Desktop tools

I met some representatives from OTOlabs at the recent TravelCom conference in Las Vegas in April. Desktop tools such as the Southwest's DING! application have clearly proven their value in creating a more intimate relationship with customers. OTOlabs' is the developer of ThinkDesktop applications such as Vail Resorts' SnowMate. I worked with Vail Resorts (as part of a PhoCusWright engagement) back in 2005. The SnowMate application is a critical tool Vail has successfully used to bond with their best customers. The Southwest DING! application had over 1 million downloads the first six months. Southwest delivers daily messages on special promotions to the desktop of millions of customers reinforcing their image as a low fare leader and bonding the customer to the Southwest brand.

I am a strong believer that providing a small desktop application to deliver personalized information to your customer is an essential component of a Travel 2.0 strategy. To my surprise the OTOlabs folks indicated that other airlines have been very slow to embrace this concept. This is truly baffling considering the transparency of the Web and desire of airlines to develop a closer bond with their best customers.

Service Oriented Architectures

A lot has been written over the last three years about the topic of a service oriented architectures (SOA). The concept refers to a more flexible way to create software using Web services. Rather than creating tightly coupled code that bounds specific functionality within the application, software written using SOA principles creates loosely coupled components that can easily be removed or altered without impacting the entire application. "SOA turns monolithic inflexible applications into hundreds, even thousands of small flexible applications" Gartner research estimates that by 2008, more than 60% of enterprises will use SOA as a “guiding principle” when creating mission-critical applications and processes.”

Understanding the underlying architecture of software has always been a difficult task for a variety of buyers in the travel value chain. Whether it is a corporate travel manager evaluating self-booking software or a leisure travel agency looking at reservation technology, the need to evaluate the underlying software architecture has never been greater.

Often vendors confuse the issue by stressing their use of Web services. Utilizing Web services to connect to disparate sources of content has become the norm in the last 3-4 years. Just because an application uses Web services for connectivity does not mean the software has been written using a SOA approach. As an example, a major hotel chain still uses a mainframe running TPF (an old operating system created by IBM for the GDS) as their central reservation platform. The company has created a Web services layer to aid in the communication with property based system and external channel distributors. This is obviously a good use of Web services but does not reflect a service-oriented architecture. If this chain wanted to do a complete revision of their rate structure, the antiquated mainframe approach would lead to a nightmare of programming tasks. If this application was built using SOA, an overall rate revision would be done with less pain, implemented faster and would not disrupt other modules of the reservation process. Unfortunately for this supplier, SOA theories were not around in the 1970's when the core reservation system was built.

Wireless Travel Applications

Last week I was interviewed by USA Today Weekend regarding mobile technology for the traveler. The premise of the call was focused on the prevalence of IPODs among travelers. The reporter asked some specific questions about downloading audio blogs for use by leisure travelers. The obvious application would allow the provider to segment the traveler population into special interest groups. A guided city tour for a history buff may be quite different from a couple looking for gourmet restaurants. Our conversation went beyond this point to encompass all types of gadgets now carried by frequent leisure or corporate travelers. I mentioned that last year I wrote an article for the PhoCusWright GDX technology subscription service on the hotel room of tomorrow. A common theme within that article is the emergence of multi-media stations in hotel rooms where travelers could hook up their MP3, digital camera or laptop and view the content on new HDTV sets. As always I am interested in any new application being deployed by travel suppliers or intermediaries that enhances the travel experience. If you know of some interesting apps, please let me know.

Web 3.0

First let me apologize to my blog readers for my long absense. I have been juggling a number of different client projects working long hours (which I know is the norm for today's 24/7 business environment). Fortunately three of the projects are closing out this week so I am back.

Lately I've been seeing a number of articles describing Web 3.0. Is Web 3.0 just another buzz word fueling the pundits and press or does it have some substance? One fallacy that is perpetuated by buzz words such as Web 2.0, 3.0 is the impression that the introduction of new technologies and approaches happens all at once negating prior technologies. In reality technology change is evolutionary. For example adding an improved consumer UI using AJAX or Flash to a Travel 1.0 platform may change aspects of the application to be more engaging, but it doesn't necessarily mean that the software is Travel 2.0 throughout its underlying code.

