Travel Innovation

As most of you know I was intimately involved with this year's PhoCusWright's Travel Innovation Summit. I have been tracking both new media and traditional coverage of the event. I wanted to provide you some feedback from the inside as well as some comments on the overall subject of innovation.
First let me acknowledge the hard work of my colleague Bob Offutt in being the creative force behind TIS and for managing the entire process. Bob and I interviewed over 50 applicants for the TIS. Our criteria was pretty straight forward- we were looking for true technology innovation. Often the applicant offered a business innovation, but lacked the technology component and thus were rejected. We heard from traditional as well as start-up companies. TIS is not a start-up - "get funded" event. It is designed to provide a forum for all industry segments to present their technology innovation.
The underlying themes from the TIS finalists are clear: (1) A better Web air shopping experience is needed (e.g. Amadeus IT), (2) Globalization of the Web is a complex process and requires some advanced technology (Translations.com), (3) Consumers continue to shop multiple Websites for a given trip and a social shopping tool can simplify the information gathering and sharing (Gliider) (4) Mobile technology is changing the way people experience travel (Global Motion). There were also presenters who demonstrated innovation in social media monitoring, leisure travel planning and integration between cable TV and the Web experience.

I have seen a few blog posts which criticizes the event as not being very innovative. Other comments have focused on the fact that the winner of the TIS 2009 event was Amadeus, IT certainly a major existing player, not an innovative start-up. Expressing one's views is certainly part of the fabric of the Web, but often bloggers or journalists miss the underlying process that goes into building an event such as TIS and are quick to criticize.
Let me comment on two particular articles:
1) Arnie Weissmann- Editor in Chief for Travel Weekly - " The Travel Technology Gong Show"
Arnie voiced his view that the show lacked true innovation. As I look at my in box at the pile of unread Travel Weeklys (I pretty much only read the online version), I find it ironic that this traditional bastion of status quo thinking would provide such a negative spin on the TIS. Much of the work as a consultant I done over the last 14 years has been with traditional travel players both in the leisure and corporate market. Often these traditional travel companies lack an understanding of online trends and rarely demonstrate true innovation (at least not without our help). In discussions with traditional travel agents as part of various projects, I am always dumbfounded at their lack of Web savviness. Many have poor Web presence and still take the majoirty of reservations offline. Since Web travel took off we've lost about 50% of traditional travel agents. Considering the rapid pace of technology innovation whether it it is improved air shopping , globalization, consumer shopping tools or the mobile revolution, traditional travel companies continue to lag. Rather than being critical of the event, Travel Weekly needs to better verbalize the underlying trends demonstrated at the TIS and educate their readers on how to deal with these technological changes.

Contrasting this with UpTake's Travel Industry Blog " PhoCusWright 2009 Travel Innovation Summit" . In this blog entry Elliott Ng's one of the founders of UpTake goes into great detail about many of the presenters highlighting their innovation and value to the industry. Granted UpTake is truly a Travel 2.0 star pioneering semantic search and adding value to the planning process. But both Elliott and Yen Lee the other founder of UpTake have spent many frustrating years at traditional companies trying to drive innovation in their travel offering, and founded UpTake to truly implement their vision of a better travel search approach.

In my career I have worked at large and small companies. Innovation at large companies often require a "skunk" project. This is an initiative not necessarily supported by senior management but driven by individual groups who drive the innovation. This was truly the case with Amadeus IT and thus end product results were very impressive. I do agree that small companies often innovate at a faster pace than traditional players, but often lack the funds and management experience to execute. Innovation is the key in driving improved interfaces and processes in the travel industry. The PhoCusWright Travel Innovation Summit is an essential place to monitor and track this innovation.

