Monday, June 25, 2012

We're Not In Kansas Anymore 
Today, GDSx announced its new TripLink™ product.  

According to their press release today, this new product, in the making for over two years, is being launched to "solve the vexing and growing problem of capturing travel data and managing real-time customer-service processes for trips purchased outside of a corporation's negotiated contracts with airline, car rental, limo, hotel, ferry and rail companies. 

I don't know about you, but I love the word "vexing".  Although it is not a commonly used term, it perfectly describes the frustration that the corporate travel management sector has been feeling with the increase in the number of rogue travelers, booking outside of the designated channels.  And when you couple this with the growth in the number of airlines that either do not participate in the GDS or are trying to woo the corporate travel manager or the travel agents to book directly via their supplier website, and you look at the limited IT resources in the average agency to address the fragmentation, the frustration is complete.

On a call to brief the press todayday, GDSx CEO Cindy Allen pointed to a comment by Cisco Systems finance director Susan Lichtenstein that was featured in Business Travel News where Susan said "We need to be able to provide to our travelers a method that allows them to stay in policy and book the way they live—through multiple channels," end quote. She continued, quote "TMCs should be addressing this proactively with their customers…We are not in Kansas anymore,".

Of course the Kansas reference is not a literal one, but a literary reference to the children's novel written by L. Frank Baum and illustrated by W. W. Denslow, which in 1939 was memorialized in the movie classic.

Our industry has long been looking for a panacea to what I believe is actually an age old problem, but Oz has been elusive.  I realize that as we look around there are many things that are not familiar, particularly to those of us that have spent our entire adult lives in this industry. 

In my blog series this weekend, I talked about the fragmentation that occurred when I entered the industry in the late 1970s.  From 70-something Agnes refusing to use Apollo because she liked her baby blue Selectric typewriter "just fine", to Jill wanting to book on the phone with her favorite airline representative, as a bookkeeper in an agency, I had to figure out how to ensure that we had all the information that we needed for corporate reporting.  Sometimes it was like pulling teeth to get the agents to change or to request more information from their client.

While that hasn't changed, the number of rogue players has indeed increased, especially amongst younger travelers, such as the 70 million Gen Y adults entering the work force.  These travelers have grown up with technology and are not nearly as compliant as those of us in the Boomer generation were at their age.  They want choice and they want control and most of all, they want to be treated like adults and they want to be trusted to make the right decisions about their travel. 

Travel Team CEO Jean Covelli was right on when she stated for the press release "TMCs have for years wrestled with managing transactions, trip processes and data collection/integration when purchases are made outside the managed-travel channel."

My favorite part of the GDS announcement was this statement "The evolution of technology, turbocharged by social media, is creating dam-like pressure behind established managed travel practices.".  What an amazing word picture that this paints for us.   

There has been pressure on all fronts in the travel industry.  Pressure on supplier profits, pressure on the GDS to innovate, pressure on agency commissions, pressure on travel agencies to knit together a large, disparate number of technology components.  I could go on and on.  But I won't.

GDSx, with both their core product and their new TripLink™ capabilities fit squarely into the mid-office product family in the diagram below.  But the important thing is that it knits together all these other disparate pieces to give the TMC and its corporate clients a way to preserve the value that the agency and corporate travel managers provide to the industry.  

Postscript to the announcement:

Bravo GDSx for seeing a need and creating an innovative solution for TMCs to capture the rogue bookings and to allow an agency to apply their normal mid-office processes to all of the content.  This product is all about the TMC and all about what the corporations needs for its travel program.  Stripping out the complexity and removing the need to have a large IT staff to do the systems integration is a real plus for TripLink™.  The ability to pull data from multiple places and navigate that data confidently and easily with this product makes total sense to me.  And I think the TMC community will agree.

The Travel Industry Odyssey

Retrospective - Part 4 of a 4 part series
(for Part 3 click HERE) 

The Power Shift

Travel Weekly 2011 Power List
During the last decade we saw the top Online Travel Agencies (OTAs) move into the top 10 agencies in the US and Expedia took the #1 slot, surpassing the old guard, American Express and Carlson Wagonlit.  Consumers voted with their wallets, with both leisure  and corporate travelers enjoying the 24x7 access, coupled with choice and control.

The power of the OTAs is undeniable and the angst of the suppliers, agencies and corporate travel managers alike over their growth and popularity is palpable.

