source of bookings for others let everyone else it would be due. And we would just be curator of knowledge and information facility being the power to travel for olive wonderful travellers sounds great. They make money ended Europe advertising minority stunning quake in galway mile. But that doesn't work. I left are far. It's the doesn't work it off. People dot likely that they don't like having to click in Guile specially when they the data analyst. Quick go comeback could somebody else goal comeback. Does not work. They had a much instant booking. As a desperate measure to trying closed at minuses Asian gap they weren't making money even now. They're stranded more more business into day trip about getting most of its. Volume from from model. Providing assuming that 60% of the revival in more war and it's gonna keep growing from here. But nobody. Clicks away doesn't work atop a bit about debt so they did this they getting traction we we are average. Expedia and Priceline swear they've never work with a minimum average within six months they're working with. There along with instant with with book on who will cause UKIP say those things get here on their review. In union there will. So this is state the world the big didn't do this because they want to upset their average edges they do because they're not like they're making money in added do that. Umps. Digital reasons why Milwaukee since you need some things that we wrote about. Oracle would publish about that the trouble with travel distribution. Arm too quick read. It's while impressive to schnabel Regan. What are the insights is accused the deal with model. Did different. The end desktop users. Recessions are really short. Half a view right now are searching Google for something because over last year OK. Get about 452 window to I'd say something else that's interesting to accomplish some little marking out buying your mobile device. Usual lot a device to transact when you're weeding for an hourly area. Right wing add staff wage shouldn't do but we argue that cable guy you know doing away driving. But it's really quick it's incredibly intentional. Rate you don't have the patience too well how order analyst at Serra for the way. Our other for all people out here we we we we've just surf the web much a formal will provide your. Accidentally go anywhere near incredibly intentional. You have a very short period time. In your dual wing something else. This isn't how different use case and the British sits down to their desk. Opens of the computer goes into a browser. In does this very intentional long session to a club which are set of objectives. It's two wholly different. OK so the resulting the result is that O assured them we view the move for a long time wise. Responsive web does not a maker desk at work everywhere at a terrible way the year. It'd terrible idea. You don't like your more war Europe your desktop. To work Quant model device because it's it's not designed for the more voice user. Which your wife is responsive model experience that is designed for the mall will use a really short sessions very intentional. Very driven very short session. User they badly. Doubt bell what Wayne knowing release that are not and then have a separate desktop experience and out. Is fall that kind of views and unrestrained use cases. So these are the challenges the rose these low miners Asian rates that bowl ability to click I you'd get quick end cooking go with the ads. Arm so they had in agree bookings. They had to design ended as the great thing about all your TA's version as the suppliers that period the stuff that we're actually more would bring into generally better. And Google's better than them. So the the unit reducing smog will first. Course specific. But interestingly creates an opportunity for the supplier and joins me shifting against the virus from long time now but increasingly this is actually change the dynamic it. Suddenly we can compete for primary Jimmy end game. We can compete week yet have the supply of year the Otis the money they used to abide yeah. There's six billion dies that the TARP Otis are giving two Q Google come from the supply of mostly hotels. They can now taken compete for primary do mayor in agree. OTE like booking environment which really well designed at least it will be. They can now promote it varies draft risk thanks to some of this. Our anti trust activity around the world that prevent that this week or about the sorry Perry rules. You know also means they can be after fewer dimming is much nova dimming gets. No demeans and no student knows is dimming Isis iron W we power for evil practice we're is. The this is the way that it's been described doing we like to give hotels. The opportunity to correct their bad behaviour. Paid what they met words you're offering interact a royalty program member raided his prior really it was well a new teary to a baby's Udall listing here. But they remove all the images and links to a looks like here click. It's really wonderful it's like Harley would evil fantastic. But Britain with this direct access to primary domain worry that added much. Eight you can actually going get yourself in collaborative and promote this capture that fall Booker information. From the first working. This is a big deal yes you do something where big challenge but at a big Apatow. To what its suppliers productive while on the hotel side. Yesterday let's get bigger let's bite somebody out of Gardner have seen this happens as a couple you this is now pointing resolved but this still we're rather. Maryann Starwood and massive. Not in huge are ready IHG really big win it is going to be more combinations are caught by its failure might raffles. Everybody is buying everybody's gonna get bigger which is hastily gets a supplier powering a little bit more negotiating power. In that helps better really good thing. Yasuo for a long time maybe independent really tough. Because I'm Euro aren't you negotiating average with no T was really now. The change did get a actors to remarkably rates I would we their commission a margin maybe 1818%. They say it's fifteen through 1819%. An independent think 2535%. That's of the big difference. Refused were two interesting. Well this change is a really crummy graphic Perella. As an independent. If you know what you do you. You can actually generate you can compete for a primary demean and with our cabaret. Have a law cost of customer acquisition. So I'll just look at the pipeline pine this an independent without. Using book on global instant booking direct primary dement. Keep it their distribution channel costing about point 5% rate that's that's the era the era effective casts. For new business. That all end rate in in for a brain hotel 24% to Xen is still really independent but when you intrigued when you inject. It direct access through this really nice looking experience. Cost goes down it's achieved this sort of business. Slightly hidden gem to really big deal. And it's working to develop operas when you're thinking about. This track the lender what we're Brent but we used to work wise. OK all right finally get M area around our take the system currently Asians the biggest. The end if not bad Arctic Hilton brand if not that depending on the market median age she brain may be higher or something. And then obviously grass. Great. And that's just the we're worked that this is certainly making it interesting can actually get. You can actually get wrote dominion generation capabilities. Primarily right and the rival the brains witches of the deal. Changes the cost of you have all those pesky steer original collaborations and expensive