Update: July 10th 2012 – Apple awarded iTravel Patent!

The approaching wave of mobile OS travel buttons (Apple iTravel, Google Travel, Bing!Travel Mobile) need to be viewed within a historical context of travel distribution. At the heart of these efforts is a new customer interface for travel.

During the pre-Web days, traditional travel agents controlled distribution through their mastery of GDS cryptic formats. A travel agents’ worth (especially in a corporate travel setting) was often gauged by their proficiency on the GDS. The customer often viewed the travel agent’s systems as a black box with almost mystical capabilities. In this environment the only consumer interface to travel was the telephone or face-to-face conversations with a travel agent.

The Web created a new era of transparency for the travel process. Supplier sites, Online Travel Agents (OTAs) and meta-search engines suddenly removed the mystery behind travel pricing providing consumers with instant access to travel prices and schedules. This transparency has reshaped all sectors of the industry. Consumers now can compare a variety of sources and book entire vacations online. Even for those remaining traditional travel agents, would quickly admit that their conversations often include “I was looking at prices online and I found…). The Web also has changed the ground rules for distribution. Though the GDS still dominate offline and much of online distribution, direct channels through supplier direct websites and new alternative distribution platforms such as Farelogix (supported by the OpenAxis Group) are causing tensions in the traditional GDS-centric travel distribution ecosystems both economically and through the holding back of ancillary services from traditional distribution channels.

It is my belief we are at the beginning of a radical change in distribution this time triggered by the mobile revolution. With the mass adoption of smartphones and the growing influence of tablets, mobile devices are un-tethering the planning and booking process from the desktop altering consumer behavior and again changing the ground rules for customer interfaces. All the current Web strategies are carrying over to mobile with most major travel companies optimizing their sites for the mobile Web (if not you are in danger of being left behind!) and many travel companies have created native (downloadable) apps for specific devices. The problem with this natural evolution from the Web to mobile is that it has created a fragmented environment where the traveler has to either engage with multiple mobile Web sites or download multiple apps. Shopping multiple Web sites online is not a big issue, but on mobile devices it can be more challenging.  Even the traditional, one-stop-shops, the  OTAs have fragmented their mobile offering reacting to the need for last minute hotel deals. Meta-search may be best positioned for mobile, but these sites lose the ability for continuous engagement, an important mobile opportunity, as the bookings are still spread across multiple sites. Consumers are hungry for a simple integrated mobile travel solution. This is opening the door for the OS travel buttons. Companies such as Apple, Google and Microsoft are masters at user interfaces. There is ample room to simplify the planning and booking process especially with the proper integration of voice, touch and gestures. This could revolutionize mobile travel interfaces. Travel companies need now to innovate with mobile interfaces by adding voice, simplifying steps through storing of preferences, and exploring other new interface methods. Mobile may act as a catalyst for further direct supplier distribution as airlines sell ancillary services on mobile directly to their best customers. Even when the OS buttons arrive they need to hook up to some existing travel e-commerce infrastructure, but the industry can ill afford to let another layer get between themselves and their customers.

With all due respect to the classic children’s TV show and game Carmen Sandiego, I have borrowed the show’s tag line having just completed a grueling travel schedule that took me to London, Washington DC, Miami, Rome and Amsterdam all within a five week period. These  trips involved client technology engagements and speeches to various audiences. My Miami stop was to participate as Co-Chair of the PhoCusWright Travel Innovation Summit.  This most recent series of trips augments a busy 2011 travel schedule that included trips to Israel, Orlando, Italy and two trips to Cannes, France.

Travel Tech Consulting provides services that cross all segments of the travel industry (airlines, hotels, OTAs, tour operators, TMCs, government and technology suppliers who support all these segments) with the underlying theme of how emerging technology is changing business practices. A common topic across these speeches and engagements has been the impact of mobile technology and social media on the travel process. Whether addressing audiences in Israel or Amsterdam, I was able to observe first hand the impact mobile technology and social media is having worldwide. Just as much of the traditional travel ecosystem has become accustomed to dealing with online issues, mobile and social are changing the game. As part of various research projects including a comprehensive special report for PhoCusWright entitled “Mobile  Hits the Mainstream”, I have interviewed a wide range of travel and technology companies about the impact of mobile and social media on their strategies. Here are a few observations:

• In many parts of the world mobile is becoming the primary means to connect to the web.
• The emergence of tablets is not only un-tethering the travel planning process, but extending the ability to plan and book travel any place at any time. When I returned I was greeted by my new Amazon Kindle Fire, the first under $200 tablet that represents the fusion of the e-reader and media tablet at a lower cost that the market leading iPad (Amazon Kindle Fire is now the #2 tablet worldwide).
• Audiences and clients all now agree that their customer’s social graph is having a direct influence on travel purchasing and most are struggling to implement an effective social media strategy to target the key influencers while protecting their brand integrity across social media channels.

