After 20 Years I am Still Looking for Innovation in the Travel Industry

Logo Transition

2015 marked the 20th anniversary of Travel Tech Consulting, Inc. I founded the company with the tag line “Demystifying Emerging Technologies for the Global Travel Industry“, committed to understanding emerging technology and how it impacts global travel practices. I and my associates have worked on projects in all sectors of the industry. This includes airlines, hoteliers, online travel companies, traditional and emerging distribution platforms, TMCs, theme parks, tour operators, technology firms of all types as well as supporting the General Services Administration as a direct government contractor. We have worked on projects across the globe in Asia, the Middle East, Europe and the Americas. Over the last 20 years I have also worked with many startups. I have been associated with Phocuswright since 2002 writing articles for their Innovation Edition, managing research projects under their brand and for the past six years, helping Bob Offutt manage the Travel Innovation Summit. It is from this perspective I wanted to clearly state my frustration with the lack of innovation in the travel industry!

I have lived and worked in the Silicon Valley (which now extends to the entire Bay Area) for 30 years.  I witnessed the birth of the Web while I was at Sun Microsystems, a true technology innovator that promoted open systems, “the network is the computer” and invented the Java programming language. The Valley has birthed major innovation from Apple, Google and Facebook to name just a few, but no similar technology driven innovation has emerged from the Valley to change the travel industry.

But Norm you say, the travel sector has the two biggest disruptors in any industry here in the Bay Area, Airbnb and Uber.  Though I admire both these companies, I would argue that their core disruption is a business model enabled by technology, not a true technology driven disruption.

Between local events and the Travel Innovation Summit I have reviewed over 150 start-up pitches this year alone, but few offer true innovation, including many who have made it to the stage at Phocuswright, much to my chagrin. I believe the problem is deeply embedded in the culture of the travel industry.  The majority of startups pitch peripheral solutions. The number of pitches I have seen that solve the “travel planning process” or “aggregate the tours and activities space” is absurd. Who is changing the very infrastructure that powers the travel process?  In every sector suppliers bemoan the cost of distribution and want a more intimate relationship with their customers, while the major TMCs, OTAs and GDS continue to dominate the customer relationships. Mobile has transformed the user access to information throughout the journey, but how that information is delivered has not radically changed  from the 1960s based technology that continues to be at the heart of much of the travel ecosystems.

The disconnect was most apparent to me when I attended a local Travel Startup Meetup a few weeks ago.  Again there was a vast number of young entrepreneurs anxious to revolutionize the same peripheral areas I mentioned earlier.  One of the most interesting conversations I had was with Max Izmaylov co-founder and CEO of Roomstorm. Interestingly enough it was not about his company, but his frustration on how the travel industry has not embraced an open collaborative software environment which allows the wisdom of the many to build the next disruptive technology.  The success of this approach is obvious by just observing how many Fortune 500 company data centers use the open source Linux OS. Another example is Bitcoin and the underlying Blockchain technology which continues to revolutionize the financial sector worldwide. Yes, there are travel hackathons, many sponsored by industry heavyweights, but this only taps individual entrepreneurs and provides access to the existing travel transaction platforms. We need collaborative efforts that tap into the brightest minds here in the Valley and beyond to truly transform the very heart of our industry.

For 2016, I am determined to work with Silicon Valley incubators and entrepreneurs to explore ways to apply truly disruptive technology to our industry. This will include meetups and events here the Bay Area as well as other efforts. Stay tuned for more information or please contact me if you would like to contribute to this effort.

 

 

 

Posted in Innovation | Tagged , , | 8 Comments

The Impact of the Lufthansa GDS Fee, Will Metasearch be Coming to Airline.com sites?

LH and 16 Euro

Lately, I have found it difficult to find time to blog as Travel Tech Consulting juggles multiple projects across the travel industry, but I felt compelled to comment on last week’s news that Lufthansa would be charging 16 Euros for bookings through the GDS.  I have read lots of commentary on this action ranging from support from fellow carriers and hoteliers commending Lufthansa as taking a bold move to shift costs to claims from the corporate travel community that this action will destroy competitive shopping. Over the last 3-4 years, Travel Tech Consulting has conducted numerous research projects interviewing airlines and corporate travel stakeholders so the Lufthansa announcement was not a complete surprise.