Suppliers are concerned, because the OTAs bring in a lower average rate, but still cost them a booking fee and some type of volume related compensation (whether it is a commission or a volume override).  Agencies, because it is costly to deploy an online presence and with the OTAs spending six figures marketing their sites, it can feel like rolling a snowball uphill in the sun.  Lastly,  corporate travel managers object because the number of rogue travelers has increased, booking outside of the designated channel, often with an OTA.

The Face of Technology Shifted

During this same time, beyond the Internet becoming ubiquitous for booking travel, we also saw mobile mature significantly, both in the sophistication of design and the proliferation of devices.   Mobile is not an optional strategy.  85% of mobile devices will be web enabled by next year.  And Google now reports that mobile searches grew 4x in the last year.

Social media has burst onto the scene in the past 5 years, forcing companies to take a multi-channel approach, depending on such tools as Facebook, Twitter and Pinterest to reinforce their brands and hawk their wares.  Social commerce is still a bit elusive, but it is definitely coming.

With the popularity of online travel and mobile and the rapid growth of the social media phenomenon, travel agency and travel management companies have been at a disadvantage to their OTA cousins and the travel supplier communities.  All but the largest agencies and TMCs do not have IT departments.  For years, the GDS played that role on their behalf. As a result, so many companies have not able to adequately compete on these new fronts.

By 2010, the number of ARC approved agencies had declined more than half and by the end of the year the total stood at 14,795.  In 2012, we are now at 13,857, lower than 1978, when I first joined the industry.

The interesting thing is that due to the impact of the OTAs and the higher average air ticket prices, the total annual air ticket sales per ARC for those agencies in 2011 was $82.1 billion, versus $11.4 billion in 1978.  The remaining agencies are stronger than their predecessors.  The average annual air ticket sales per agency for the remaining 13,857 is $5.8 million today, versus $772,000 in 1978.

With growth comes complexity

Last year when I attended the Global Business Travel Association Conference (GBTA), I was amazed at the number of travel technology vendors that had emerged since the last time I attended (when it was still NBTA).

Not only that, but I was overwhelmed with all of the different categories that an agency had to consider in their technology "stack".  This is daunting for the TMCs that have a large IT staff to sort out all of the options, and impossible for those that don't even have a network administrator.
As I developed this graphic, I thought back to my days at Bay Travel and wondered how it all got so very complicated.  Between Agnes, Cherie, Jill and I, we did everything and produced $3m in annual revenues.  I realize that as a group, with our limited tools, we were not "scalable".

Had that same team faced running an agency in 2012, in order to scale, we would have needed to a technology stack that we could deploy without a full time IT person.  We definitely would have needed access to the Internet at each agent desktop. We would also have needed a solution that would help us handle the client's need to book wherever they want to, yet not sacrifice the ability to perform quality control, ensure policy compliance and consolidate the data for reporting and accounting.

And while we were at it, we would have asked for world peace.

Where will the Odyssey Take Us?

There are several 1000 pound gorillas in the room that introduce some wildcards into this Odyssey.   And I am not talking about the GDS companies or the suppliers.

One is Google.  With very deep pockets, a big stockpile of cash for acquisitions and a vested interest in travel, it will be interesting to see their direction in travel.  While their efforts may be focused the leisure part of the market, corporate travel can't be far behind.

The other is Apple.  They have filed a patent for an iPhone travel app and they are brilliant marketers.  Everything they do, they do with simplicity and elegance.  And if they finally get Siri right, corporate travel could be in their sites.

And speaking of simplicity, I believe that the next ten years will look a little more like "back to the future" than 2001: A Space Odyssey.

We will revisit those things that worked and tweak them to suit our current challenges.  We will strip out those things that don't work.  We will find ways to cope with the further fragmentation.  And hopefully we will focus on finding a business model that is a win-win for everyone involved in marrying buyers and sellers in this industry.

After all, that is what it is all about.

Stay tuned as I muse on what to write about next and while I figure out whether it will be worthwhile to see what GBTA holds this year.  It might be worth going just to see two former US presidents, the CEO of AMR/AA and a Saturday Night Live star, all on the same agenda. 

Sunday, June 24, 2012

Flashback 1995 - This is not a drill. This is not a drill.

Retrospective - Part 3 of a 4 part series
(for Part 2 click HERE)

In my last blog, we talked about how mini-computers impacted the travel ecosystem and how they helped travel agencies consolidate booking information from multiple sources for reporting and accounting purposes.