Now that I am back home in the San Francisco Bay Area and looking out my office window at San Francisco and the Silicon Valley I am amazed how my region which is home to Apple, Google and Facebook is changing the travel industry in every corner of the globe.

The introduction of the Apple iPad has ushered in a new era of tablet computing. Over the next 12 months the market will be flooded with competitive tablets based on Google Android, Microsoft Windows 7, RIM’s QNX OS and  HP Palm WebOS. ABI research estimates that 11 million tables to be shipped by the end of 2010. Manufacturers such as Cisco, HP, RIM Blackberry, Motorola and Sony are working on new tablets. Tablet computing represents a new battleground where multiple sectors are competing for the first time. Smartphone manufacturers (Apple, RIM), computer companies (HP, Dell), entertainment device manufacturers (Sony) and even networking companies (Cisco) all are competing in the tablet marketplace.

Tablets are a natural device for travel with their high entertainment focus (movies, books), always on connectivity (no need to wait for the computer to boot) and light portable design. As competition heats up in 2010-2011, capabilities such as two cameras will allow video conferencing and AR apps to take on a new enhanced capability on a growing number of tablets.

All travel companies must start now on their tablet strategy for every market segment – business, groups & meetings, and leisure travel. Research has continually shown that frequent travelers are the early adopters of new technology. Though much of the focus has been on the ability of a tablet to replace a laptop, the product category itself represents a new platform. Applications such as Flipboard, which aggregates Facebook, Twitter and other feeds into a very appealing magazine-like style, is an example of a new application that is taking advantage of the tablet platform. As with any new platform, simply taking an existing Website or smartphone app and applying it to the new tablet devices, misses the opportunity the new platform provides. The key for tablet apps is personalization and integration of multiple sources of information into a seamless app that is location and contextually sensitive (a similar mantra to smartphone app development) but also takes advantage of the larger screen and ability to more easily integrate immersive video and gaming.

Source:  Global Intelligence Alliance

One major debate that persists in the area of mobile development is the question of whether a travel company should create a native (downloadable) app or simply provide a mobile Web application. As part of my upcoming PhoCusWright Webinar Mobile Chaos: Do I Need an App for Every Platform? (next Wednesday September 15th at 12:00 noon), I will discuss this subject.  As a teaser here are some of my thoughts concerning this debate.

An interesting paradox exists in respect to the motivations of travel firms in porting their Website to the mobile Web. Many state that their primary motivation is to make their app available on as many devices as possible at the lowest cost. Though this is an admirable goal, the reality of the mobile Web is that the majority of browsing is happening on smartphones such as the iPhone, Android or the BlackBerry. Therefore if the goal is to reach full feature phones, through these efforts is misdirected. A more important issue is how a normal Web pages appear on today’s smartphones. Even the most sophisticated smartphone browsers still provide a frustrating experience for the user when viewing a normal Web page; therefore, every travel company needs to port their existing Website to the Mobile Web. With more and more browsing happening on the smartphone and with the direct correlation between the frequent traveler and smartphone ownership, the effort to transcode the current Website to be more readable on a mobile Web browser is no longer a luxury, but a mandatory part of every travel company’s mobile strategy. As HTML5 matures, the ability to interact with a phone’s core features such as the GPS, calendar, address book, accelerometer and  compass is emerging.

Source:  Global Intelligence Alliance

As a result, the mobile Web will behave similar to the native app and within the next few years matching native app capabilities. The question then arises, do I need a native app?