Ancillary Airline Revenue and Fare Families

Over the last few weeks I have given a number of keynote presentations to a variety of airline groups. These audiences covered the entire spectrum of airline types: legacy, LCCs , and 2nd & 3rd tier airlines with speeches in the US and Europe. The airline executives were a mix of e-commerce, revenue managers and IT executives dependent on the conference sponsor. I spoke about emerging technology trends including mobile, semantic search, personalization, social networking and meta-search.
I began each presentation with a discussion of ancillary revenue showing how the carriers have profited greatly by charging fees for baggage, meals, and other services. I used this cartoon to emphasis that from a customer viewpoint these are fees for formerly free services. I have no doubt that the airline executives are well aware of this fact, but with the fever pitch around the value of ancillary revenue particularly in this tough market, the perspective of the customer is often lost.
I received a more surprising reaction regarding the subject of fare families (branded fares). Online search whether through an OTA or Meta-search company, yields a logo and price worsening the move towards commoditization. Every airline is concerned that their product is perceived as a commodity, but few are embracing fare families.
I am old enough to remember earlier LCCs attempts at market dominance with carriers such as People's Express and Texas Air disappearing after a few years of heavy fare matching by the legacy carriers. Of course today's success of LCCs is powered by direct distribution through the Internet and thus is flourishing in every corner of the world. The simple fact is that LCCs are not going away and are actually increasing in numbers and market share. It is my opinion that fare families are the best means for traditional carriers as well as high value LCCs (e.g. JetBlue, Virgin America) to compete beyond price. As I pointed out in my presentation, every part of the distribution travel value chain will be impacted by the introduction of fare families, but despite these challenges, I am hopeful the concept will take hold. One important aspect of the shopping process that would need to change for both OTAs and Meta-search, is the ability through mouse-overs or other similar UI techniques, to provide the fare family advantage to the customer at the point of sale. See Frontierairlines.com as an example. What I envision is that a customer goes on an OTA or Meta-search site, gets back the same fare from both a LCC and a legacy or high value LCC and when the consumer mouses over that quote, the option of paying a bit more to include services such as baggage, seat assignments, access to on board entertainment systems, meals, on board Wi-Fi, and other emerging services at different family price points. It is my belief this will be the only way airlines can truly compete against the LCCs by promoting a differentiated product fighting the trend towards commoditization.

Global View

I am writing from Cannes, France where I gave a speech this morning on emerging technology trends that impact airline e-commerce. I represented PhoCusWright at the conference and I was able to draw on some great stats and trends from a number of PhoCusWright research pieces. This speech was for the Amadeus' airline e-commerce conference. Last week I was in Los Cabos, Mexico giving another speech for the Amadeus' LATM corporate travel leaders symposium. Tomorrow through Monday I am taking some time off and my wife who traveled with me to Southern France and I will explore the French Riviera.

I wanted to write briefly about the global perspective I have gained over the last 12 months. My work in Kuwait had me traveling to the Middle East once a month for the last year. Often I stopped in Europe on the return trip to either attend a conference or meet with a client. I have worked in Europe with different travel IT and software companies many who deal with airline customers. The Kuwaiti engagement tapped my corporate travel technology and leisure distribution experience.

There are a couple of points which all markets have in common:
1) Every segment of the travel value chain worldwide is under pressure from low cost competition. Whether its LCCs for the airlines, alternative or direct distribution for the GDS, or online competition for the TMCs, every sector needs to drive greater efficiency to lower costs.
2) Mobile technology is beginning to emerge as a major new battleground where traditional suppliers and distributors are being challenged by innovation from new market entries.
3) Airline Fare Families and the airline focus on ancillary revenue is here to stay. This is good news for the airlines who are really suffering. Fare families creates a more logical relationship between services and price.
4) Local Carries are a global phenomenon that is driving consumers in emerging markets online
5) Corporate travel trends are the same globally, the differences are around the level of maturity in the market. Latin America is a particular challenge as major airlines have pulled inventory out of the GDS in markets such as Brazil.
6) The global economy is beginning to rebound with travel increasing, but premium travel is still not near the levels from 2007.

I feel blessed that I have the opportunity to travel to such diverse places in the world and help a variety of customers market, build or purchase travel technology.

Convergence

The pace of mobile convergence continues to accelerate. A camera is now a common feature on mobile phones. Smartphones have gone further with integration of PDA and MP3 player functionality. Tom Tom is now available as an downloadable application on the iPhone signaling the convergence of Personal Navigation Devices (PNDs) with smartphones. Gaming is already immensely popular on smartphones cutting into the portable gaming market. Mobile payments are still limited to specific regions of the world. In Japan, mobile payments have been a standard feature for some time and mobile micro payments for public transportation is emerging especially in developing countries.

