Tis the season of holiday travel.
And family dynamics aside, for many of us, that means it's a time rife with logistical vexations.
There are carry-on fees to decipher.
There's the array of airline options determining how much you're willing to pay for a seat upgrade.
McKinsey Senior Partner, Jules Seeley, says these practical steps take away from the delight of travel.
It's very interesting today because the typical customer says they like the travel, research and experience.
They like to kind of explore and think about where they want to go, but they just don't enjoy the practical side of then converting that into a specific trip itinerary.
But Adentic AI just might be the tool to alleviate that less fun side of booking travel.
So over time we're excited about Agentic because we think it could be a very different way to manage travel for a customer and have them focus on the excitement and not as much on the friction and pain.
This is the McKinsey Podcast, where we make sense out of the world's toughest business challenges.
I'm your host, Lucia Rahilly.
Jules Seeley, welcome to the podcast.
Thank you.
It's great to be here.
McKinsey and Skift just collaborated on a new report about the potential impact of agentic on the travel industry.
Jules, help us understand the current state of AI adoption among travel companies.
So we're seeing significant adoption already, particularly in internal experimentation to see how they can use it to help improve their own business.
Have these early adopters companies who are using AI already seen heartening results from these early forays into AI, or is that still TBD?
I would say it's still TBD.
There's a bit of AI paradox we talk about, where we see about 80 of companies now actively using and deploying AI in some form, but only 20 saying they can actually see any impact and benefit directly from it, particularly in the PL of the business.
And I think that really reflects the early stage that AI is at and the experimentation that's going on.
But we're quite confident that over time we'll see the impact flow through both to the economics but also to the customer experience.
Walk us through some of the benefits that it might pose for folks who work in the travel industry.
You've said that the most significant area of adoption has been internal.
Suppose I'm a frontline travel worker.
How could AI affect what I do and how I do it across a whole set of roles within travel companies?
AI as an assistant to help the employees be more efficient, to do more of the manual work and therefore free up their time for the value add that they can bring to the organization.
We think that's a early path to adoption and one that there's quite a lot of excitement around.
In addition though, there is the other side of AI that, in automating many of those tasks, it might also change the employee landscape's.
To that point, the report highlights that skill sets might need to change, but that, over time, these evolutions will free up employees to deliver meaningful service.
So let's say a gentic does become capable of managing some processes from end to end.
What kind of human-only skills will remain vital to the travel experience?
Yeah, I would say travel is a very personal and emotional area.
And so the end customer is looking for something that talks to them and inspires and excites them around travel.
Sometimes it may be travel they have to take, but even then...
People are looking for that excitement and what we call the magic of the travel experience.
And so we think that means there's always a role for people in the process and physical touch points in the process, because that's going to help make sure the customers are getting the very best from that experience and the navigation they can.
Walk us through what kind of operational processes our research suggests might be largely or even fully delegated to agentic AI within the next few years.
So these are areas like marketing how you think about targeting your marketing.
Some elements of customer service, including AI chatbots, AI interaction through a website, even AI digital voice engagement.
Broader sales activity, sales origination and sales operational support.
And then, as we've all heard, a lot about internal software engineering, so AI that can code on behalf of an organization as well.
And so a number of those internal activities we see as increasingly supported by AI in a way that's both automating some elements of them but also making them even better and more powerful along the way.
Suppose I'm a travel leader then and I am sold on the benefits of investing in agentic.
What's the right starting point?
One area, very naturally, is around internal processes, because the organization has visibility and control over them.
They can make some changes that are perhaps less visible to external stakeholders and external customers.
And therefore it gives them a bit of a canvas to experiment in without getting tripped up in external challenges with third parties.
It also can drive some meaningful cost efficiency opportunities over time which in lower margin businesses can be an attractive part of the AI deployment as well.
And something has to help fund the technology that goes into making these changes.
But one caveat we'll often have for organizations is that, while those are very valuable capabilities, It's not clear that being agentic AI enabled in your HR or finance processes or through a call center is going to give the company a long-term strategic competitive advantage.
We'd expect many companies similarly enabling their internal processes with AI.
So in parallel, we also encourage organizations and leaders to look at their organization and form a very sharp view on what is it in their company that they want to be known for.
What's the magic of their own organization?
And then how do we think about AI's role in that part of the organization?
