The Demise of Clear

As a frequent traveler I am quite frustrated with the demise of Clear, the registered traveler program. I just signed up for Clear a few months ago and I only got to use it a few times. I believe the concept was good, but the execution was very inconsistent. For example, in San Francisco, the Clear lane merged into the normal security line rather than the FC priority line. So though you were a priority traveler, you had to wait while families and their strollers navigated through the security process. In addition, rather than being a self-service, the Clear personnel basically took my card and put it into the machine. I am sure this was designed to assist first time users, but definitely added to the cost of their service. The best experience I had with Clear was at Dulles Airport in Northern VA. In fact with all my work with the DTMO and GSA, I intentionally signed up for Clear knowing that it would be of value at Dulles. The Clear check-in line was downstairs and saved me at least 30 minutes fighting the mobs on the normal security lines. The way Clear simply shut down without notice will make me very reluctant to every sign up for a registered travel program again. In addition, as a Global Service member of UA, I am able to bypass the security line and allowed to cut into the FC line (though I always feel guilty when I do so!).
As mobile boarding passes become the norm over the next few years, the airport security process should set up dedicated lines for mobile boarding passes as the TSA staff at the various airports will need to be trained to accept the mobile bar code. Considering the fact the TSA process is not standardized across all US airports (for example some require you hold your boarding pass in your hand, others don't and some look at boarding pass while others don't), the implementation of the mobile bar code boarding pass is bound to have some problems.

Travdex

I am pleased to be helping my colleagues at PhoCusWright with the launch of the brand new technology tradeshow Travdex, May 5-7 2010 in Atlanta . Some may simply say, why does the travel industry need yet another tradeshow? Each of the segments- airlines, hospitality, corporate, cruise, traditional travel agencies, online travel companies, all have conferences and tradeshows. The question, in these tough times, are these traditional conferences worth the investment for the buyer and the seller? What makes Travdex different is the fact that it is solely an appointment driven buyer/seller marketplace for every aspect of technology covering all sectors of the travel industry. No matter the economic climate, businesses still need to sell their products and buyers need to source and select systems.

As part of my consulting practice over the last 14 years, I have led many procurement efforts for new reservation, customer management and infrastructure systems. These efforts have been for many different sectors including: resorts, travel management companies, wholesalers, online travel companies and the US Federal Government. The first step in procuring anything is to source suppliers. Sourcing is now a global exercise as the right solution may be from a company outside your geographic area. Tradeshows can be an important element in the sourcing process, but from a buyer viewpoint trying to get some time at a crowded tradeshow with the right vendor can be a frustrating experience. From a technology supplier perspective a recurrent problem at most tradeshows is sorting through the foot traffic to uncover the real buyer. Technology companies can spend days at tradeshows giving demos, but often have trouble equating the traffic with concrete sales. The goal of Travdex is to change the tradeshow experience. How do I know it will be successful? Travdex is being put on by PhoCusWright, a company that has reinvented the concept of a travel conference. If you ask anyone in the travel industry they will tell you that the PhoCusWright Conference in November, is a must do event bringing together the innovators and leaders in the travel industry. This is why I know Travdex will be like no other tradeshow before it, bringing technology buyers and sellers together for an intense two days where deals will be made. I encourage all travel suppliers to sign up now to take advantage of early bid discounts.

