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ANALYSIS Travel Chatbots are Hot, But Will They Replace or Augment Human Conversation? By Norm Rose September 2016 In the last several years, conversational bots – computer programs that enable text conversations – have been among the hottest technology topics. Startups and traditional travel players have launched a variety of chatbots focusing on customer services, trip planning and booking. This analysis reviews the current state of chatbots and how they are being implemented by travel companies, and discusses the future impact of this technology on the travel search­shop­buy experience. This content is published by Phocuswright Inc., a wholly owned subsidiary of Northstar Travel Media, LLC.The information herein is derived from a variety of sources. While every effort has been made to verify the information, the publisher assumes neither responsibility for inconsistencies or inaccuracies in the data nor liability for any damages of any type arising from errors or omissions. All Phocuswright publications are protected by copyright. It is illegal under U.S. federal law (17USC101 et seq.) to copy, fax or electronically distribute copyrighted material beyond the parameters of the License or outside of your organization without explicit permission. © 2016 Phocuswright, Inc All Rights Reserved. Travel Chatbots September 2016 About Phocuswright is the travel industry research authority on how travelers, suppliers and intermediaries connect. Independent, rigorous and unbiased, Phocuswright fosters smart strategic planning, tactical decision­making and organizational effectiveness. Phocuswright delivers qualitative and quantitative research on the evolving dynamics that influence travel, tourism and hospitality distribution. Our marketplace intelligence is the industry standard for segmentation, sizing, forecasting, trends, analysis and consumer travel planning behavior. Every day around the world, senior executives,marketers, strategists and research professionals from all segments of the industry value chain use Phocuswright research for competitive advantage. To complement its primary research in North and Latin America, Europe and Asia, Phocuswright produces several high­profile conferences in the United States and Europe, and partners with conferences in China and Singapore. Industry leaders and company analysts bring this intelligence to life by debating issues, sharing ideas and defining the ever­evolving reality of travel commerce. The company is headquartered in the United States with Asia Pacific operations based in India and local analysts on five continents. Phocuswright is a wholly owned subsidiary of Northstar Travel Media, LLC. © 2016 Phocuswright Inc. All Rights Reserved. 2 Travel Chatbots September 2016 Table of Contents Abstract 5 Introduction 5 What are Next­Generation Bots? 5 Bots on Messaging Platforms 6 Bots, Humans or a Hybrid Model 6 Are Chatbots an Interim Step to Voice­Enabled, Human­to­Machine Conversations? 7 Chatbots and the Impact on Search­Shop­Buy 7 Examples of Travel Bots and Human­Driven Texting Solutions 8 New Leisure Travel Services 8 OTA 9 Corporate/Business Travel Services 10 Hospitality 10 Metasearch 11 Airline 11 Ground Transportation 12 Summary 12 Endnotes 13 © 2016 Phocuswright Inc. All Rights Reserved. 3 Travel Chatbots September 2016 Figures and Charts Fig. 1: Growth of Messaging Platforms 6 © 2016 Phocuswright Inc. All Rights Reserved. 4 Travel Chatbots September 2016 Abstract The phrase "I've got an app for that" is quickly being replaced by "I have a bot for that." Since late 2015, conversational bots, computer programs that enable a conversation via text, have become one of the hottest technology topics. Startups and traditional travel players have launched a variety of chatbots focusing on customer services, trip planning and booking. The main driver of the chatbot trend is simplicity. Using an existing messaging service, a chatbot can help automate tasks via text without the need to download an app. Some believe that chatbots represent the beginning of a post­app world. This analysis reviews the current state of chatbots and how they are being implemented by travel companies, and discusses the future impact of this technology on the travel Search­Shop­Buy experience. Introduction 2016 is already being called the year of the bot. MobileBeat 2016, a conference sponsored by Venture Beat, was devoted to the subject of Bots and Artificial Intelligence (AI). The conference lasted two days and had over 30 speakers, with strong representation from the travel industry. A number of questions were raised at the conference. Can bots truly hold a conversation? Are bots simply a stepping stone toward AI­powered human­to­machine voice interfaces, or will the bot phenomenon continue to have a distinct role within text­based conversations? How are travel companies using bots today, and what is the future of bots in our industry? What is the best mix of bots and human­based messaging? What are Next­Generation Bots? Conversational bots, which are also called chatbots, are not new. The chatbot concept was introduced