The answer is best provided in terms of market segmentation.  To create a native app that simply mirrors the functionality of the current Website, wastes resources and may not yield any significant incremental benefit to the travel company or traveler.  From a market segmentation perspective, the native app should be targeted to your best customers and as a result provide unique functionality that takes advantage of location, personalization and situation.  Recently, Priceline reported that a good majority of its mobile app bookings where coming the same day as the reservation.  Priceline did not disclose whether these bookings had cannibalized their Website bookings or whether they were incremental. The Priceline Negotiator is a good example of a limited function native app that is targeted to specific activity – book last minute hotel or car reservations. Clearly Priceline did their homework to determine the profile of their best customers and the type of function they wanted in a mobile app. Other downloadable apps miss this opportunity and simply mirror Website functionality.  Native apps can provide a travel company with a great opportunity to interact with a company’s best customers, but these applications must be innovative taking advantage of the smartphone’s unique capabilities such as the compass or accelerometer and provide personalized recommendations based on the traveler’s location and situation. It is with this in mind, a travel company can have a successful native app launch. Though most apps seem to first appear on the iPhone the importance of the Android and BlackBerry platforms cannot not be ignored as each has a significant market share. For non-US roll-outs Nokia is an essential platform as well.  We also have the launch of Windows 7  in the fourth quarter of this year and the re-emergence of WebOS under the direction of HP as wild cards to consider as well, not to forget about the explosion of tablets that will hit the market over the next 12 months.  Mobile Chaos will be the norm for some time.

Apple has filed a patent for the complete travel process on the iPhone.The patent includes an application called iTravel for planning, searching, reviewing and booking flights, hotels, car rentals, trains and bus trips, as well as technology for identification at airports for baggage handling and boarding passes. The patent relies heavily on Near Field Communications (NFC) to enable the quick exchange of information at all travel check-in points. This patent has triggered a great deal of speculation across the travel industry with many fearing that the iTravel app may indeed compete directly with OTAs, meta-search and itinerary aggregation services such as TripIt and shift the balance of power in the travel industry much as Apple has done for the music industry.

In initial review of the patent, the primary focus seems to be on in-transit services.There is no question that NFC could help the processing at airports as it already does in Japan, but the major US airports and airlines would need to install NFC readers a significant  infrastructure investment. In addition to Japan, NFC is being implemented throughout Europe, so rather than leading this trend, the Apple patent seems to building upon existing NFC  momentum. In addition to the infrastructure needed to support NFC, the majoirty of owners of the iPhone would need to upgrade to the latest NFC enabled  models. All this points to a near horizon reality of at least 5 years, before this capability impacts market. By that time the majority of phones will be NFC enabled.

The most striking aspect of this patent is the itinerary capture and booking capability.  Some have speculated that this could spell trouble for the OTAs, but at this stage it is unclear how these reservations will be booked, fulfilled and managed. The patent also clearly positions the iPhone as the repository of key identification information including your drivers license and passport. Combining this with retina scans and fingerprints could usher in a new level of airport security.

Clearly this patent has some novel ideas and can help the travel process, but the immanent competition with OTAs and other travel value chain players seems unlikely. The pace of technology facilitated business practice changes continues to accelerate in the travel industry. It is therefore difficult for a general tech company such as Apple to recognize all the nuances of these changes.  For example, the current trend toward merchandising is also forcing changes to all points of sale not reflected in the patent. That being said, Apple is a major catalyst using technology to change business practices for music, video and mobile communications and therefore their potential to alter the travel process should not be underestimated.

In a recent article from Media Post a software application developer from Istanbul, Turkey attending a conference in San Jose, California, voiced his opinion that the US does not understand the importance of the Mobile Web. This article reminded me of the panel discussion I moderated at the PhoCusWright @ITB conference in Berlin earlier this year where the subject of downloadable applications was debated against the advantage of the Mobile Web with a panel of European mobile travel experts. During that discussion a common argument in favor of the Mobile Web approach was the ability to have the application available on all devices with a mobile Web browser. On the side of downloadable apps, the ability to use the GPS location capability and ability to balance the processing load between the network and device were common arguments for the downloadable app approach. Given the explosion of app stores from device manufactures and wireless network providers , it is clear that the downloadable approach has been recognized as an important channel for application delivery. So given this debate, what is the right approach for travel companies who want to build and deploy mobile apps?

The answer lies in the recent 2nd quarter market share numbers published by Canalys. Here is the worldwide smartphone adoption numbers:
From a global perspective the growth of Apple’s iPhone is phenomenal. But the true insight comes from the individual regional market share.

Clearly in the US market RIM and Apple dominate the smartphone market.

Contrast this with the EMEA market share

Now compare this with the numbers for Asia Pacific:

As you see Apple and RIM do not even qualify for their own category and are grouped into Other.
The simple conclusion is this:
1) Clearly smartphones are a growing category.
2) Areas of the world dominated by Nokia have not felt the true impact of the smartphone adoption.
3) Travel companies need to understand the specific smartphone adoption market share percentages for their clients when planning a mobile strategy.
On a long term basis as recently voiced by Google, browser-based applications may dominant, but for the short term (3-5 years), downloadable apps will be the most logical path. Keep in mind that smartphone penetration is much greater for frequent travelers who are early adopters of smartphones. Developing applications for the leading smartphone devices: RIM, iPhone and perhaps Windows Mobile is the most logical path to follow. Nokia’s recent announcement concerning their new relationship with Microsoft is an obvious attempt by both companies to fight the growth of RIM and iPhone.