renovation rules alive CDs Dana dingle well we would all our required. Admitted really compel the brains know this evolved into this game theory they've. Tacitly or explicitly acknowledged. That independence is now viable option either would be staffed brains that now are everywhere I win the horror stuff brands. Hearing in inner city. But everywhere the major brands has some kind of soft Brent. We're you know you kind of an independently yet system delivery benefits and we don't really tell you how often your how to change the shooter rather staff still appoints. And inner core. Cases several their explicitly recognising independence as a viable option there saying. By the end of going to be falling in a pennant will new reactors during this crucial ability to attract opting. It's a big deal. So really big deal they're basically saying. We regret. It's what we did itself we did it with franchise fees brimming coming or think that maybe don't we do up. Arm sell. Q is that euros that you're of the reality here's the thing you need to realise we're Arlington due to any shift to the industry. From a transaction. Mindset. I used to say that are on the at the travel industry has goldfish memory rate no core Fisher. But I have my memory US five seconds. There after five seconds at just goes away so that's why they can I live in the small fish for knuckle crazy because those were around the idea. Hate to cancel need to rally in. It's not. You know David you don't know they'll crazy in European but. This this is how we are already weak we train people and industries say these stayed with us before. And sit down question. We now I'll get the deal arraigned Friday unless the strain of blinking. Platt and loyalty member. Of the dumbest question we say about the time. We actually train people reduced because we had this first time their retirement tardy about everything. As a result dollars systems are built this way we optimise the yield on the transaction. We calculate your based on the discount. Offer the opening close discount in the yield management systems. This is stupid we need to think about the cost for acquisition. The cost of getting a customer end keeping them. End buying their future alive at the lowest passable cast. If we do that. Calling the point Brian knows me realise narrowly is direct booking. Nine for re. It might be your most expensive check when it's well worth it because you're buying that customer from the first booking. On the first stage from the first flight the first trip. New on the if you know what you do you think about the white sec for the customer and actually create real life cycle marketing mile. Do all that you can actually on the profitability for that life cycle and you're not slave to the OTA is really by the sources of the mayor and which has selling new that would seeing customers over and over and over again today. We have to break that cycle or not it's very hard are telling all the systems that are in place across Drummond street. Are designed to optimise the transaction. With the change step in if we do we will we're. Here's what really gonna happen now that instructors will do first. It will structures are interesting in this unity visa are already doing it already thinking in terms of how can get matching new oral Lee. In keeping forever. So. If we go from the school cost walking past as will bring change are yielding from. From yielding from the discover what's your by increments how the of the sorts. Opening closing share goals. Based on the likelihood that that guessed that travel has not worked with me before. Different or through bid if we think eagle from customer satisfaction. Brain which is nice sounds great right. To get the next booking. If everybody in there in hotels down in airlines Jarvis will now act satisfied that. Instead. You know a jar to make sure the next time they travel the travel with that's it changes every it's a smart but it's a really big debt. Do you think the people have thought some half an airplane dragged off screaming and bleeding if you're holdup is getting a little while you again. Now what Chris that was done anyway but you know. Did we forget we get taught we broke into Italy Britain but if we have that mine to everyone Jarvis to get the next booking. You can actually knew you'd change would you may change everything operation the big deal and set back road go up you'll get. So for a time everytime your relationship. Do you this. By using did you have on the information you need right now your dear everybody else's. To wire big big is really hard is three. Rate predicting if you actually killing the decisions we would informal rule your decisions noted during. Developing life cycle marketing so we know at this point in your life civil based on these trigger waivers we're avoiding dubious things you. On the digital natives know this. We in the old world we just haven't quite cut it. And in. Very deliberately added revenue and profitability this as a a refiner brought harm Watson piece of advice about goth versus said just. Relax and slow down your swearing in we're until live with the added distance and accuracy. So was enlisted to all these things into were delivered the ad revenue and profitability. So here's last year from in or get into questions. Right we live creative destruction. If you don't think you'll owe you destruct areas. You'd hear you're in big trouble you being distracted there somewhere out here that affected who. Trump thinks is hacking there's a retreat and the like that he's actually trying to do your best customers and profit from them. Right arm so here's a test port here. We're gonna learn from our detractors. I would have to be then UKIP out Expedia Expedia adds that had been your needs. But you can learn from in which you're learning has one particularly. What's that how. In my experience that era addressing. Right. If you. If you look at anything luck of these wonderful can four point you have the point of interaction touch point with your customers today. That you're wondering where can view. That that your vulnerability that your village in your vulnerability undressed in what they are an endless tail end. Exactly how by one how they can use and then put up a one off may trigger protecting their respect. If you know you're vulnerable you know there's a gap there. Well need to figure out how to solve their yeah cause someone well in the strategy you know. What is decision is its key rate think digital first. Think about how destructive would do this player war game and figure out OK as get a really get that bearish market what you are Rolling Hills and Roman say OK. Go attack our core business. Big that's a way that you do do destroy our core business. There could be pretty interesting. N do this with the idea of detractors now. Maybe you do this into a crisis. Maybe you have just got caught team that's yours in that period Jarvis you know the best and ready for auction business which Jarvis to figure out. To the new business mile it's gonna patrol business model or business maybe you quite a new way for them the grant when he doesn't buy out. But it's always a risk raise the price we could be one well. Maybe it's. Do we concurrent is down and did before they get what we this kind of spread the money out across a lot of potential destructive. Knowing how what it would take got my business in the future Dimon is a repeat of average. One day are have a big part of the thing that fuels and and I living. So these strategies to help men age destruction to help mitigate. The inevitability. Of destruction. For your business and with that. We'll move to questions thank.