in 1966 by MIT computer scientist Joseph Weizenbaum. He created a program for mimicking human conversation called ELIZA, which worked by parsing the words that users entered into a computer and then matching them to a list of possible scripted responses.1 The limits of ELIZA were based on the knowledge contained in the scripts. Though technology has advanced significantly since 1966, the depth of knowledge to answer all possible questions continues to be a challenge for even today's most sophisticated chatbots. The 1990s saw a first wave of chatbots. Early bots were based on simple logic tree applications (SLT), which gather information and redirect the user to pre­determined answers. When interfacing with an SLT chatbot, a seamless experience can happen if the query matches a pre­determined answer, but questions that stray from the predicted responses often hit a dead­end.2 As a result, the 1990s SLT chatbots failed to produce true conversational capabilities. Evaluating the conversational capability of a chatbot relates directly to the current state of AI. The Turing test has long been a measure of the effectiveness of AI and can generally be tested in a chatbot context. The test was developed by English mathematician Alan M. Turing to determine whether a computer can appear to think like a human brain. The idea is simple: if the researcher cannot detect that an electronic conversation with a computer masquerading as a human is not actually a human, the software passes the Turing test.3 Today the effectiveness of chatbots is still often measured against the Turing test. Today, bots reflect the convergence of three types of AI disciplines: Natural Language Processing (NLP), Machine Learning and Cognitive Computing. Natural Language Processing is the ability of a computer program to understand human speech or text. More recently, NLP has been replaced with the term Natural Language Understanding (NLU), which more specifically implies that the machine understands the request. NLU generally requires an ontology (e.g. a set of common terminology with a specific discipline) that defines terms within a specific sector. For example, texting a chatbot to book a flight might yield a response that describes books about flight vs. actual options for air travel. Defining the ontology of the travel industry is critical to move NLP to NLU. NLU applies to both voice and text communication and is now used extensively in conversational bots. Machine Learning, as the name implies, is the ability for a computer program to learn patterns based on usage. For example, an airline booking platform that utilizes Machine Learning may suggest specific flight times or carriers based on past behavior © 2016 Phocuswright Inc. All Rights Reserved. 5 Travel Chatbots September 2016 of the user. The term Cognitive Computing often encompasses both NLU and Machine Learning, but adds Big Data analysis to the application analyzing large amounts of structured and unstructured data to deliver intelligent recommendations. IBM's Watson platform is the most prominent example of cognitive computing. 4 The current wave of chatbots that utilize NLU, Machine Learning and in some cases Cognitive Computing deliver responses that make sense within the context of the conversation. Despite the use of these AI techniques, there is still significant debate on whether conversational bots can handle the complexity inherent in the Search­Shop­Buy process of travel. Bots on Messaging Platforms One of the key differences between the 1990s bot revolution and today's chatbots is the mass adoption of messaging platforms. For example, Facebook Messenger opened up their Messenger platform to bots earlier this year, and a mere 80 days after the announcement, the network was flooded with more than 11,000 chatbots.5 The growth of other messaging platforms such as WhatsApp, WeChat, Instagram and Snapchat, in addition to the traditional SMS (e.g. mobile text messaging), has changed the way chatbots are being deployed. Rather than requiring consumers to enter a private chat session via an app, the majority of today's chatbots are being deployed on top of these robust messaging platforms enabling conversations without requiring the user to leave their preferred messaging environment. Figure 1 In addition, enterprise messaging platforms such as Slack also provide a new platform for chatbots. Slack's growth has been phenomenal, recently reaching 2.7 million daily users.6 A number of travel chatbots have deployed on Slack's group messaging environment. Bots, Humans or a Hybrid Model For decades, science fiction novels, television shows and movies have prepared us to interact with intelligent machines. The use of AI, the ability for machines to mimic human behavior, is commonplace in and outside the travel industry. In fact, when AI becomes mainstream, we often take it for granted and don't think of it as AI. It ranges from the obvious — personal assistants such as Siri, Google Now and Cortana — to the use of AI in video game characters that learn your behaviors, © 2016 Phocuswright Inc. All Rights Reserved.

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