Apple has filled patents for fingerprint recognition system for the iPhone. This may have major implications for m-commerce and security as well as mobile user interfaces. Fingerprint reader technology has long been used for computer security. The interesting thing about Apple’s research is that involves the use of fingerprint patterns to actually identify distinct fingers. The idea is to match specific functions to specific fingers. This table shoes how an index finger press might perform on action (PLAY/STOP) while a middle finger press could fast forward.
Clearly fingerprint reading is coming to mobile phones. When implemented consumers could become comfortable with storing personal information on their mobile phone provided no one can access it due to the fingerprint lock. There has been a great deal of discussion on the concept of a portable profile that could be used across sites to provide more personalized interaction. Given the personal nature of the mobile device, fingerprint controls may provide the needed security to make a portable profile a reality. Travel apps could use specific fingers for targeted tasks such as purchase or rebook. Clearly fingerprintf identification and interaction is something to watch over the next few years.

This image is an iPhone, right? Look again. This is an illegal iPhone copy made in China that I found was being sold in Dubai. A client of mine bought this from a vendor in Dubai about a week ago while I was there. Apart from the obvious legal ramifications of this device (I’ll leave that to Apple), the impact on the market will be significant. My client bought this iPhone copy for 300 Dirhams (about $82 USD).
In our report for PhoCusWright, we predicted a flood of smartphone copies in 2009. This clear ripoff of the iPhone is characteristic of what will be common phenomenon throughout Asia. As long as the wireless carriers go along, illegal copies like these will flourish and significantly increase the penetration of smartphones in the market. It is unclear if this phone would access an app store. BTW if you didn’t notice, the key difference between a real iPhone and this illegal copy is that it only has four rows versus five on the main screen.

With Apple approaching 1 billion in downloaded apps, I thought it would be good time to take a look at the top 5 most popular free and paid travel apps on iTunes

PAID.
1. Flight Track - this application from Mobiata is similar to Web based applications such as Flight Stats, but produced by a small mobile app vendor. – Question why doesn’t Flight Track have the top position here?

2. Tipulator – Allows you to calculate the appropriate tip for service. Question: Isn’t that essentially a calculator?

3. Where The Locals Eat – was created by the dining guide company of the same name. The popularity of this paid app reinforces the demand for local dining advise

4. iFare Finder – is a Kayak like meta-search application. The interesting aspect of iFare Finder is that it is only a mobile app. I could not even find a Website for RIV Creations the creator of iFare Finder, only a blog. Having helped a client last year create a mega-search engine, simple screen scraping will not work as a long term solution. Time will tell the quality of the engine behind iFare Finder.

5. Zagat to Go – At last a familiar brand name!

FREE
1. Google Earth – shows how Google is already dominating the mobile space

2. Urbanspoon – a slot machine that allows the user to chose a type of restaurant randomly

3. YELP – the UGC local restaurant and services

4. WiFi Finder – locate free and paid Wi-Fi networks

5. Choice Hotels Locator – At last a familiar travel brand!

So what does this all mean? Though brands such as Kayak, Hotels.com and Disney do appear in the top 20, a vast number of travel brands are missing. Now multiply this by 1000 and you can start to see how the explosion of app stores from Google, RIM Blackberry, T-Mobile and Nokia will further lead to missed branding opportunities unless the travel industry major players recognize that mobile downloads are here to stay and that they need to be part of every travel company’s strategy.

Apple launched its App store in March of 2008 permanently changing the way mobile applications are distributed. Today there are over 15,000 apps in the iPhone store, but there’s a lot more to come….

New app stores have been announced from RIM Blackberry, T-Mobile and Google. There has also been some speculation that both Microsoft and Nokia may be launching apps stores.
So what does this mean to the travel industry? Sometime in the not to distant future we may be looking at over 100,000 downloadable applications available from a variety of sources. The percentage of applications that fall into the travel, location based services and navigation categories will likely be high. The travel industry needs to create applications today for the current app stores from Apple, RIM Blackberry and T-Mobile. These apps should not simply be retreads of their current Website but include innovative ways to combine location, context and personalization into delivering unique value to the business and leisure traveler.