Datalex Users Conference

Last week I was in Dublin Ireland to participate in the Datalex Users Conference. Datalex is a long time client of Travel Tech Consulting. The conference has a small number of attendees (50-60) consisting of Datalex customers and prospects, but the quality of the attendees and depth of the sessions was very impressive. I had the pleasure of siting next to Jim Young who opened the conference with some provocative observations about industry trends. Jim, most recently of Frontier Airlines can truly be called an industry pioneer. At Frontier he was instrumental in implementing fare families, at IHG he was the executive that pulled inventory from Expedia and then renegotiated a new agreement which included a mix of content and advertising benefits and while at Continental he pioneered the direct distribution model during the turbulent 2005 period. Also in attendance was Mark Rosenberg who recently left Air Canada, where he redefined the distribution landscape with the idea of a fare family and pushed the GDS to accommodate this new model.
Day 1 was all about ancillary revenue. Jay Sorensen, President of IdeaWorks presented the results from a new Ancillary Revenue Guide that he just published. The discussion was lively with different airline executives from American, Continental and Frontier debating the various approaches to ancillary revenue. As an observer, I had to comment that all these ancillary revenue strategies often result in a single customer reaction, paying for services formally free (baggage, meals and in the case of Ryan Air on board toilets!). There is no question in my mind that this current focus on ancillary revenue represents a permanent change in the way all airlines market their product. Fare families (also known as branded fares) breaks the long held practice of yield management by associating services with different fare categories regardless of seat class availability. This will likely impact all sectors from distribution (how GDS and intermediaries display these fare groupings) to corporate travelers (will corporate travel negotiations now center around services as much as discounts?) and even meta-search as the Kayak and Fly.coms of the world struggle with showing airfare comparisons when branded fares associate price with service characteristics.
On Day 2 I gave a talk on mobile. By the response of the audience I realized that the airline executives still do not get the impact of mobile. The main response was about how difficult it would be to sell a mobile project to airline senior management. This was an odd discussion from my vantage point as the prior day's focus on ancillary revenue ties directly in to the opportunity with mobile. It looks like the major carriers will have to catch up on the mobile revolution and risk the possibility that a new intermediary will emerge on the mobile platform adding additional distribution costs and separating the end traveler from the supplier once again.

Update

I just completed an exhausting two week trip to the Middle East (Kuwait and Saudi Arabia), Dublin, Ireland and Washington DC. I thought I would create some short blog entries about each of these trips.


First up, my first visit to the Kingdom of Saudi Arabia (KSA). My client Al-Tayyar is one of the largest travel companies in the KSA, the GCC and througout Africa. I was hired by Al-Tayyar to evaluate their internally developed ERP system and to comment on their soon to be launched IBE. Obviously, there is a level of confidentiality that prevents me from talking about their systems in any great detail, but in general I found the systems to be very impressive. The main point here is that Al-Tayyar has embraced the concept of dynamic pricing based on customer value. This is approach maximizes agency profitablity while recognizing the value of different customer types and forms of payment they use. This relates directly to the agency's bottom line and is a type of customer management which is ahead of much of the global travel industry. The IBE system they have built has a multi-source structure and allows customization of packages dynamically. I was very impressed with both these systems, but I did realize they were built around requirements that were very specific to the KSA market. The sytems were built in partnership with Interglobe Technologies a very experieinced Indian travel software company.

Sabre's new Tripcase a TripIt Competitor

Sabre has introduced a downloadable iPhone app that competes with TripIt.
It has some similar features but unlike the email parsing capability of TripIt, TripCase automatically imports the PNR information provided it was booked in Sabre. It is currently only available on the iPhone, but additional platforms will be introduced later this year. So is this a TripIt killer? Maybe at some point, but certainly not immediately.
What I find fascinating is the fact that Sabre participated as one of the investors in TripIt's 5.1 million in Series B financing. It looks like Sabre is hedging its bets!

What is a bit ironic is Sabre's market behavior which reminds me a lot of Microsoft back in the 1990s. Back then, Sabre joined other tech companies in challenging Microsoft's ability to control the development of applications because of its ownership of the OS and browser. In those days Microsoft had a solid reputation of partnering with smaller software entities and then coming out with a competitive product. It is unlikely that Sabre Studios who developed TripCase had any connection with the Sabre group that invested in TripIt, but the fact that TripCase is a clear TripIt competitor at least gives one the impression of a one time partner who is now a competitor.

From my perspective I am happy to see a major travel brand embracing the downloadable app store approach to distribution as these types of apps can take advantage of the location awareness of the smartphone delivering new services not available on the Web.

Illegal iPhone Clones are Here

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.

