Blogpost
Virtual Reality – New reality for the travel industry?

Virtual Reality – New reality for the travel industry?

Portrait of Jörg Esser
Partner
Dusseldorf Office, Central Europe
+49 211 4389-2123
June 27, 2019

Start-ups introduce various services along the travel value chain to the market

In recent years, technological and commercial developments around Virtual Reality (VR) have fueled speculations about its impact on numerous industries. More specifically, predictions on the repercussions of VR on the travel industry range from considering it a mere technological gimmick to perceiving VR as a threat that could potentially substitute traveling. Featuring three startups on the forefront of VR, this article sheds light on applications and limitations of VR in the travel sector and provides four guiding principles for industry players.

Virtual Reality tour on a historic site
Featured Start-Ups
"The current VR landscape in the travel industry is emerging and fragmentated – it is not yet unified in any meaningful way. "
Founder and CEO
Lithodomos

Status Quo of Virtual Reality

VR builds artificial environments, accessible through headsets. These provide immersive simulations through image, sound, and motion-tracking.

Despite the hype and optimistic sales projections, adoption has been relatively slow, mainly due to a lack of sufficient content, performance issues and high prices of VR devices. Therefore, reaching a large customer base remains a major challenge for content and software developers. Consequently, despite sufficient funding from investors, developing financially sustainable business models has been difficult for many companies in the VR sphere.

Virtual Reality in the Travel Sector

Despite current challenges, VR is still believed to significantly increase its impact on the travel industry, as it provides three overarching features for travelers: Enabling, Escaping and Enriching experiences:

"Travel companies are now realizing that they need to apply the digital transformation not just to their tools and processes, but to the content as well."
Co-Founder and CEO
FirstView

Whereas these three features can individually accompany both travelers and companies in all steps of the customer journey, they tend to create the greatest benefits in a specific phase as illustrated in the following:

Customer Journey Phase 1 – Inspiration, Planning and Booking

As travelers are not able to try travel experiences before their purchases, they often seek to gather as much information as possible to reduce potential disappointment and find offers suited to their individual prospects. Moreover, as the world is more connected than ever before, people face the paradox of countless ─ often overcrowded ─ travel destinations and a wide range of attractive, yet unknown destinations.

As VR enables experiences, travelers can use this technology for inspiration of new destinations and plan ahead to reduce risk of disappointment through (virtual) "trying before buying".

"We help companies to benefit from VR via enhancing their brand, building a closer customer relationship or through ancillary revenue."
Co-Founder
Inflight VR

Customer Journey Phase 2 – Transport

Transport to and from the destination, especially on long-haul trips, is often considered the least favorite part of travelling due to discomfort, boredom or stress. In this context, the second feature of VR, escaping experiences, comes into play.

VR can be used by transport operators, e.g. in airplanes, coaches, and trains, to improve customer experience by allowing travelers to detach themselves from their surroundings through entertainment and information.

"We seek to contextualize travelers’ experiences in order to enhance their connection with their destinations."
Founder and CEO
Lithodomos

Customer Journey Phase 3 – Experiencing

Once travelers have arrived at the destination, VR can enrich their experiences. Hotels, for example, can increase their service levels by displaying relevant information on the available facilities, excursions and surroundings. Most important, agents such as tour operators, museums and historical sites are able to ameliorate their offerings by incorporating VR technology to add entertainment and information to their services.

4 Principles to Build Your VR Experience

Despite its recent prominence, VR has not yet been able to show its full potential of significantly altering the travel industry or even substituting travelling. From today's perspective, we consider VR a natural evolution of content that, if applied correctly, can increase customer satisfaction and corporate performance. Before jumping on the bandwagon and investing in VR, travel industry players would benefit from considering the following four principles:

1 - Know your target customer and collaborate

VR applications are not for everyone. Whereas travelers spending only a single night might be less interested in trying out a hotel virtually, a couple planning their honeymoon will gladly embrace this possibility. Therefore, focus on your customer needs, analyze where you could enable, escape or enrich experiences and collaborate with relevant actors along the customer journey to provide an integrated travel experience.

2 - Get your VR logistics right

In its current stage, many areas of VR lack the platform and infrastructure to enable efficient transactions among market actors which hampers the monetization potential of the technology. It can be challenging to get VR applications to customers due to the limited number of VR devices in the market. Thus, with the current spread of hardware, companies can benefit more from VR when they are interacting face-to-face with customers and are able to provide the required VR equipment.

3 - Think beyond customer interaction

VR does not have to be limited to the mere interaction with customers but can create value through performance improvement and cost reduction in all areas of your organization. Exemplary use cases are training of front staff in hotels to increase service levels and providing sales agents with detailed information about products and services. Also, VR can be a source for ancillary revenues, as demonstrated by engaging and cost-effective inflight entertainment systems.

4 - Prepare for the critical mass

Building upon our second principle, companies should get prepared for VR to be a mass product soon. With improving performance and simultaneously decreasing prices for devices and content development, a steep increase in market penetration of VR is expected in the near future. Therefore, companies should start planning to capitalize on this technological opportunity now.

Further reading
Portrait of Jörg Esser
Partner
Dusseldorf Office, Central Europe
+49 211 4389-2123