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Our thoughts don’t revolve around industry players that build better lifts than we do in the Alpine region. We do genuinely hope that we’ll continue to physically develop the best ski resorts within the next generations with strong steel cables, and innovative gondola materials, however, digitalisation is bringing new players and technological innovations to the market that could fundamentally change the economic environment for mountain cableway companies.
Transport Company vs. Experience Designer
Today, mountain lifts are the big players in the majority of alpine tourist destinations. Looking back just a few decades ago though, that wasn’t always the case. From the start, spas and grand hotels dominated mountain tourism. It was only after the end of the Second World War that mountain railways started to increasingly become the heart of these destinations as a result of the “Alles fährt Ski” campaign and the national ski-boom. Von Roll built the first chairlifts (in Flims in 1945), the state organised snow-sport weeks to encourage Swiss school children to start on skis and in 1950/51, the state began to subsidise ski schools.
Skiing as a mass sport: valley station of the Crap Sogn Gion gondola lift in Laax ca. 1970
Of course, cable car projects had been realized in Switzerland before, but only a few were for tourist purposes. The majority were merely transport and access cable cars like Mürrenbahn, Bettmeralpbahnen or Wirzwelibahn. The turning point came after the Second World War: It wasn’t just new lifts that were built, but rather, new holistic experiences revolving around skiing. The value chain around the transportation cable cars was extended through the development of ski slopes, ski schools, sports shops and mountain restaurants. Today, we would say that Swiss ski resorts have advanced a sophisticated customer experience revolving around skiing and have evolved into experience design companies. Experience design seems to be deeply anchored in the DNA of the ski resorts.
The digital dimension complements the overall experience
Today this overall experience is enhanced by a digital dimension. The scope of the digital dimension is immense, but in my opinion it can be reduced to the following three levels:
- Access to experiences
- Convenience achieved through reduced pain points
- Enhancement of the physical experience
Access to experiences
While physical experiences remain largely the same, the access to these experiences are currently being completely re-designed. Due to its simplicity, visitors are increasingly buying and booking experiences online, and it’s here that the new market players make an entrance. Large, international players have optimised online purchasing to its last details. Through their collective experience, their know-how and focus on user experience, they remain miles ahead of individual tourism service providers in regards to online sales. Booking through these platforms is just easier and more fun.
In certain areas of tourism, for example in the hotel industry, this is nothing new. In the last 16 years, bookings through local tourist organisations have been declining. Along with E-Domizil, the American group Airbnb is one of the strongest players for booking holiday rentals throughout Switzerland. In the hotel industry, every third overnight stay is booked via OTAs (online travel agents). The three bigger players, Booking.com, Expedia and HRS make up 94% of all bookings. According to Hotellerie Suisse, Swiss hotels made commission payments of around CHF132 million to OTAs. The Swiss hotel and guest accommodation industry has long been disrupted by Silicon Valley big tech.
Digital disruptors in tourism
How’s it looking for mountain railways? Since the Covid-19 pandemic, lift-tickets at Swiss ski destinations were increasingly being purchased online. Some mountain railroads built their own solid online purchasing channels whilst others decided to outsource online purchasing to third party providers such as Ticketcorner. The situation looks similar for the booking of activities. Airbnb is already playing along with its Airbnb Experience solution and there’s also Get your Guide as well as local players like the Hyll App.
At first glance, this development could be interpreted quite positively from the point of view of the mountain railroads and other tourism service providers. Commission payments come into play but then, "digitization is solved for me". Let’s stay with the example of the mountain railroad: lift tickets and the activities revolving around it would all be bookable online in an instant. So as a mountain railroad provider, “I no longer have to worry about digitization and spend little to no money on it”. Digitisation made easy - right?
Not necessarily. Some operators will probably only realize the true price they paid for the “fast digitalization" in a few years. The real cost is that the direct relationship to the customer has been taken out of their own hands.
