Chatbots, contactless travel, blockchain & crypto: Korean companies dig deep into tech to ride out Covid-19

From automation of the back end to chatbots and tech solutions to facilitate contactless travel as well as the introduction of blockchain and cryptocurrency, online travel companies in South Korea are being spurred by the Covid-19 crisis to innovate.

Speaking during WiT Virtual: Spotlight on the “Kingdom of South Korea”, Jun Shin, chief strategy officer of Tidesquare, predominantly an outbound player, said the company has been handling cancellations and refunds since January.

Jun Shin: “The bigger lesson is, we have been focusing heavily on the front side of ticketing, selling and connecting with airlines directly to get better fares, but now we have to do work on the back end.”

“All the airlines have different policies, and they are
placed differently in the documentation. We had to go through every single one
and check each policy and this took a lot of time. Now we have learnt a lot and
we started talking with a technology partner to use MRC (Machine Reading
Comprehension) so that the machine can identify exactly where that policy is
and that will actually help agents save a lot of time.

“This will be the foundation for us to develop a chatbot to
handle simple questions. And the bigger lesson is, we have been focusing heavily
on the front side of ticketing, selling and connecting with airlines directly
to get better fares, but now we have to do work on the back end.”

Accommodation unicorn Yanolja is probably best positioned for recovery and Jong Yoon Kim, CEO, Online Business and Corporate Strategy, said it is seeing pick-up in demand for domestic accommodation, particularly in the small accommodation category.

“We see growing demand for smaller accommodation in certain locations like Jeju and Gangwon, and we are developing contactless solutions for these small accommodation. The customer can just check in without any contact with humans – just a QR code on their phone. This is going to be a big trend going forward. We are seeing 20% growth year on year in the small accommodation business.”

It is also collaborating with regional governments and
provinces to see how to stoke the return in demand. For the coming long weekend
from April 30-May 2, however, stoking doesn’t seem necessary.  Flights to Jeju are sold out and
accommodation is pretty booked out.

While there is a mixture of excitement as well as apprehension as to whether this could result in a second wave of infections in a country that has been praised worldwide for its effective containment of the virus, travel companies are hopeful the pent-up demand means the beginning of recovery.

Jong Yoon Kim on the launch of Yanolja Coin: Blockchain enables direct communication between provider and customer, and allows companies to share customers. The more interchangeable the coin is, the more customers can be shared.

“Blockchain enables direct relationships and sharing of customers”

Not that they are sitting around, waiting for the day.
Yanolja recently launched Yanolja Coin, its blockchain and cryptocurrency
initiative, to target “the younger generation with limited budgets for travel,
and also those who now don’t have jobs because of the bad economy”, said Kim.

“They get Yanolja Coins when they book with us, but then
they can use the Coin to either buy more travel or they can invest it – we have
collaborated with other partners so that the coin becomes interchangeable more
broadly.”

It has integrated with MiL.k, a blockchain rewards platform, where customers will be able to trade Yanolja Coin for Milk Coin, a cryptocurrency that can be traded on exchanges or redeemed for rewards. The deal with MiL.k will enable the Yanolja Coin, a (non-crypto) rewards currency, to be exchanged for Milk Coin, a cryptocurrency that can be traded on crypto exchanges. Other vendors that have integrated MiL.k’s crypto rewards platform include Delivery Car, a popular South Korean car-sharing platform, and an airport bus service in the city’s capital: Seoul Airport Limousine. 

Said Kim, “Blockchain can improve the travel business in two ways. One, it enables direct communication between provider and consumer – and in this case, Yanolja is the provider. Two, it minimises marketing costs – Tidesquare and Yanolja, we spend a lot on customer acquisition. If we can make our coin interchangeable, it means we can also share customers – so we don’t have to spend so much on Google or Facebook.”

Tidesquare’s Shin said there’s been lots of talk in previous years about blockchain and cryptocurrency in travel but “we haven’t seen any actual implementation in travel; Yanolja’s is the first application being seen in the market”.

Direct-to-consumer shift has serious implications for travel retailers

Just
as this crisis has accelerated the shift of consumers towards everything
online, Kim believes this could be the breakout moment for technologies such as
blockchain and cryptocurrency because it fits into the direct to consumer (DTC)
shift being seen during Covid-19.