"According to Inside Facebook, the social network is working with mobile payments provider Zong on a test allowing a small number of users to sample the mobile payment option in its virtual gift shop". Social networking is already a major activity on smartphones so Facebook's test with Zong is a significant development towards the mobile wallet.

So what does this all mean for the travel industry? The bottom line is this: labeling the device in the frequent travelers' pocket as a phone is not only naive but misses the true opportunity for innovation that can enhance the travel experience.
If you want to learn more, please join me next week for a Webinar through PhoCusWright. Details are below.

Smartphone Market Share Influences Download versus Mobile Web Debate

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.

Innovation in Online Travel

The general media is a buzz with stories about the lack of innovation of the major OTAs. A recent Forrester Report which shows consumers' frustration with online travel planning and booking is cited. The report stated that many consumers are fed up with the complicated process of planning and booking travel online. Part of this frustration concerns added fees, what we like to label in the travel industry as ancillary revenue. The article points to a resurgence of bookings through traditional travel agents.
From a different angle a recent VentureWire report states that VCs are funding start-up travel sites such as Oyster and LeiusreLink. This article further reinforced the concept that there is a lack of innovation from the four large OTAs (Expedia, Travelocity, Orbitz and Priceline).
Both media articles site lack of innovation, but both draw different conclusions. The Forrester research is being cast in the light of a return to traditional travel agents while the VentureWire WSJ blog points to an opportunity of new start-ups. So what is happening with online travel? Are the OTAs on a path to their own demise? Is online travel going to die based on the resurgence of traditional travel agencies?
In this era of sensational news reporting, dramatic statements forewarning the death of popular OTAs through renewed competition from traditional travel agents or new travel niche brands help sell papers (or in this day and ag, electronic articles). A key point missing in both these articles is a realization that the online travel market is at a mature level. Traditional, Crossing the Chasm analysis, points to multiple adopter segments.
By definition the late majority are conservatives. This market is naturally skeptical and thus resistant to change. The online travel market has reached the mainstream and thus includes many infrequent travelers who are not comfortable with booking travel online. Even the cliche quote by Henry Harteveldt " Could your mother-in-law use your Web site without having to call you for help?’ The answer is always no" is somewhat blind to the fact that my mother-in-law is an infrequent traveler, part of the late majority (actually she is more of a laggard) and thus has characteristics that are different from frequent travelers (who are often innovators, early adopters, and early pragmatists) who have grown accustomed to the online travel process.
Despite the generalities of these articles I do believe that greater innovation is needed from the OTAs to maintain their market position. Most of the start-up competition comes from niche plays such as Oyster (hotel reviews) or LeiusreLink (vacation rental). Innovation in travel planning is the focus of sites such as Uptake and Triporati. Whether it is true technology innovation or business innovation, carving out pieces of the all encompassing OTAs is a natural market evolution. OTAs will react to these niche start-ups if and when they see a direct correlation to revenue loss. For example when Expedia, Inc. recognized the importance of user generated hotel reviews it purchased TripAdvisor. Movement to traditional travel agents may be occurring, but it may be limited to specific segments and does not mean the death of OTAs. In various research I have conducted over the past few years interviewing traditional travel agents, all agents recognize that the OTAs are their direct competitors and customers often quote OTA prices during the selling conversation. As a result, agents use tools such as Agentware to search the Web for competitive fares.
I agree that OTAs are not a replacement for human beings (that is why each has deployed a call center for support), but for routine trips they do perform well. Quoting the appropriate ancillary fees is an industry problem that is being worked on by ARC, the GDS and the airlines to simplify the online quote process. No the OTAs are not in danger of extinction by niche players or traditional travel agents as all will co-exist with the consumer making the ultimate decision based on their comfort with technology and experience with the online process.

How a Single Vacation Experience Can Impact Loyalty

I generally do not blog about my own personal travel experiences, but I felt compelled to do so after my family's recent trip to Hawaii. To validate that I am indeed a frequent traveler, I am currently a UA Global Services member, a SPG Platinum and a Marriott Silver Elite. I have made 11 trips to the Middle East in the last 12 months and traveled to Amsterdam, Berlin and Dublin on the way back from some of these business trips.