All the airlines have some common goals that point to this type of move:

  • A desire to eliminate the “financial assistance”  received by the TMCs and OTAs which is essentially a kick-back of segment fee funds paid by the airlines. The financial assistance dates back to a begone era when the airlines owned 100% of the GDS and could leverage bias in order to move market share. The financial assistance sweetened the offer from the airline/GDS and was used successfully convert TMCs and travel agencies. Airlines no longer use the GDS as a way to move market share and in fact have been bemoaning the GDS fees as being too high for the last 10-15 years ever since they sold off their ownership of the GDS. Despite this market shift, the financial assistance passed on by the GDS remains an important source of income for TMCs and OTAs. I have been warning TMCs for many years not to expect financial assistance to continue indefinitely.  The second and third tier TMCs and OTAs are most vulnerable as the volume of the major mega-TMCs and two large global OTAs will likely force the GDS to continue to pay financial assistance even if the underlying economics change.
  • As I explained in my Phocuswright study last year , by using IATA’s New Distribution Capability (NDC), the airlines want to take control the offer. This means that airlines want every fare request to come to their systems. The major carriers have invested significantly in merchandising platforms designed to dynamically bundle ancillary services based on a customer’s value.
  • Many airlines have been implementing corporate recognition capabilities on their airline.com site.  It wasn’t until this project was complete did Lufthansa feel comfortable to make this dramatic move.
  • An overarching theme the airlines want to implement is Customer Experience Management (CEM).  This means collecting customer information at every touch point and delivering personalized services at every touchpoint. Delivering this CEM vision within the corporate travel market has been very challenging as often the channel (TMC/GDS) passes through limited information on the customer and prevents the level of customer intimacy desired by the airlines.

I agree as many have argued, that the biggest obstacle to implementing a direct channel bias is the elimination of transparency to compare fares.  The assumption is that the airlines will simply ignore this issue to gain the direct channel cost advantage, but that is likely underestimating the airlines understanding of the market. What if an airline implemented a competitive shopping engine on their airline.com site?  The technology is already available by simply becoming an affiliate of a meta-search company such as Kayak or Hipmunk.  In addition, with metasearch capabilities,  the airline could see the offer from the competitor and use their merchandising software to sweeten a dynamic, personalized offer to the business traveler.

The other major obstacle is support.  Progressive TMCs are using Concur’s TripLink API to bring an out of channel support application to the agent desktop. In fact, TMCs have an excellent opportunity to charge higher fees for support of direct bookings (a necessary revenue source to pursue if financial assistance disappears).

Of course the staggering of airline contracts has been an important GDS strategy to avoid a big bang shift from the airlines. Despite this fact, expect other airlines to implement direct channel shift strategies in the coming weeks and months. Not all will be as blatant as Lufthansa’s fee, but the desire and intention is clear.  Also keep in mind, mobile apps, create a 1:1 opportunity for the airline for direct distribution beyond any fee or industry effort.  With many corporations still struggling to manage travel apps, airlines (and hoteliers too!) may successfully implement share shift to the direct channel by simply using the app to present unique offers to their best corporate travelers.  One thing is for sure, even if the Lufthansa move does not stand, we are on the cusp of some radical changes in corporate travel distribution.

Posted in Airlines, Corporate Travel, GDS, Metaserach, Open Booking, Travel Agency, Travel Distribution | Tagged , , , | Leave a comment

Bloomberg West Interview

I appeared on Bloomberg West today.  I participated in a round table discussion with Daniel Farrar, CEO of Switchfly.

Here is the video:

Bloomberg

Click here for the Bloomberg Link

 

Posted in Corporate Travel, Hotels, Mobile, Travel Distribution | Tagged , , | Leave a comment

Airline Customer Experience Management

 

CEM Cover

Earlier this year I produced a report on Customer Experience Management (CEM). CEM is a major airline trend intended to gather customer insight from all points of passenger interaction and deliver more personalized services at every customer touchpoint.  The report is now available for free download (Simply click on the Image to download this report). The study reviews the state of airline CEM efforts, the barriers and challenges in executing the CEM vision and a notional architectural framework for creating a CEM platform.