Because if that's what gives them a strategic competitive advantage today and they aspire for that, to do so in the future, using AI to make that as amazing as it could be, a very powerful part of that.
Does the travel workforce have the skills necessary to adopt agentic at scale?
Does working through agentic internally help develop these skills, or do leaders need to put formal upskilling programs in place?
In general, I would say none of us have the deep capabilities today to really harness the full power of agentic, and nor do we really know where it's going.
It's going to be a learning journey for all of us.
And that can be through internal experimentation with agentic in your organization, but it's also through how you use it yourself in your personal life.
So Are you going and exploring your own travel journeys using agentic AI?
Are you looking at retail and shopping with agentic AI?
Are you trying to better understand and research topics or synthesize materials, using it in work and outside of work?
And so, formally and informally, encouraging yourself and your organization all the way through, from top to bottom, to really get deep on the technology and what it can do.
We would also encourage formal learning journeys as well.
And we often go on these with our clients.
And so we run some executive immersion sessions where we'll have the entire executive team or the entire board of an organization for two or three days, come and immerse with us and some other organizations to really get a flavor for the cutting edge of the capability and what the technology can do, and then go through a learning journey over the next six to 12 months to explore how that can come more present in their own organizations.
So learning takes time, right?
And internal experimentation takes capacity.
Are there things that folks need to stop doing to focus on agentic?
Or is our belief that the efficiency benefits are immediate enough that they'll help bridge that capacity gap?
Part of that will be prioritizing or reprioritizing the current activities.
And so even in the technology space there are many efforts, I'm sure, underway in organizations that, in light of some of the agentic opportunities, might now have a lower priority.
And we would encourage organizations to look through that roster and decide do they still need to be pursuing all of those elements?
And do they still have the ROI that they thought they had two or three years ago when they planned them, given the newer agentic capabilities and what they could do?
And so we would encourage a reprioritization to ensure that there's enough capacity and bandwidth, both technical and managerial.
On the agentic opportunities How should companies introduce agentic to customers who might err on the side of reluctance?
Are there some interactions, in other words, that are more delightful and feel safer than others and that might enable a wade-in-the-water approach?
So there are ways to experiment without the commitment hurdle of plan and book and commit the entire trip.
So we can imagine customers would start on a journey of physical purchases, perhaps of smaller commit levels, and then get more comfortable with both committing the larger dollars that travel involves, but also the larger complexity.
And we think there'll come a point and perhaps not too far out that while an LLM is never perfect and information is never perfect, it gets to the level that it's as good as the customer is, who also doesn't know anything about that particular hotel in that particular region or the choices of airlines or activities.
And so put some trust in the thousands of other travelers who've been on that journey and the LLM's ability to synthesize that together and create something for them.
On the travel company's part?
Are there also governance or oversight mechanisms that have to be in place, given that customers' money, as you were saying, or personal logistics or family relationships on the line?
Yeah, there's a few elements that the travel companies will have to think about.
So firstly, it likely becomes less transparent quite who is the ultimate booker of the travel.
So if I'm interacting through my favorite LLM and I'm researching a trip to Paris, it's not clear to me whether it's going to the airline website to book the flight and the hotel website to book the flight, the hotel, or if it's direct connected into them, or if it's intermediated through an OTA.
Perhaps it's even buying a package somewhere behind the scenes off a package travel provider.
And so that may create questions for the customer and also differing risks for the providers, depending on whether they are formally the merchant of record, the transacting party, or whether there's some intermediary along the way.
And so I think there's many elements of the payments that go with, that is, your money held securely until the trip, refundability questions, currency and exchange rates and all those sort of elements that play in as well.
And I think it'll take some time for either the norms or, in some cases, the regulations and rules to take account of this level of complexity.
Forgive me to bring catastrophic thinking into the mix here, but suppose there were some kind of agent-related imbroglio that affected a lot of customers.
Do leaders need to do anything specific on the risk mitigation front to prepare for that kind of logistical or reputational risk?
The question through these agentic processes, where me as the customer, may not have chosen exactly which pathway it's being booked and who my counterparty is.
The question is do the individual companies involved in that research process and that ultimate transaction, are they clearly aware of the risks and issues that they have to manage as part of that process?
Um, around you know ethical use of ai, around how pricing works, a lot of sensitivity around ai, personalized pricing, for example there's a lot of data and intellectual property risks, with personal data being sent through the chain as well financial data, and so making sure that the risk management processes and enterprise risk view that these organizations have, making sure those are fully up to date on how to think about the new risks and challenges that play through as part of an agentic process, will be very important.