In order to use free tickets on UA for my family, we extended our stay a few days before and one day after. We exchanged our Marriott timeshare in Lake Tahoe for a timeshare on Kauai. We stayed at the Sheraton Kauai for three nights and the Kauai Marriott for one night.

When I checked-in at a separate line for SPG members at the Sheraton Kauai, I was pleasantly surprised to learn that we had been upgraded to a corner suite which were three connecting rooms and three balconies. This is a picture from one of the balconies. This was a great start to our vacation and reinforced the Starwood brand.

Our Marriott Lake Tahoe timeshare is one of the most desirable timeshares on the market at the foot of Heavenly Ski resort overlooking Lake Tahoe. We were sold on the timeshare a few years back based on the superior level of the property and its value in exchange through Interval International. When we arrived at the Pono Kai we received no recognition (the property is managed by Blue Green) and though I had requested an ocean view, called two weeks prior to the property (on the advice of the property) to request it again, we were given a garden view. Overall the property was fine and we enjoyed our stay, but the lack of recognition and the lower quality of the property has made me question the value of our Lake Tahoe Marriott timeshare investment.

At the end of our trip we stayed at the Kauai Marriott. There was no special line for Elite member check-in. In addition, I had requested an upgrade and I was not aware that having done so, we would have to pay an additional $150 per room for the ocean view. An email came to me the day before checking in stating the $150 charge. I was disconnected during entire trip so I never saw this email. We were using points for the two rooms for a one night stay. When I asked to downgrade, I was told that no garden view rooms were available. We had to wait approximately 3 1/2 hours to check in and the room though newly renovated was only a partial ocean view and did not have any furniture on the patio to allow us to enjoy the expensive upgrade. The property is beautiful and the renovated room was very nice, but the lack of recognition and overall treatment has influenced my future travel booking behavior.

As a frequent unmanaged business traveler, I generally have complete choice on where I stay. I am currently working on two projects for the US Government which will involve lots of trips to the DC area over the next 2-3 years and I have consciously chosen to stay at Starwood properties as a direct result of my Kauai experiences. As a Global Services member, UA treats me great. The three nights in the luxury suite at the Sheraton Kauai has increased my loyalty to Starwood. Given the money we've invested in the timeshare and the number of nights I've stayed at Marriott this year, the lack of recognition and surprise charges dilutes any positive feeling I've had towards the brand. Overall it was a great vacation, but proved first hand how loyalty can be impacted by a single trip.

The Dark Side of UGC - The Cleveland Video

We've all read about the value of user generated content (UGC) and viral marketing. Unfortunately the best intentions do not always produce the desired results. Positively Cleveland, a DMO that promotes the region created a "Hastily-Made Tourism Video Contest". The goal was simple, use UGC to promote the city. This video was "created" for the contest, but obviously was never selected. None the less the first version of this funny but disturbing video has attracted 1,206,632 views. The second version to the left has attracted 994,291 views. When searching Cleveland on YouTube this video comes up 1st!
The lesson here is an important one. Travel companies can try to use UGC to enhance their online offering, but beware as the Internet user population may take this opportunity to do exactly the opposite from your intended goal. The sad part of this video is that though it is obviously a farce, it does show our country's declining "rust belt" and the toll the Recession has taken on the area.

Augmented Reality to Enhance the Travel Experience

One of the future trends identified in the PhoCusWright mobile research was the use of mobile devices to augment reality. Layar a browser available on the Google Android platform has announced the opening of its API to a select group of developers. As mentioned in the TechCrunch article other AR browser players include:" Tonchidot’s Sekai Camera and Mobilizy’s Wiki Tude. Even IBM is playing around with mobile AR apps." The Layar video uses a real estate example, but the value to the traveler should be very obvious.
In recent speeches to airline and hotel executives I have been emphasizing how mobile is a new platform for developing appplications that never existed before. Developing AR browser based applications for travel is a great example of this opportunity. The ability for the traveler to view a real world structure and augment that with various types of data such as historical information, services (e.g. restaurant reviews) and special interest subjects (e.g. architectural design) are just a few examples on how AR browsing can enhance the travel experience.
The mobile platform is much more than a phone as it is truly a sensor of the physical world. Already it is common place for travelers to tweet, blog or upload pictures about their current destination. AR browsing takes this one step further by enhancing your surroundings with data that you find relevant.