They vastly improved productivity, accuracy and timeliness and were especially useful for those agencies and TMCs that had multiple GDS systems and multiple offices.

At the end of the last part of my tale, I talked about Terry Jones and his band of innovators known as Sabre Interactive.  As early as the late 80's, they had already experimented with consumer direct and corporate direct and just 557 miles north, Timothy O'Neil-Dunne and his team at TWA PARS in Kansas City had already released Commercial PARS, reportedly months ahead of Sabre.  Both used the new networks, Compuserve and Prodigy, precursors to the Internet that would soon become ubiquitous.

The travel agencies watched with amusement and some modicum of concern about the new technology.  Most of them still were using what we called "dumb terminals" with monochromatic green screen displays and cryptic (but fast) entries to accomplish availability entries, PNR building, pricing and ticketing and were not equipped to "dial into" these new networks.  Most had little desire to do so, even if they could.   They saw these tools as slow and clunky and didn't sense any impending danger.  They certainly didn't know that they were in harm's way.

As certain a threat as was the Japanese submarine that had John Wayne's cruiser in its sights in the 1965 classic "In Harm's Way",  this new technology would threaten the very existence of the traditional travel industry.  It was not a drill or a passing fad.

In 1997, there were more travel agents than there had ever been, but it wouldn't be sustainable.  In the US the number was 47,286.

As Travelocity and Expedia were launched in the mid-90s, Jones and O'Neil-Dunne were on those respective teams, bringing their GDS expertise to bear on this new channel.

The early iterations of these systems were very focused on function and information, versus their marketing and advertising focus of today.

Meanwhile, suppliers quickly responded to the Internet craze and moved toward launching their own booking sites online for consumers, competing with Travelocity and Expedia.  These new tools had been so successful commercially, that a group of airlines in the US decided to launch a competing effort, codename Travelocity Terminator or T2).  Orbitz was born.  The site launched in 2000.

To read about the pedigree of each of these sites, click on the links provided.

The first bomb had hit the bow of the agency "boat".

The real culprit wasn't the Internet itself, or even the new Online Travel Agencies (OTAs).  Commissions had been capped and then cut on domestic air tickets.  Some airlines had even cut them on international tickets.  This severely cut into the revenue stream of travel agencies.  Those who refused to charge service fees or who did not shift their sales away from air to leisure travel products, such as tour and cruise, were soon out of business.

By 2000, the number of travel agencies had already declined by nearly 25% to 38,861.  Wait.  Was that 25% in just 5 years?  

The Internet forever changed our industry.  But as they say, "you ain't seen nothin' yet!".

Mobile and social were still to come, as was the revolution by the airline industry against the GDS for their "high" booking fees" and the ensuing war, dragging in the Department of Justice and multiple courts around the country to solve dispute between (former) parents and their disowned children.

Never mind that the agency community was bringing in a higher average ticket price on both domestic and international tickets than Orbitz or their own airline sites.  I won't get into that here, but for details and stats from the Airlines Reporting Corporation (ARC), see the latest blog series on Making Sense of Airline Distribution, beginning with the blog on Anti-disintermediation.
Tomorrow the last blog in this series will talk about the current state of the travel distribution ecosystem and give you a peek into what may happen when Apple perfects Siri for the travel industry.  

I think I will entitle it The Travel Industry Odyssey.

Stay tuned.

Saturday, June 23, 2012

Flashback 1980 - Mini-computers were anything but small

 Retrospective - Part 2 of a 4 part series
(for Part 1 click HERE)

The year was 1980 and the major manufacturers of computers had already started on their mission to change the world and make our lives easier by bringing them down in price and in size to be practical for small businesses.  Well, change the world they did - at least my world.   

(The jury is still out on the “making our lives easier” bit, or at minimum giving us more time, as I sit here at 1225am on a Friday night writing my blog). 

I had taken a job with a company that sold accounting systems, quite literally without ever seeing even a demo of what it could do.  But I did understand the problem that it solved and that made all the difference in being able to embrace the task at hand.

Data General
Nova 3
Armed with a large three-ring binder that was the Operating Manual for the system, I set out from Milwaukee to Chicago on Amtrak 3 days a week to try to sell my wares. 

