ChinaTravelNews, Ritesh Gupta - The Lufthansa Group has assiduously taken initiatives to comprehend how the start-up ecosystem is powering the travel and mobility tech space to make travel frictionless. The group’s central digitization unit, Lufthansa Innovation Hub (LIH), featuring a team of serial founders, start-up specialists and long-term Lufthansa employees, clearly intends to be where the action is.
This is exemplified by Berlin-based LIH’s decision to foray into Singapore and Shenzhen.
So why China for expansion at this juncture?
“China is unequivocally the most funded and most dynamic breeding ground for travel and mobility tech in the world,” said Gleb Tritus, Managing Director of LIH.
According to the team at LIH, which tracks venture capital investments in this sector and is on look-out for start-ups with an initial proof of concept, China alone garnered 55% ($14 billion) of the global venture capital in this space last year. According to a report released by Abacus, 500 Startups, the South China Morning Post, Shenzhen has 11 companies each with worth more than $1 billion valuation. In the ride-sharing segment, the battleground is getting intense in China as DiDi is being challenged by the likes of Meituan Dianping, Ctrip and Alibaba’s AutoNavi unit. The bike-sharing sector, too, has experienced action – Meituan Dianping opting to acquire Mobike, and ofo securing $885 million or so in funding led by Alibaba.
“China’s tech ecosystems are skipping certain evolutionary steps and thereby shaping consumptions patterns of global relevance. We aim to claim an active part in this,” said Tritus. “China will remain the most dynamic battleground for innovative mobility platforms for a long time, ranging from cars over minibuses to bikes and beyond. If one would like to understand how we will get from A to B in the next years, especially in the urban context, this is the right place to be.”
Gleb Tritus, Managing Director of Lufthansa Innovation Hub
He further added, “We see more tech giants participating in travel and mobility assets: for instance, (online travel group) Ctrip invested in China Eastern Airlines in 2016 and is now backing the supersonic start-up Boom. Tencent invested significantly in the German Vertical Take-off and Landing (VTOL) startup Lilium and is gearing up its own autonomous car technology. This has game-changing potential: huge players owning predominant ecosystems of online customer touchpoints are venturing into transportation metal.” said Tritus, who has been associated with several German start-ups as MD in the e-commerce space.
“No matter how we might utilize these developments and trends in the context of Lufthansa Group, it is crucial to deeply understand the ecosystem and leave an authentic footprint first. This is why we are getting started with an explorative phase instead of simply extending the product and service mix of Lufthansa Innovation Hub Germany to China.” said Tritus.
Consumers responsive to innovation in China
“Fortunately, there is not only innovative supply, but also a very responsive audience: the Chinese consumer is more likely to adapt to technological innovations than travellers in Europe or the Americas. In simplified terms, the “product-market-fit” of new ideas is more evident and faster to find than in mature ecosystems outside Asia – and we are just getting started as only half of the country is online in 2018,” said Tritus. Such optimism is validated by the fact that even though China’s Internet penetration is around half, its sheer scale means there are 3x the number of smartphone users and 11x the number of mobile payment users in China than in the US.
“Mobile consumption patterns in general remain very exciting in this market, be it travel, media content or banking – China leads the way with omnipresent apps like WeChat handling communication, ID management, payment and many other aspects holistically. We can learn a lot from this extreme form of platform economies.” said Tritus.
Tritus also mentioned that considering how Lufthansa Group’s operations have progressed, it is time to build on something even more substantial.
“We remain the No. 1 between China and Europe together with our partner Air China and in 2017, for the first time, we had more Chinese passengers than Europeans on board. Being this the case, we are looking to leverage this strong local footprint in the travel and mobility tech context. Naturally, you can do this way better with people already on the ground.” he said.
Areas of investment in China
Before getting closer to investments and partnerships, LIH intends to go ahead with an approach that would be test-driven and iterative, similar to the way the team started in Europe. The long-term goal of LIH is to participate along the whole travel journey both for business and leisure traveller.
“Generally, we see a lot of potential in consolidating technological backbones due to the fact that the travel and mobility value chains remain highly fragmented. Being this the case, many prototypes from the Lufthansa Innovation Hub follow a platform-approach instead of focusing on very specific solutions tailor-made for certain customer-segments.” said Tritus.
Considering the vast VC ecosystem, Chinese tech landscape etc., LIH has worked out its plans.
“Our focus areas are subject to an exploratory phase that we are conducting at this juncture: we are meeting big and small players across the whole country, talking to entrepreneurs, venture capitalists and other corporates, figuring out how we can be a value-generating part of these local ecosystems instead of a corporate third-party from abroad. We allow us up to six months for this – just as we did when launching in Germany back in 2014.” said Tritus.
Overall, the overarching goal of LIH is to connect the Lufthansa Group – especially its airline business – with strategically relevant players of the global travel and mobility tech ecosystems, be it specific start-ups or the entrepreneurs, venture capitalists, accelerators and incubators behind them.
The team has been following four focus areas:
- Discover: monitoring of the global travel and mobility tech landscape (e.g. startups, funding events, changes in consumption patterns)
- Partner: facilitation of strategic partnerships between digital players and Lufthansa Group business units.
- Build: incubation of new, stand-alone digital ventures of particular strategic relevance.
- Invest: investing into strategically relevant travel and mobility tech players of different maturity degrees.
“We are discovering, assessing and commercializing business opportunities in the digital space to sustainably reinforce our position as the airline group with the world’s highest level of digitization.” explained Tritus.
The unit’s approach is also significantly different to how organizations that have been around for decades work.
Citing an example, Tritus said, “Instead of conducting feasibility studies we are building tangible prototypes, releasing them only a couple weeks later into the real world. Usually, this is more cost-efficient, faster and way more accurate when it comes to validate the underlying hypotheses.” At the same time, the team is also counting on expertise in specific disciplines, too. “We are involving relevant experts from our core organization where it makes sense: for example, nobody understands airline pricing better than our revenue management – therefore we consult these people when dealing with the growing trend of airfare price prediction.”
Also, the team works with the IT department of the Lufthansa Hub airlines to make the group’s data available to start-ups via the Lufthansa Open API. It offers direct access to data (flight statuses, seat maps, availability, prices, etc.), which can be integrated into start-ups or other companies’ own web-based and mobile applications.
Among various projects that LIH has worked on so far include AirlineCheckins.com. It is an automated check-in assistant that checks in travelers all over the world for flights on 190 different airlines.