Posted in Airlines | Tagged , , | 1 Comment

Intelligent Travel Assistant Update

Those readers who have been following my blog over the last 9 years, know that I have long been an advocate for the creation of a mobile Intelligent Travel Assistant (ITA).

Despite the frustrations consumers have with current OS intelligent assistants such as Siri, Google Now and Microsoft Cortana, a second generation of truly intelligent assistants is on the near horizon. Some pundits have even speculated that the recent Apple/IBM agreement may bring the intelligence of Watson (the computer that successfully beat humans at Jeopardy!) to Apple’s Siri. These next generation intelligent assistants will likely include support of some travel services. This is evident today as Google Now currently tells you when to leave your home for a flight. A true intelligent travel assistant would need to have functionality beyond generic assistants requiring more specialized functionality specifically designed for the travel experience. (Note some of this content in this blog is from a PhoCusWright Innovation article on the subject of intelligent travel assistant I recently authored).

Here is a notional diagram of what I believe are the key elements of an ITA and the ecosystem it will live in:

ITA ecosystem

  • Speech Recognition (Natural Language Processing) – To be an effective part of an ITA solution, specific travel ontology (i.e., a hierarchy of concepts within a specific domain) is required that captures both commonly used travel terms as well as consumer types of travel requests (e.g. ‘book me a flight”).
  • Machine Learning – Machine learning capabilities allow the ITA to understand the request and improve its accuracy over time.
  • Recommendation Engine – To truly provide anticipatory services, the ITA will need a recommendation engine that uses explicit and implicit preferences to suggest products and services.
  • IA Bots – In order for the ITA to capture information from the device and cloud based sources a solution will likely deploy IA .  These software tools have been around since the late 1990s and often work in the background to gather information from internal and external sources.

With the increased amount of information in the overall ecosystem from iBeacons, social media and the Internet of Things, an ITA may be needed to manage and organize travel information during the trip. This is particularly true with the growth of personalized offers delivered by iBeacons and powered by Big Data. The ITA may sort out these offers only presenting those that are truly relevant to the traveler’s preferences and immediate needs. The ITA could work with a consolidated itinerary automatically changing all travel plans and notifying family members or business associates in the event of a disruption.

For more insight, please see my article in the PhoCusWright Innovation Edition entitled ” Intelligent Travel Assistants: When Will True Intelligence Arrive? which should be published late August early September.

 

 

 

 

Posted in Mobile | Tagged , , , | Leave a comment

NDC A Different Perspective

IATA NDC

There has been a great deal written about IATA’s New Distribution Capability (NDC). Essentially NDC is an XML standard designed to allow airlines to deliver dynamic content and price based on a traveler’s value. It shifts control over pricing from a traditional published process to a dynamic repsonse controlled by the airlines. NDC has created a lot of controversy.  Major concerns include a lack of fare transparency, customer privacy issues and the lack of collaboration with current distribution players. The Open Allies for Airfare Transparency (OAAT), a coalition of 400 independent distributors and sellers of air travel, corporate travel departments, travel trade associations and consumer organizations was formed specifically in response to NDC. Airlines want more control to deliver dynamic content (bundled and unbundled ancillary services) and even price targeted to their customers in a bid to differentiate their services and enhance the travel experience. Distributors are concerned about consumer’s ability to do comparison shopping, the misuse of their private information and about their role in this new distribution environment.

I am not going to debate the issues around NDC, but instead I wanted share a different perspective on why collaborative efforts, perhaps using NDC as a springboard could benefit airlines, distributors and ultimately customers!

