Bob Offutt

The Travel Distribution Technology Ecosystem: Dinosaur or Leading Edge?

Episode Summary

It takes ambition to ride travel distribution’s next wave. The most difficult part is money, monetizing new initiatives in trouble distribution. Commissions are all paid by hoteliers, airlines, they spend the money, they strain the channel. In order to decrease that bottleneck, technology needs to look at the entire trip process: dream, search, shop, buy, experience, share. We see a lot of work around dream, which is where the trip planning begins. AI and machine learning are tools that help narrow down myriad choices the customer has and all the information available online. Today there are much better ways to dream where you want to go, ways that weren’t even on the radar 30, 40 years ago when it was all magazines, big books, hotels listings, just really bad stuff.

The types of technology that will have the potential to significantly impact online travel planning and booking have to look at availability and reliability. If you run the numbers 99.99%, it’s really a pretty long and large amount of downtime, so you need to have high-availability, high-reliability systems in that scale. You also gotta have scalability, and the internet technologies aren’t necessarily build for that kind of scalability.

The business and technology trends that will affect the future of travel distribution will have to go back to the traveler’s experience, which has be seamless. You don’t wanna have one site for your rental car and another to check the weather, etc., It’s badly fragmented, and it’s gotta come together so there’s a seamless passenger experience, a good customer’s experience. AI and machine learning are today’s big thing. Last year it was mobile, and now that is being consumed as a part of our ecosystem and our lives, so now we are seeing how to put better content on those devices and apps. Take a look at the recent Pokemon craze, they produced a global product that showed streets, location, etc., all built on Google products. If you can do that for a bunch of little figures, then you can do that for menus, you can do that for events, and you have a virtual assisted world for your experiencing.

Some say the travel spectre has reached its next phase of evolution. In tying with the tagline ‘Dinosaur or Leading Edge’, the reliance on GDS is going to diminish. We are gonna see a channel warfare and it’s going to shake out things in a different way. The airlines distribute their fares and their rules to the GDS. They then deliver those fares and rules and the agent shops against those. That heavy lifting it’s all done by the GDS and it’s a huge cost because the look-to-book ratio is up to 1,000 to 1 in many cases. You can conceivably have twenty airline hookups but the technology to shop across those is the GDS technology, and it’s expensive and complicated. So the airlines are tired of paying the GDS to help the GDS’s customers compare fares, so they want you to go direct connect, directly from the travel agent’s office to the reservation system of the airline.

On the other hand, if all the airlines went to direct connect it would be almost impossible to shop, because you could not shop mobile, transfer points, a trip that had more than one airline in it, there would be a great deal of difficulty shopping. The alternative is to stay in the GDS, but in some cases customers don’t want to pay a 16 euro fee, so there’s still a lot of tension in the channel about how this is gonna shake out. In the meantime, the airlines have developed new technology based on XML, which makes this connections easier.

 

You need to look at the entire trip process: dream, search, shop, buy, experience, and share.

Questions & Answers

What does it take to ride travel distribution’s next wave?

A: It takes ambition, you know, where do you wanna go? The most difficult part is money. Monetizing new initiatives in trouble distribution. Commissions are all paid by hoteliers, airlines, they spend the money, they strain the channel. In order to decrease that bottleneck, technology needs to look at the entire trip process: dream, search, shop, buy, experience, share. We see a lot of work around dream: trip planning. AI, machine learning, tools are helping narrow down myriad choices you have and all the information available online. There are much better ways to dream where you want to go, ways that weren’t even on the radar 30, 40 years ago when it was all magazines, big books, hotels listings, just really bad stuff.

 

Some say the travel spectre has reached its next phase of evolution. In tying with the tagline ‘Dinosaur or Leading Edge’, what do you say needs to be destructed?

A:  I think the reliance on GDS is going to diminish. As a matter of fact we’ve already seen Lufthansa penalize people who write a ticket on Lufthansa through the GDS, they pay a 16 euro surcharge because of the privilege of use of their GDS, as opposed as just going to Lufthansa and booking it directly. We are gonna see that kind of channel warfare and it’s going to shake out things in a different way.

 

What types of technology would have the potential to significantly impact online travel planning and booking?

A: I am an infraestructure guy, so I kind of think of things in terms of what the foundation would look like. You have got to look at availability and reliability. If you run the numbers 99.99%, it’s really a pretty long and large amount of downtime, so you need to have high-availability, high-reliability systems in that scale. You also gotta have scalability, and the internet technologies aren’t necessarily build for that kind of scalability.

 

What business and technology trends will affect the future of travel distribution?

AI and machine learning are today’s big thing. Last year it was mobile, and now it is being consumed as a part of our ecosystem and our lives, so now we are seeing how to put better content on those devices and apps. It goes back to the traveler’s experience, and that’s gotta be seamless. You don’t wanna have one site for your rental car and another to check the weather, etc., It’s badly fragmented, and it’s gotta come together so there’s a seamless passenger experience, a good customer’s experience. Take a look at the recent Pokemon craze, they produced a global product that showed streets, location, etc., all built on Google products. If you can do that for a bunch of little figures, then you can do that for menus, you can do that for events, and you have a virtual assisted world for your experiencing.

 

What does direct connect mean and how does it affect the customer?

A: The airlines distribute their fares and their rules to the GDS. They then deliver those fares and rules and the agent shops against those fares and rules, so they know you want to go from San Francisco to New York, and change planes in Chicago, Minneapolis, Atlanta, etc. That heavy lifting it’s all done by the GDS and it’s a huge cost because the look-to-book ratio is up to 1,000 to 1 in many cases. So the airlines are tired of paying the GDS to help the GDS’s customers compare fares, so they want you to go direct connect, directly from the travel agent’s office to the reservation system of the airline. You can conceivably have twenty airline hookups but the technology to shop across those is the GDS technology, and it’s expensive and complicated. One alternative is to stay in the GDS, but in some case customers don’t want to pay a 16 euro fee, so there’s still a lot of tension in the channel about how this is gonna shake out.

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