Is Virtual Travel the New Business Opportunity for the Airlines Industry?
The strategy behind ANA’s (2nd Largest Airlines in Japan) new virtual travel company
The strategy behind ANA’s (2nd Largest Airlines in Japan) new virtual travel company
ANA (All Nippon Airways), the second-largest airline in Japan, recently announced a new company called ANA NEO. It is a company with grand ambitions: to shift the travel industry to the virtual economy.
Every time I travel to a new place, whether it is a new country or the countryside in Japan, I am convinced that virtual experiences cannot replace real experiences. All the experiences in the five senses have to be recreated: smell, touch, vision, hearing, and taste.
However, the recent experience with smart devices doesn’t allow that. A 6.1-inch screen can offer a lot but not a compelling travel experience.
This is why I was surprised upon hearing the announcement two weeks ago from ANA. And it is even more shocking that the airline company is proposing the service when it can potentially cannibalize their earnings.
But ANA seems to be serious about the endeavor, aiming to generate $3bn in revenue in 5 years or roughly $600mn/annum. Currently, ANA’s revenue is $1bn. They are expecting to earn a considerable chunk of their business in the virtual industry. It is a strong statement for ANA, alluding to their vision of the future.
The Sky Whale
ANA’s new virtual traveling platform is called “Sky Whale,” with the catchphrase of a “Passenger Plane Transcending Time and Space.”
The Sky Whale is comprised of 3 services:
Sky Park: A 3D CG virtual traveling experience with prominent cities and breathtaking views of the world. A maximum of 8 people can enjoy traveling at the same time.
Sky Mall: A virtual shopping and entertainment plaza, where you can purchase goods and services from the virtual travel spot.
Sky Village: A virtual smart city with healthcare, education, and public services. I believe it will be connected to real-life services.
According to Tomita, CEO of ANA NEO, he is thinking of monetizing cross-border EC, specifically selling Japanese goods to foreigners. ANA NEO will sell apparel, branded goods, and products from the virtual destination. Another avenue for monetization is ads in the virtual environment.
This is my hypothesis, but ANA may just as well build their cryptocurrency for the virtual economy. It will be much easier to orchestrate financial transactions across borders.
Tomita also expects 59M users by 2025, with 80% comprised of foreigners from Europe, Asia, and China. The age target is 20~40-year-olds.
Final Thoughts
Even upon hearing these grandiose ambitions, I cannot imagine 60M people using this app for virtual traveling and shopping. However, the parties and stakeholders involved are nothing short of impressive:
CEO: 20-years in the marketing department of ANA
Producer: CEO of JP Games, who has developed the hit game series “Final Fantasy XV.”
Music Producer: Hakase Taro, a world-renowned violinist
Marketing Partner: TripAdvisor, Shopify, JCB, etc.
One thing that strikes me as strange is that ANA is building an “app”. As I stress, there are limitations of an “app” being able to deliver compelling experiences. If VR sets are more immersed in our daily lives, such as in the world of “Ready Player One,” then it might be a possibility.
However, it is a big bet for ANA because it is contingent on other players to pave the way. Apple may release one soon and change the world as it has done with the iPhone.
Also, as the producer is the creator of “Final Fantasy,” the focus could be more on the gaming experience. It is maybe easier to think of this scheme as ANA funding the creation of a new virtual travel game. For some context, Final Fantasy had a total R&D budget of $140mn.
The app will launch sometime next year, and I am prepared to be proven wrong. And quite frankly, it is refreshing to see a Japanese company coming up with such an audacious and exciting vision.
What do you guys think of the future of Virtual Travel and ANA NEO?