At the heart of a personalization effort is insightful data. Merchandising is not just about presenting differentiated products, but matching those products with actionable intelligence about the customer. Airlines are investing in systems that go beyond loyalty to truly track customer behavior and value, but limited to direct channels. How can this be done through distribution?  Not only is it imperative that the industry technology providers address this issue through distribution, but airlines also need to recognize that distributors whether GDS, OTAs or TMCs have a unique and valuable perspective for the airline. Simply put, it is distributors that understand the full 360 degree view of the customer. Distributors can know when the business traveler deviates from their normal preferred carrier and takes a competitor due to price or schedule advantage. It is the distributor that understands the full breadth of shopping performed by the traveler.  Airlines need to find a way to incorporate this insight into their merchandising efforts.

Travel distribution is all about efficiency.  The reason why many travel agents continue to use cryptic GDS formats is a belief that it is simply more efficient. The GDS have worked hard to create GUI environments that maintain this efficiency while enhancing the user experience with multimedia to help sell enhanced product offerings.  What has not been done is to leverage information to deliver personalized offers to travelers through distribution. The major OTAs  are working on systems to deploy actionable intelligence. Metasearch engines are also capturing tremendous insight into customer shopping patterns. TMCs understand the balance between customer preferences and managed travel priorities. All these sources have deep customer insight, but no one has developed a solution to bring that insight back to the airlines to allow them to truly delivery customized offers though distribution.

As IATA launches NDC pilots with airlines and distributors, the next question that will arise will likely be whether distributors will be paid to sell airline ancillary products. This is the wrong question.  It is doubtful the airlines will be willing to share in this revenue. In fact, asking this question reinforces the old model that distributors should get a piece of every transaction.  We are in a new world where customer insight and actionable data is the most valued part of the travel planning, booking and purchase process.  This insight can be monetized.

NDC provides an opportunity to radically change airline distribution by putting a value on customer insight. Now is the time for a fresh approach to airline distribution that delivers value to all parts of the ecosystem, while providing new sources of revenue based on the value of each of the players. NDC can be a catalyst for this new ecosystem provided the players can adjust their perspectives, revenue models and use technology to deliver true customer insight. If we maintain the status quo and battle over bypass, the ultimate victor will be the company with the most rich customer data.  That may end up being Google, Apple, Amazon  or Facebook rather than an OTA, GDS or TMC.

 

Posted in Airlines, Corporate Travel, IATA, NDC, Open Axis Group, Social Networking, Travel Agency, Travel Distribution | Tagged , , , , , , , , | 4 Comments

The Open Booking Debate

???????????????????????????????????????????????????????????????????????????????????????????????

Over the last 18 months I have sat back and observed the heated debate over open booking. My strongest critic of this debate is not about the pros and cons (though I will share that in a moment), but on how definitions vary across articles and thus cloud the very essence of the debate. So before I give you my view, I want to establish some clear definitions:

  • Out of channel bookings –  Even with the most successful managed travel programs there will always be a certain percentage of bookings outside the TMC/Corporate Booking Tool (CBT) channel. For some, these are called rogue bookings. Clearly the transparency of the Internet along with the growth of OTAs, Metasearch engines and enhanced supplier websites have continued to tempt the corporate traveler to book outside the channel. The reality is that even during the days of telephone-only based reservations, there was a segment of the managed travel program that called the hotel or airline directly. Out of channel bookings are and continue to be a problem for managed travel programs from a policy enforcement viewpoint and impacting Duty of Care issues.
  • Unmanaged travel –  Many articles have equated open booking with unmanaged travel.  These are clearly two different things.  Corporations who let their travelers “do what they want”  – booking through any channel on any supplier – really have an unmanaged travel program. That is not a new option or a good idea for any large corporate entity.
  • open booking – Here I am intentionally using the small o, small b in this definition. Though the problem may have gotten worse over the last 10-15 years, out of channel bookings have always been an issue for managed travel programs. The debate over open booking really has its roots in the way high tech companies such as Google manage travel, by being channel agnostic, but setting up benchmarks costs for trips along with requiring the traveler to submit their itinerary for Duty of Care purposes. It changes the focus on channel and policy compliance to budgetary goals. My colleagues Scott Gillespie and Evan Konwiser solidified this concept by describing it as Managed Travel 2.0. Simply put, my definition for open booking in this article and others I’ve written is the same as Managed Travel 2.0.
  • Open Booking Solutions – These are products such as Concur’s TripLink and Sabre’s TruTrip. One of the reasons for the confusion about the definition of open booking is that originally Concur called their solution Open Booking. These applications have two roles. They can simply be used to capture out of channel bookings or they could be the underpinning of an open booking/Manged Travel 2.0 policy implementation.