Is the Finger Print Reader on the IPhone the Solution for M-commerce and Security?

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.

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.

Innovation in Online Travel

I am working with Bob Offutt this year screening applicants for the PhoCusWright Innovation Summit in November. This effort has triggered some thoughts about how innovation comes to the market as well as the danger to companies that lack innovation.

From 1989-1995 I worked at Sun Microsystems. Part of management training at Sun was reading the book The Paradigm-Shift-Promise-Information-Technology . While I was at Sun I was able to secure funds to implement an early corporate booking tool from a now defunct company called TravelNet. Why not look internally to develop this application? Even though at that time Sun was far ahead of other companies in talking about "the Network is the Computer" foretelling the current hype around Cloud Computing, I could not get any internal IT support for this self-booking effort. I even had a Senior VP of Purchasing tell me that "we do not like to be early adopters of new technology". Yes this was a Sun VP acting as a Luddite about emerging technology. Despite the paradigm shift training, Sun's demise can be traced to its slow reaction to open source software. Hopefully, IBM will purchase Sun and put it our of its misery.

Another interesting paradox regarding innovation concerns online travel. Conventional wisdom may make you believe the current online travel heavyweights came from venture funding. Though each of the major OTAs has received venture funding over the years, Microsoft birthed Expedia, Sabre created Travelocity, the major airlines created Orbitz. Only Priceline has true venture capital roots, but was literally reborn under Jeffrey Boyd's leadership after the company went bust trying to promote "the name your own price" strategy to other non travel segments. Jeffrey successfully transformed Priceline from a opaque distribution channel to a full blown OTA and expanded the company's global reach with acquisition of Booking.com. The point here is that Venture Capital is often not the source of new innovation.

So where is tomorrow's innovation in the travel space? We need not look any farther than the emerging mobile platform. Our sponsors for the PhoCusWright Mobile Special Report represented some of the travel industry's largest companies (Starwood, Hilton, Carlson Hotels, Travelport, Amadeus and Abacus, IBM and Teradata to name just a few), but few showed true mobile innovation. Many sponsors are simply taking their Web content and reformatting for the mobile browser. This strategy misses the value of the new mobile platform and cannot access location a key component of succesful mobile applicaitons.

True innovation in the mobile space is likely to come from small companies such as Intelligent Spacial Technologies who have a unique point and click application that takes advantage of location, context and broadband wireless communication. Last year's winner of the Innovation Award was another small mobile advertising comany called Interactive Mobile @dvertising,

Can innovation continue in a down economy? Absolutely, though funding is tight, true innovation is a game changer and will continue to emerge from small companies. Even though hugely successful, the four major OTAs may miss the next "paradigm shift"(which I believe is mobile) and a new small entity may emerge with disruptive technology for travel applications on the mobile platform. No company of any size can simply ignore emerging technology trends such as mobile or risk becoming victims of shifts in market dynamics caused by innovation.

Mobile Panel at PhoCusWright

I had the pleasure of moderating the panel entitled : Best Practices in Mobile Applications at the PhoCusWright@ITB conference earlier this month. We had a good cross-section of panelists that included Pablo Alvarez, Group Innovation Manager, Lastminute.com, Stefano Galastri, President and CEO SIA Internet, Marina Hegemann, Managing Director, TouristMobile GmBH, Michael Lacy CEO the Handy Group, and Gerry Samuels, Founder and Executive Director Mobile Travel Technologies. We had quite a spirited discussion on a number of topics. The biggest disagreement was around the development strategy and ultimate distribution approach to mobile travel applications. I promoted the vision of multiple app stores (e.g. Apple, Google, Nokia, RIM Blackberry, T-Mobile) and my belief that was voiced in our recent publication "Mobile The Next Platform for Travel" (a summary of our special report "The Future of Mobile Travel") which recommended downloadable Web-enabled applications (versus solely browser based) as the best strategy going forward. Our panelists voiced different views, from a firm commitment to downloadable applications (Marina Hegemann) to a belief that browser based mobile applications are the future (Michael Lacy). Time will tell whose strategy is correct, but all agreed that mobile travel apps are still in their infancy and that dramatic change is ahead over the next 12 to 18 months.

