Both Orbitz and Travelocity this week announced new leaders at the helm.
Orbitz now has a technology savvy, operationally capable, marketing focused executive who is talking already about social media, which could imply new models afoot for the OTA. Orbitz had been outpaced by Expedia and Travelocity in the advertising model/social media capabilities, but does it really help them materially to do a "me too" offering to match Trip Advisor and iGoUGo?
Just weeks ago, Amadeus founding CEO Jose Tazon stepped down from the CEO role with David Jones, his number two taking the helm. Company veteran Philippe Chereque moved from his role as head of strategy to become the company's Chief Commercial Officer, replacing Jones.
Sabre puts its own COO at the helm of Travelocity, not replacing him in the Sabre organization, but instead splitting his job amongst his peers.
Is it time to go from 3 GDS companies down to two or are the firms just further tightening their belts for their private equity owners?
I am trying to decide whether this more closely resembles the astronauts running out of oxygen in Apollo 13 or is it more like Sid and his buddies in Ice Age, with the temperature around them changing, wondering if the woolly mammoth can hold on?
OTAs are now quite mature at more than 10 years old (with Orbitz being the baby of the bunch at just under 9 years old). The GDSs are the granddaddy of the industry at 30 years old on average (with Amadeus as the baby at just under 20).
Their models are old and tired and fraught with challenges as the air travel sector (whom they all depend on for as much as 90% of their revenues) contracts with the economy. Just 15% of all travel in the US is by air and just 22% of all spending is done by air travelers (according to the recently renamed Travel Industry Association nee USTA). That number isn't expected to improve anytime soon, as airlines continue to contract their networks and reduce both frequency and capacity.
Travel suppliers continue to push online shoppers to shop on their own sites, leaching business from both the OTAs (which actually makes financial sense for them) and from the traditional travel agent (which makes no sense whatsoever as outlined in previous posts), which impacts the GDS directly.
The OTAs and the GDSs must open their eyes beyond the air traveler to support the drive market, which represents 85% of all trips annually and 78% of all spending. For the 10 and 30 years that these folks have been around, the air traveler market has been sufficient and it has been good to them, with double digit margins.
With the pressures from shareholders - whether IAC and the public at Expedia, or from Blackstone and TCV for Travelport and add in the public for Orbitz, or TPG and Silverlake at Sabre/Travelocity, the OTA business and the GDS industry has to expand its horizons and realize that the ecosystem is changing.
The good days are over Sid.... the wooly mammoth IS in danger. And the air is getting very thin in the spacecraft for Apollo 13 astronauts.
Time for a change. Where will it come from?
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