OK now that we are all on the same page, let me express my opinion by answering some basic questions:

1) Will open booking/Managed Travel 2.0 become widely accepted and replace the current GDS/TMC/CBT distribution channel?  

The jury is still out on this one. I have seen some growth of the open booking/Managed Travel 2.0 strategy by specific corporations and TMCs, but the mainstream has not yet adopted this approach.

2) Are capturing out of channel bookings important?

Absolutely! The new Open Booking Solutions are essential tools for corporations and TMCs to capture out of channel bookings for increased oversight and Duty of Care.

3) Is the traditional corporate travel distribution environment under threat?

Yes. With the growth of smart devices – smartphones and tablets- corporate travelers now have untethered access, 24 hours a day to travel content. This fragmented environment is promoting self-service and allowing more immersive, personalized and intelligent interactions.  The threat may ultimately come from Google Now or Apple Siri rather than the traditional debate of supplier versus distributor.

BTN recently told me that a majority (a little over 50%) of corporate travel managers still do not have a mobile travel management strategy in place. This is a very disturbing statistic. This is much more of a threat to managed travel than all the rhetoric around open booking, especially for those who try to confuse the issue by mixing up unmanaged travel (never a good thing for large corporations) and open booking.

 

Posted in Corporate Travel, Open Booking | Tagged , , , , , | 3 Comments

The Dark Side of Travel and Big Bang Disruption

Frustrated traveler

As a consultant over the last 19 years, I have traveled a great deal, but my travel experiences have mostly been sheltered from the challenges faced daily by the average traveler. This is particularly true as a top status frequent flyer with my favorite airline, traveling business class internationally and using CLEAR to bypass security lines at US airports. Even as a frequent business traveler, travel can be challenging as I have experienced my share of delays, but I often forget what is like for the infrequent traveler and how dysfunctional our industry can be.

This became very clear on a trip my family just completed to LA for a family event (my wife’s grandfather just turned 100!). The flight was crowed and we experienced a minor delay, all something I am very used to. My epiphany came when I went to pick up my Hertz rental car. I have been a Hertz Gold member since the program began, but because I booked the car at a very low rate through Priceline, I was told that I would not able to use the Gold Service. At first when I arrived at the Hertz lot I mistakenly went to the Gold building. I went up to the counter and the representative quickly said, “you booked through Priceline so you need to go to that other white building across the lot”. With that comment I already started feeling like a “have-not”segregated to a separate facility. There I found a line of about 15-20 people. Each person seemed take 5 minutes or longer to process, so it was not until about an hour and half later for me to arrive at the front of the line. During this time all of the folks in the line observed Hertz representatives suddenly walk away from their desks (without warning or communication to the customers on line) leaving at one point a single agent who seemed to be embroiled with an international group of travelers for over 30 minutes. When I finally got to the head of the line, the Hertz agent literally was jumping between 4 computers trying to find a car for me. The problem was that every time she found a car, it turned out that the car’s registration had not been renewed. After about 30 minutes trying she finally convinced a Gold agent to release a car for me. After nearly two and a half hours, I finally was in my rent a car and off to my hotel.

I wanted to share this story not as an irate traveler with another travel horror story, but to illustrate what this dysfunction tells us about the travel experience for the masses.  I do not blame the Hertz personnel as each seemed to be working their hardest to resolve my problem as well as service the other travelers. The problem lies in the fact that Hertz as many travel brands believe, as I do as well, that self-service is the way of the future particularly mobile based solutions.  The problem is that we are not quite there yet and once you revert to a more traditional human-based system combined with heavy cost cutting measures implemented by Hertz and many others in the travel industry, the result is poor service and frustrated employees and travelers.  My experience at the Hertz LAX counter is being repeated globally every day at all types of travel services and touchpoints where employees are pushed beyond their limits and the brittle travel infrastructure breaks down due to weather, operational problems or other factors.