How Twitter has changed the conference experience

At the PhoCusWright@ITB Bloggers Summit, Twitter was the hot technology talked about at length as a new window into social networking. Something that has not been covered is the impact of Twitter on the conference experience itself. This was very true the second day of the conference. I sat at the PhoCusWright table behind all the bloggers. Without an exception each had their TweetDeck (or equivalent) on their desktop providing immediate commentary on the show. I participated as well. While Dale Moss spoke on onstage on how Open Skies (BA subsidiary with all BC cabins) will succeed in the market, I questioned his sales pitch with a number of tweets. No longer can a presenter expect to contain the audience feedback to the conference attendees. Twitter has enabled real-time conversation which has changed the rules of a conference and opens up everything said to criticism. Yes there is lot's of hype around Twitter, but one thing is certain, at any public forum a speaker must be sensitive to how his or her presentation is being perceived by the audience which is no longer restricted to attendees but now encompasses all the followers of the twitter user's tweets.

PhoCusWright @ ITB - Day One

I am blogging from the PhoCusWright@ITB. The day began with a BloggerSummit, clearly the leaders in new media from around the world with representatives from Europe, North and South America. We exchanged best practices in blogging and tweeting. This was followed by an early look at the five minute of fame innovators who will present tomorrow. Philip Wolf then addressed the bloggers on his views on major trends for 2009. Philip announced the theme for PhoCusWright Conference 09 - Money, Media Mobile, & Moxey. More on themes as we get closer to the conference in Orlando in November.
After lunch, the first panel of bloggers who were asked the top trends they see in 2009. A lot of discussion about Twitter. The online poll had the 1) Shift in philosophy on social media, 2) hire a social media guy, and 3)PR firms will use social media. Unfortunately the panel missed mobile. That was further evidence that the travel industry still has not recognized the impact of the mobile tidal wave approaching.
The second session first reviewed these three top trends. Then a discussion on ROI of social media was discussed. In my view it is about reputation and identifying who in a social network has that influence. Tools are coming to the market to help easily identify this, such as NodeXL

Full Content

Dennis Schaal, technology editor for Travel Weekly has written some very insightful articles regarding the lack of full content in the GDS (despite the full content agreement signed in 2005) and more recently the termination of the agreement between Farelogix and Sabre. (links requires a subscription). This is a complex problem that is both an issue of technology and business strategy. From the travel agent perspective full content is essential particularly given the transparency of fares triggered by the Web. With the economic conditions worsening suppliers will continue to put downward pressure on segment fees and implement all possible opportunities for ancillary revenue. The GDS are working hard to add capabilities to accommodate new airline add-0n fees as well as continuing to move key processes off the mainframe on to more modern technology. The question is whether these initiatives are moving fast enough and whether 3rd party providers such as Farelogix are a viable alternative. Unlike the other so called "GNEs" (GDS New Entrants), Farelogix never positioned itself as a replacement for the GDS but instead as a new aggregation layer needed in a multi-source world. In that role they have been successful working with major airlines such as American and Emirates. Though understandable from a competitive viewpoint, Sabre's termination of the Farelogix is a bit short sighted. Now that Travelport has embraced a multi-source front-end (developed by G2 Switchworks) the concept of multi-source content will be permanently ingrained as a competitive advantage. I have no doubt the management of Sabre is well aware of this and that their current solution with Agentware (private labeled as NetCheck) is most likely a temporary fix to meet this multi-source reality. Unfortunately with economic pressure on corporate accounts the use of alternative LCCs will likely increase and legacy carriers will continue to implement strategies to drive business directly to their Website. Web-based tools such as Agentware have become a common way for agents to sell inventory not in the GDS, but end up causing additional steps that decrease productivity. The travel industry needs to continue to push the GDS to provide more flexible integrated tools. Projects such as Farelogix's open source POS Hawkeye should be embraced by the industry so we can move beyond issues of bypass and instead have all agents be able to embrace an integrated multi-source point of sale.