To understand this better, it's worth taking a quick look at business models of big tech companies. Practically all of them are built on the principle of owning the customer relationship. Specifically, this means that they have access to customer data and can use it holistically for themselves. Customer data which represents the basic currency in the digital world. They don’t need much more, because the infrastructure and labor is outsourced to local service providers. Only those who have the digital customer relationship in their hands will also be able to design and steer the overall experience for their guests in the future. Only then can the full potential of digitisation be leveraged for the company and its guests.
The business models of Silicon Valley companies without own infrastructure
Convenience achieved through reduced pain points
Owning the customer relationship brings two advantages that can be regarded as critical to the success of a good digital strategy:
- You are in control of the digital interfaces to the customer
- You are owner of the data
Today the digital experience is a central part of the overall experience and we can’t forget about it. To not be in possession of the digital interfaces means guests will visit third-party platforms over your own channels. Should the planning and booking take place on a third-party platform you have no influence over the digital experience and you can’t accompany the customer throughout their digital journey. Ultimately, you simply become a hardware provider. What remains of the mountain railroad is then to simply run the lifts - everything else would be controlled by third parties. Similar to Uber today…
If you do, however, own the interface, you can create a multitude of digital touchpoints along the customer journey which results in a large data pool. This data allows mountain lift operators to provide context based information in real time for their guests when they need it. In return, the experience for the customer is simplified and the pain points are reduced. Here’s some examples:
- Personalised recommendations instead of information overloads
- Reserving a parking space instead of searching for one
- Ordering food on your smartphone instead of waiting for service
- Customized guest card offers instead of universal discount booklets
- On-demand taxi service instead of betting on your luck on the curb waiting for a cab
Enhancement of the physical experience
That the guest experience can be simplified and enhanced with the right use of technology and data is probably obvious. More and more, however, technology is also being used to create a digital layer that complements and intensifies the physical experience.
An effective way to do this is through Gamification: the application of game-typical elements introduced in a non-game context. In the context of mountain railways, gamification could, for example, be based on the logging of the number of days spent skiing, hiking or biking. This trend of performance tracking continues to grow amongst amateur and outdoor athletes. People are getting used to tracking their performance and achievements digitally. Elements such as leaderboards, daily overviews and challenges create a fascinating symbiosis between the real and digital world - and elevate the mountain experience to the next level.
Enhancing the physical guest experience, excerpt from Inside Labs' initial concept for the Bike Kingdom app.
We also continue to see the use of augmented reality (AR) technology being used to add a virtual dimension to the physical landscape. This can help people orient themselves even in foggy conditions, or stories and experiences can be told based on the local environment through a virtual dimension. Currently, approaches for completely virtual parallel worlds, also known as "metaverses", are also being conceptualised. The use of Web 3.0 for linking the real world with the virtual world, for example via NFTs, is also being evaluated. We can look forward to seeing how the physical guest experience will expand digitally in the future.
Experience Designers or just Infrastructure Providers?
Today, the digital dimension is already a fixed part of the overall experience of any guest. The question that needs to be answered is this: Do I want to actively adapt and control the digital dimension or do I deliberately not do this?
Digital dimension of the guest experience
There’s hardly ever a right or wrong. However, if you want to keep the digital experience in your own hands, you must own the customer relationship. The aim is to co-exist with the digital channels that customers are accustomed to in the initial phases of their journey, and then to provide guests with the best possible digital support throughout their on-site experience. It’s also predictable that in the near future, there will be more tech players entering the tourism industry. The advantage the destination has over globally scalable solutions is their locality: their proximity to the service providers and the experiences. If you decide to actively co-create a digital experience, you need to make “digital” a fixed part of your performance contract and begin a journey for several years. To bridge the gap to a big tech, you need to decide if you want to be Uber or an Uber driver.
Do you have any questions about the article or other topics related to digitalization in tourism? Then write to us via talkto@insidelabs.tech . We look forward to hearing from you.
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