We are a point in history where any travel brand cannot rest on their laurels despite deploying the latest cool smartphone app.  If you sell your product through a distribution channel (in this case Priceline, the fast growing OTA) you have to pay attention to the experience of the traveler. We are in an age of  Big Bang Disruption.  Companies such as Uber and Zipcar are real threats to traditional companies such as Hertz and without a greater focus on providing superior service to every customer, even the largest rent-a-car company is at risk.  While innovation can dramatically improve the travel experience, people are still part of the ecosystem. The brand damage from having a lack of sufficiently compensated line personnel combined with a lack of investment in tools to make their jobs easier, is a critical error especially in this social media charged environment where consumers can voice their negative views about brands instantly, impacting a company’s image. Some politicians have talked about the “2 Americas”. Having recently experienced the dark side of our travel industry, I caution all travel company executives to recognize that the immediate gains from self-service solutions often result in dysfunctional experiences for large segments of the traveling public who continue to use more traditional human-based travel services.

Posted in Priceline, Rent a Car, Travel Distribution | Tagged , , | 4 Comments

Travelport Breaks Ranks and Agrees to Integrate AA Direct Connect

AA and Travelport

Today’s Travelport /American Airlines announcement marks a watershed moment in airline travel distribution. Over the last six months the two camps seemed to be solidifying their positions.

On the airline side the purchase of the Open Axis Group schema by ATPCO followed by the IATA’s announcement that their New Distribution Capability (NDC) would embrace the same Open Axis Group standard,  aligned the airline distribution approach around a single methodology (created  by Farelogix). The stated goal of the airlines is to gain more flexibility to offer customized products and services to individual travelers based on their preferences and value.  Despite recent press to the contrary (NY Times, Fox News), I do not believe this is anti-consumer, but rather a valid attempt to get in line with the general e-commerce trend towards greater personalization.

The opposing forces representing corporate buyers (BTC), TMCs and the GDS seemed to continue to spend considerable marketing dollars to counter this Open Axis Group/NDC/Farelogix effort with the argument that more personalized offers would lead to a lack of transparency, higher airfares and hamper the consumers’ ability for competitive shopping. It is interesting to note that while the GDS where lobbying to derail NDC/Open Axis/Direct Connect, all have spent  considerable money on implementing travel agent desktop point of sale platforms that are able to integrate airline ancillary products. Up until today those ancillary products still needed to be distributed through the traditional channel (ATPCO/EDIFACT).

As the first of the three GDS to embrace the Open Axis Group/NDC/Farelogix standard to allow full access of ancillary services and ultimately allow the airlines to offer unique bundles and pricing to customers, Travelport is using their Universal Desktop to truly be an aggregator of multiple sources of inventory. Considering that the roots of the Universal Desktop came from Travelport’s purchase of the assets of G2 Switchworks, an early proponent of alternative distribution is quite ironic.  I am hopeful that this marks the beginning of the end of this airline/GDS battle allowing all channels access to full content and services while allowing the airlines to better market their products in an era of hyper personalization.

Posted in Airlines, Travel Distribution, Uncategorized | Tagged , , , | 2 Comments

The Future of Travel Distribution – Presentation at Farelogix Media Day

Consumer Ecosystems

I was in Miami last week attending the Farelogix Media Day.  My presentation entitled The Future of Travel Distribution can viewed via SlideShare.   Part of my presentation discussed how competing consumer ecosystems (Apple, Google, Amazon, Facebook) provide unique content and purchasing paths via mobile devices.

Over the next five years mobile devices (including tablets) will become the foundation for most travel e-commerce. As a result airlines can create their own mobile ecosystems around their alliance/joint venture partners

Airline Distribuiton Ecosystem;

Soon airlines will be able to offer specific targeted content to their best customers directly to their mobile device creating a true personalized direct distribution ecosystem.

Posted in Airlines, Travel Distribution, Uncategorized | Tagged , , , , | 1 Comment