An intelligent travel assistant

It was way back in 1985 I first began exploring the use of AI expert systems to automate the travel process. At that time a close friend worked for Mad Intelligent Systems in Santa Clara California. I was at United Airlines and I already had a thirst for emerging technology. I believed that automating the travel process would be made easier. This belief was reinforced when I viewed the Knowledge Navigator video that was presented by John Scully of Apple at MacWorld in 1989. I also have spoke about intelligent agents for travel in my blog post from October 2006

Technology Review (published by MIT) cites Intelligent Software Assistants being one of the major trends to watch in 2009. In that article it mentions a new Silicon Valley startup named Siri which is a spin off of research done at SRI International for the DOD.

When online travel was first introduced, the theme promoted by many OTAs was an automated travel agent. Of course this was nothing more than marketing spin as no OTA uses expert systems to enhance the travel planning and booking process. In addition firms such as Rearden Commerce, Trip Chiill and Manticpoint all have used the marketing theme of an intelligent travel assistant. I applaud their efforts, but I still believe the ultimate travel assistant that can act like the Knowledge Navigator is still unrealized and I am hopeful with firms such as Siri, true intelligent travel assistants will emerge over the next few years.

Yelp deleting negative reviews for a fee?

Some reports have surfaced from local media about complaints from local merchants that Yelp is willing to remove negative reviews for a fee. I do not know whether these reports are accurate and reflect an overall Yelp strategy or whether there are rogue Yelp! sales reps offering this service to boost their own volumes. It should be noted that Yelp denies these allegation and states that their reps don't even have the ability to edit reviews.

There is a challenge at any Web 2.0 site to balance the open submission of user reviews with the need to police the reviews to avoid companies from trashing their competitors. As user feedback volumes increase and become more instantaneous with consumers s reading or leaving reviews through their mobile devices, managing review contact will become even more challenging. Location based services will continue to expand and promoting discounts at local restaurants is a key service desired by frequent travelers per our recent PhoCusWright research:

How will Twitter impact the Travel Industry?

In spite of tough economic times, the microblogging site Twitter continues to receive funding. I have to admit that even though I have a passion around all things related to emerging technologies, I have had some trouble understanding how Twitter fits into the mix and how it can impact the travel industry. That recently became much clearer.

The concept of microblogging began in March of 2006 when Facebook introduced status updates. Twitter came along in July of 2006. In May of 2008, Twitter raised 15 million and another $35 million in February 2009. Considering current economic conditions, many VCs still see an opportunity.

In an article on Techcrunch Erik Schonfeld begins with this question. " What if you could peer into the thoughts of millions of people as they were thinking those thoughts or shortly thereafter?" He goes on to state that Twitter is the "crude beginnings of the "now" search engine."

Mining twitter feeds may provide some insight, but from my perspective the interesting thing about Twitter is not so much the content but the influence the individual can have on any given subject provided enough people follow the person's tweets. To me the main issue is around reputation within a social network.

Twitter's impact was felt in a big way in late 2007 when Mark Zuckerberg, CEO of Facebook was being interviewed by Sarah Lacy of Business Week at the South by Southwest Interactive conference. The audience did not like the way Ms. Lacy was treating Mr. Zuckerberg and they immediately let the world know through Twitter.

The relationship between Twitter and blogging is also important. A blog allows a subject to be discussed in detail. A tweet can point to a blog article. Also I believe Twitter on mobile devices is a great match between device and application. Even with the most advanced smartphones, writing a blog entry on a mobile device is challenging. Writing a tweet on a smartphone is easy.

So what impact will Twitter and its corporate enterprise siblings, such as Yammer, have on the travel industry? The bottom line is that if a given individual has a strong opinion about something, the world soon learns this view provided the person has established themselves as a thought leader in the an industry sector or within the company. This has obvious implications for both suppliers and intermediaries in the travel industry. Long gone are the days of responding to customer complaints through standard form letters. People will voice their opinion immediately on Twitter and if they have a strong following, a given travel vendor's product or service may be impacted by this influential person. As Twitter style applications come to the enterprise, influential tweets from key corporate players can also have a significant impact provided the person has a significant following within the company.

I have just begun to tweet myself and I hope to use the effort to provide some more instantaneous feedback on industry events.