American Airlines Arpey Interview

On a conference call discussing 1st quarter results with analysts, Gerard Arpey, CEO of American Airlines was asked" What kind of distribution cost savings might there be out there?" His response was very unnerving for travel agents and the GDS:" We're still paying much higher levels of commission and booking fees, and a lot that hinges on the use of technology and the competitive environment, because of lot of those commissions or overrides or booking fees are paid in order to stimulate traffic. If we can as an industry do a better job keeping the supply of seats in line with the demand, then that will help us on those fronts." The line that triggered a strong reaction from travel agents was this " I can see a day, and maybe I'm dreaming here, where those folks who are the intermediary between us and our customer have to pay for access to our product rather than us paying them to distribute our product." This brings to mind a number of points.

First, for the airlines to truly manage their capacity and fares based on demand they need to move away from a focus on an individual flight's profitability and better understand who is truly their customers and how to better forecast their demand. Overrides emerged in the 1980s during an era when the airlines still owned the GDS and used display bias to allow a travel agencies to earn override commissions if they switched GDS systems. This was an age before direct airline corporate discounts and the major airlines continued to rely on travel agents for corporate account management. In 1992, Robert Crandell, Mr. Arpey's predecessor, introduced"Value Pricing" The plan was designed to make fares simple, sensible and fair. It offered customers travel flexibility, and was a major revision to American's fare structure. The aspect of Value Pricing that the general media missed was that it essentially canceled all existing corporate agreements. At that time, corporations did not receive a direct discount based on overall volume, but creatively used available meeting fare discounts to provide broad discounts for their company's travelers. About a year later with the failure of Value Pricing, the major airlines began negotiating corporate direct discounts. Since this has been the norm since the mid 1990s, one might believe AA and the other major carriers have amassed a vast knowledge of corporate travel patterns and thus could project demand more accurately. Sounds good, but this true demand analysis seems not to be in airlines' DNA as most still look at the profitability of a given flight not overall customer performance when calculating overall demand. I don't believe that things today are quite as bad as when I was in sales at UA back in the late 1980s and I was told that the company had created their forecast for the next year, but forgot to include the sales force estimates. That's right UA as a major carrier would forecast demand without incorporating the forecasts from their sales force. I am not sure if we could find another industry where this type of absurdity could exist. No doubt in today's world, carriers such as AA do take into account corporate account volumes and measure closely their performance against contracts, but I doubt that this analysis is used to forecast demand as the airlines continue to be ruled by yield management goals for a given flight.

The second point concerns ineffective incentives to distributors. Overrides are paid to large corporate TMCs and large online players. The absurdity of the distribution discussion is that time and time again the airlines have missed platform shifts, such as the emergence of the Web in the mid-1990s. This has in turn allowed new entities to emerge such as the Expedia and Travelocity as major online distributors. The airline's effort which formed Orbitz was a strategy to limit the OTAs' power, but as everyone knows ended up being sold to what became Travelport and thus reinforced the hand of the online distributor. I agree that ineffective incentives should not be in place, but the reality is that the market strength of the leading TMCs and OTAs forces the airline to play the override game and if not, could result a negative selling campaign against non-preferred carriers; a situation which has happened many times over the years.

My third point comes back to my favorite subject, mobile technology. It is my strong belief that mobile technology represents a new platform for travel distribution. Most carriers have simply extracted their current Web booking platform and transferred it to the mobile Web. This misses the broad opportunity to create location-based, contextualy relevant and personalized information delivered to the airline's best customers through a network enabled, downloadable app. Will the mobile platform create new powerful intermediaries who will demand higher compensation? This is possible considering the overall travel industry's view of mobile as a customer touch point rather than a new distribution platform. The major airlines' aspirations to lower distribution costs and reverse the flow of money back to the airlines is a legitimate goal, but unlikely in the near term, though Lufthansa continues to pursue this effort in Europe. What is more significant is how the airlines again may miss a major technological shift, and thus allow new intermediaries to emerge who will continue to demand compensation.

Top Apple Travel Downloads

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.