When one of my clients wanted to actually see a demo, I had to arrange a trip for the three of them (and me), to go to Denver.  I decided to go out three days early to learn a little bit more about the system before the prospects arrived.  I must have learned well, because the owners asked me to move to Denver and head up implementation.  To be fair, I should tell you that I was actually the first full time employee, after Marcy, who was the receptionist, answering client questions as our help desk.  

I traveled around the country Monday through Friday, converting agencies quite literally from a shoebox full of receipts and a box of invoices, to a state of the art accounting system running on a Data General Nova 3 computer that resembled a large refrigerator.   

If the ICOT terminal in the Whitefish Bay agency was the Jetsons, this was 2001 Space Odyssey.  It had flashing lights on the front that flickered whenever you posted cash receipts or requested that it print a check.  All it needed was a voice like HAL 9000 and a protagonist named Dave.

The system, known as Travelink, could even print out the “adding machine tape” of tickets to report to ARC.  Invoices and statements were a breeze and it could even remind you of the dates for deposits and final payments on tours, groups and for cruises.     
The amazing thing is that the entire program fit on a 10 megabyte hard disk pack that was bigger than an extra large Dominos pizza and about 3 inches thick.  
I still remember carrying it through airports (that’s right, there were no security checkpoints with xray machines) and putting it in the overhead when I went to an agency for the first time, or if we needed to take an upgrade to them.   

Once I had installed all the systems that had been sold, I magically became the VP of Sales.  We then hired Suzanne to replace me in installations.  She was employee number three. 

Within a year, we had doubled our account base and at a trade show, I was next to the Agency Data Systems booth, talking to Jim, the VP of Sales and Service.  He offered me a job.  Within a month, I was in Tampa, Florida for training on ADS.  Within a few weeks, American Airlines had acquired the company and I found myself moving to Dallas, Texas. 

The year was 1982.  By this time, most agencies had one of the Central Reservation Systems (CRS) sold by United, Delta, American, TWA or Eastern and many actually had three dedicated printers, one for tickets, one for invoices and one for boarding passes.  Some agencies actually had multiple CRS terminals side by side on their desk, often to service new corporate clients that used a system other than their primary system. 

The CRS (aka GDS) groups eventually spun out of the airlines as separate divisions and of course later became known as GDS companies.  Their new moniker (Global Distribution Systems) came from the international expansion of their parents.   In many cases, the “child” became more profitable and valuable than their airline parents, many of whom filed for bankruptcy or who were acquired.   

By 1990, the GDS systems now contained the inventory of not only the host airline and its close marketing partners, but all of the systems included hundreds of airlines globally and also had hotels and car rentals and were adding new types of inventory every day, including tour companies and cruise lines.  If a supplier wanted to reach the 50,000+ travel agencies worldwide that made up the various GDS company networks, GDS participation became a business imperative. 

We now had consolidated, comparative shopping across travel suppliers in multiple categories, easy to read invoices, tickets and boarding passes (yes, you could still issue advance boarding passes then) and the information that was fed to the accounting system was consistent with what was in the PNR and if the agent did their job, it was complete and relatively clean.  

There were still some bookings that took place by phone or the new FAX technology, but it became commonplace to record these manual bookings in the Passenger Name Record (PNR) with a passive segment (GK), so that the agent could produce a complete, consolidated itinerary and could ticket the manual segments.  This also allowed us to have everything in the back office systems for reporting and accounting purposes. 

I missed the simplicity of my days at Bay Travel, but had to admit that the addition of technology to the equation had indeed made life easier.   

By the mid-80s, the refrigerators had been replaced with smaller, micro-computers that could sit on a desktop and since Sabre had by then fully "adopted" the ADS group, we were able to launch an industry first called Sabre Two-Way™, where you could use the accounting system terminal to switch over to Sabre, which meant that the bookkeeper could retrieve PNRS and actually do the research themselves and cleanse the data that was incomplete in the PNR.  

Wonder of wonder, miracle of miracles.  

God was smiling and all was right with the world.  

But wait, down the hall and around the corner, Terry Jones and his team were cooking up new products that ran on Prodigy and CompuServe and they actually put EAASYSabre (which was anything but) and Commercial Sabre in the hands of consumers and corporate travelers.  

The revolution was about to begin.  Man your battle stations.  

Stay tuned for tomorrow's blog, number 3 in the series.   The title will be a line from my favorite movie, In Harm's Way with John Wayne.  Danger was imminent.   "This is not a drill.  This is not a drill". 

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