So what is Web 3.0? A common mantra expressed around Web 3.0 is that software will be more pervasive, faster and cheaper to deploy. Web 3.0 applications will understand the semantics of Web sites enabling new levels of machine-to-machine communication. Personalization will filter information to deliver information that is more relevant to the consumer delivered on the device of there choice. Information itself will be dynamically generated reflecting the needs of the supplier to sell perishable inventory. With the travel industry still struggling to integrate Web 2.0 features and functionality (e.g. user generated content, new UIs using AJAX or Flash) the arrival of Web 3.0 will likely take some time to manifest itself in travel applications.

O'Reilly ECT Day #2- Incantations for Muggles: The Role of Ubiquitous Web 2.0 Technologies in Everyday Life

The talk began with this basic premise: How do you balance needs of the users with emerging technologies? The goal of the talk was to use different lens on emerging tech and end-users. The backside of technology development is people. How to segment people which are not like "you" - don't design for oneself or one size fits all. There are four life stages each with a different set of properties- stage one - friends, attention, play/leisure, sex, consumption; stage #2 - Sex, friends , money , play/leisure, labor; stage #3 - labor, family, money, power, property; stage #4 - family, health, religion, hobbies, friends. technology adoption and priorities reflect these four life stages. Corporations are currently driving technology. Corporations need to satisfy shareholders reflecting continuous growth. To monetize the interaction people the user must be passionate about the technology. Unhappy users don't make products stick. Four aspects of modern technology: persistence (never goes away) searchability (ability to find what you want), replicability (what is truth?, the ability to copy), Invisible audiences - (don't have a sense who is in the audience- you don't know who your are talking). All rules of privacy is changing. When things really go mobile will create a new shift in practice - combining location and technology.

O"Reilly ECT - The Coming Age of Magic -Mike Kuniavsky, Co-founder and Principal, ThingM

Ubiquitous computing is moving away from traditional platforms (PC, PDA, smartphone) to include non traditional platforms such running shoes. In 1995 General Magic designed their wireless handheld interface as a desktop. This interface had limited functionality partially due to the desktop metaphor. Extending the desktop metaphor to a wireless device doesn't work with ubiquitous computing. Mike is advocating the use of existing cultural understanding (magic) to describe the behavior of ubiquitous computing objects. Design principles- every day objects (shoes, hammers, hats, plates), they are familiar, physical, no screen , not human, not superhuman, reinforcing the fact that we don't believe in magic. Ambient orb from Ambient Devices looks like a crystal ball. the Nokia medallion - allows communication. Wands (Nintendo Wii), Hitachi Magic wanted. Concept of wands already exists based on embedded technology. The move towards "magic" devices is already happening. The age of magic is coming. Using the magic metaphor should not be an excuse for poor design.

Jeff Hawkins

Jeff is the original founder and designer of Palm. He described human function and how his new company Numenta is developing next generation for intelligent computing. Jeff stated that you can’t get computers to act as humans- visual perception, auditory perception, somatosensory perception, Languages, Adaptive behavior, planning, thinking etc….

What is preventing this? Common wisdom believes:

• Computers are not powerful enough - no longer the case

• Brains are too complex to understand
  

• Brains work on quantum principles
  

• Brains are magic

Reality is not too complex, don’t work on strange principles and we just didn’t understand how they work.

Hierarchical Temporal Memory (HTM) –

1) Creates a model of its worked

2) Recognizes new patterns

3) Predicts

Generates behavior Numenta Platform for Intelligent Computing (NuPIC)

Simple vision system –

HTM applications areas of focus:

1. Automotive
2. Gaming
3. Network modeling
4. Drug discovery
5. Vision systems
6. Market analysis
7. Business modeling
8. Nurture applications
9. Anything requiring prices timing or high order temporal data
10. Music
11. Language
12. Robotics