Suppose travelers start interacting primarily through AI agents.
Will brands need to start thinking differently about the way that they maintain relevance and loyalty?
And should leaders be thinking about that now, with LLMs providing an incredible amount of detailed, nuanced and tailored information, the LLM could provide quite a bit of that information without the need of the brand stamp on it.
And so it does raise a question of what then, is the future value and relevance of a brand, and how do you keep that deeply connected to a customer?
Our sense is that brands that have a powerful and clear value proposition will continue to do that, because the customer understands this and appreciates this and will go and seek it.
So they may be traveling somewhere and say, this is the city I want to stay in.
But then they could also say and these are the brands that I like, or the LLM may already be aware of the brands that they like.
And so it absolutely could continue to play a powerful role in the future.
But brands that are weak or lacking in differentiation.
They're likely to suffer more in the future because the ability to have different markers for that quality or standard of what the brand stands for could mean that the brand doesn't have the same value it has in the future.
Is there a way for smaller travel players that may not have such great brand equity right now to get some of the benefits of AI or to participate in the AI-enabled ecosystem without being left behind?
In a gentic world where there's a large availability of information and insight around different experiences, different hotels, you could imagine that those that really resonate with like-minded consumers and have that sort of value.
You could imagine that an LLM would be starting to surface those more because other customers like yourself, when they've traveled to that particular place, have appreciated that particular experience or hotel.
And so it could create a higher level of visibility for some more boutique brands or boutique experiences that haven't been as visible in the past.
The flip side is it is likely to be harder for those organizations to develop the sophistication to participate as actively as larger organizations can.
And so that's where larger organizations will still have some of the edges that they have today around their ability to understand really where the customer is and the customer expectations, and then adapt their own businesses to that.
So talk to us about a world where there are an increasing number of agents participating in travel through LLMs, but then there are also bespoke agents that are used by individual companies.
So a hotel brand company or an airline or a cruise or an OTA will likely have its own agents that you can interact with and will likely be developing their own vertical expertise around how to use agentic in travel, in addition to the broader horizontal expertise of LLMs.
And that's some of the debate that's going on right now around to what extent travel ends up as a vertical agent play, with the depth of experience and complexity that goes in travel, or whether the horizontal LLMs play a bigger role because of the wealth of information they have more broadly about a customer.
So interesting.
Okay, last question.
If we were to fast forward, say three to five years, what do you think would be most surprising about our experience of travel in an agentic-enabled future?
If we fast forward, we'll likely see a few meaningful shifts.
One is this overall experience of travel research and travel booking.
We'll likely see more of the passion and emotion, more of the excitement and less of the frustration around that booking experience.
I think secondly, we'll see the leading travel players really focus on a small subset of areas in their business where agentic can significantly change them.
And so I'm sure there'll be lots of experimentation broadly but focusing on where are the agentic capabilities going to make the most difference for their company?
What are those domains and how do you completely re-engineer that domain or that capability from end to end?
Today, I'd say we're still in the world where AI is being applied to steps on a process or steps on a journey.
As the capability becomes more mature, I think we'll see that entire process or journey getting re-engineered from end to end.
And then thirdly, there is a lot of experimentation now with voice assist and voice engagement and to date it hasn't been as helpful for travel beyond trip research.
Because once you get beyond description of a particular destination and some of the places you'd like to see, once you get into say, selecting a hotel, a voice assistant to list out 50 choices of hotels is very inconvenient.
And so you still want to come back to being able to display the product.
I think one of the things we may see and this is a much higher bar and more complicated, but one of the things we may see is the ability to really personalize and tailor to the individual based on the data, the insight, information and the LLM's processing capability, and really narrow that list down.
So when you're talking about exploring a particular destination, to what extent can it find you the hotel, or the choice of three hotels that really resonate with what you're looking for from a price point, an experience, a location, amenities?
And if it could get to that level, that would significantly change how a customer interacts with a travel company in the first place and make it much more like a rich conversation and much less like a index and database search.
Jules Seeley, thanks so much for joining us today.
Thank you.
It's been a pleasure being here.
Thanks so much for listening to the McKinsey Podcast.
I'm Lucia Rahilly.
And I'm Roberta Fasaro.
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