Younghoon Kang, Partner, McKinsey & Company, Korea, said even in a market like South Korea, which is pretty advanced (e-commerce represents 25-30% of the retail industry), Covid-19 has seen a mass migration of consumers online, including older generation and other shoppers who had preferred offline. “Now they can see how easy it is to compare prices and how convenient it is, and they won’t go back,” he said.

He said there has been a sharp increase in online food delivery, with beer and wine selling well, as well as Korean fried chicken. The country’s top fried chicken franchise reported a 30% spike in orders. Online grocery shopping with companies such as Market Kurly and Coupang are doing well. “In fact, we haven’t seen “bulk buying” or “panic buying” in Korea because of advanced logistics system and e-commerce penetration,” said Kang.  

He said this
direct-to-consumer shift will have serious implications on traditional retail
companies including travel.

“Consumers globally
expect long-lasting effects of COVID-19 on their personal routines and
finances. Consumers also
expect shifts in how they spend their time. Most consumers globally expect to
spend less time working and more time consuming entertainment, including
digital and video content, news, and social media. A notable exception is
China. As it emerges from the worst effects of the pandemic, consumers plan to
spend more time back at work.

“We will be tracking consumer sentiment to gauge how people’s expectations, perceptions, and behaviors change throughout the crisis.”

“Care for your customers and build trust”

To ride on the
recovery in the local market, Shin said Tidesquare will be shifting its
business to domestic. It is integrating rail into its hotel product and will be
looking for “unorthodox partnerships”.

It will stay focused
on travel, and not get into other services such as food delivery. “South
Korea has the biggest food delivery market and there are so many players in it.
We will stay focused. We have a subsidy from the government, provided we
maintain our staff. We are managing fixed costs, our cash fund and we are
preparing for the rebound.”

Like Yanolja’s Kim, he also believes that
customers are going to prefer staying in small accommodation or private villas
when they can travel again. “We are also looking at making it easier for
our customers to use their miles so they can upgrade from economy to business
when they can travel again.”

Kim also said Yanolja will not be expanding its restaurant business, a line it got into with the acquisition of DailyHotel, which has 1,000 fine dining restaurants. “Those restaurants actually belong to hotels – we have no intention to expand to other restaurants. There are so many players and South Korea has so many food delivery businesses. What we will do is help hotels sell their restaurants better as a feature.”

Yanolja has seen impact on its three lines of businesses. The
hotel PMS business is down almost 70% in revenues and the company has removed
royalty fees for customers. There’s also been big impact on its franchise
business in South Korea and South-east Asia. Its booking platform – which
includes domestic and overseas accommodation as well as tours and activities –
has been largely hit. The only bright spot is private car travel and small
accommodation with domestic business.

Thus far, it has not laid off any employees but Kim said
this depended on how long this crisis lasts.

Kim said with the poor economy, he expects people will not
be making as frequent trips as before but rather they’d be making fewer trips
but spending more on each trip for a better experience. He expects road trips –
by private car – and rail trips to come out strong when people can travel
again. “There are many new journeys people can discover and make by car and
rail, that they didn’t look at before.”

Meanwhile, Shin said he did not expect Covid-19 to weaken
the power of global OTAs when market recovery happens. Tidesquare raised funding
last year, including from messaging giant Kakao (which now has a 28.9% stake in
the company), and had stated the new funding would help it compete against
global OTAs which were growing in power in South Korea.

“We feel global OTAs will be the biggest threat coming out
of this crisis. That’s why local players are forming partnerships, to see how
we can defend territory.”

Kang said it was important that businesses not be
opportunistic at these times but instead realise that “consumers are
emotionally fragile, they are uncertain about their finance and future”.  

“Thanks to the measures taken by the government, there’s
been no major lockdown and compared to the US and Europe, we have a relatively
good healthcare situation, so we are in a relatively better situation.

“However, people’s concern now is less about coronavirus,
more about economy. South Korea is heavily dependent on the international market.
When we do the survey, we find their biggest concern is the uncertainty over
how long this situation will continue.”

He said the important thing for brands is to show care for
customers and those that earn and win consumer trust during this period will
recover strongly.

You can watch the event here

• Featured image credit: tommaso79/Getty Images

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