Werner Vogels, Vice President & Chief Technology Officer, Amazon.com

Mr. Vogels is the VP and CTO of Amazon.com. His talk focused on how Amazon has created an the backbone which can enable small start-ups to reach scale by using the Amazon's infrastructure. The talk centered around how to build a business around ideas verses resources. Amazon services is designed to help a launch new businesses. Building an architecture to deal with peaks 3-4X the average daily transactions is difficult. The 70/30 switch 70% on heavy lifting (infrastructure) and only 30% time investing in actual product development. Amazon chart - service oriented - 150 services together to create a single page. Three parts of infrastructure = EC2 - Compute, S2- Storage - SQS which does Messaging= Web scale computing. Web-scale computing turns huge fixed costs into a variable cost. scalable-increase or decrease capacity impacts cost Effective - low rate pay-as you-go, Reliable and Simple- SOAP and REST based computing. Simple storage service 15 cents per Gigabyte per month and 20cents a GB data transfer. Why can't the GDS follow this model. Rather than owning the transaction, how about owning the infrastructure?
.

VC Forum - Web 2.0 and Wall Street

Panel with Tim O"Reilly and William H. Janeway, Vice Chairman, Warburg Pincus and
Peter Bloom, Managing Director, General Atlantic LLC. What can Web 2.0 learn from the financial markets and visa versa? Attributes of Web 2.0 demonstrated on Wall Street. Speed matters. e-Trade strived for a 9 second trade. Average trade on NYSE is now 30 milliseconds. A thousand transaction a second have become the norm. How does this compare with travel transactions which is measured by 2-3 second response time? Web 2.0 economy - network intelligence phenomenon. Focus on transactional efficiency. The pressure of Wall Street to push down the cost of transaction cost down to zero. Profits as "agents" was no longer possible (sound familiar?). Those who had been agents became traders. This is just like a GDS becoming a travel agent (e.g. Travelocity). Now promoting marketplace based on automated trading systems. Technology turning agents into principles. The interaction of computers and human beings. Now computers trade with each other but are shut off switching to human trading during a major drop.

Jeff Jonas - IBM Chief Scientist

Using an story of a cheating Vegas dealer illegally working with a customer to illustrate how data silos don't interact, Jeff introduced the concept of "Enterprise Amnesia". In this story the dealer and customer share a common address - clearly a signal that something is wrong. "Enterprise Amnesia" is when marketing, HR an security departments don't share a common database. Enterprise Intelligence requires persistent context. Data and queries in a single data space. Federated search - just in time context.

Sequence neutrality - identifying the same customer in a database. Database drift is natural and the bigger the wearhouse the more this problem persists.

Live from the O"Reilly Emerging Technology Conference

I am blogging today from the O'Reilly Emerging Technology Conference in San Diego. In 2006, my friend and colleague Philip Wolf coined the phrase Travel 2.0 to describe the new focus on user-generated content and improved user interfaces in online travel. To all deference to Philip, it was Tim O"Reilly who actually coined the original Web 2.0 phrase to describe the user generated and interface changes that is impacting the entire technology industry. Attending pure technology conferences such as this one, always reinforces the fact that the travel industry continues to lag behind the general tech curve. I will be blogging all day on each topic covered: The agenda can be found here.

After the opening remarks, the first speaker is Jeff Jonas, Distinguished Engineer and Chief Scientist, IBM Entity Analytic.

New Joint Study with PhoCusWright

In an effort to answer my prior blog entry regarding the commodification of self-booking technology, I am pleased to announce a new joint research study with PhoCusWright. As most of you know I have a long association with Philip's organization as an analyst and subcontractor on multiple projects over the last 6 years. In 2003, we jointly published a study on Dynamic Packaging technology. In a similar fashion this new study will look at corporate travel technology trends particularly as it relates to the implementation of Travel 2.0 technology. We are targeting late May- early June for the publication. It will be available as part of the PhoCusWright Channel as well as available both at the PhoCusWright and Travel Tech Consulting online stores.

Here's the abstract:

Abstract: Traditionally the corporate travel market has lagged in the adoption of emerging technologies. Despite this fact, technology for self booking, corporate portals, meetings management, business intelligence, expense management, risk management and the aggregation of content has become a key part of the travel management process. Services, such as consulting and account management also depend heavily on technology for analysis and support. With the emergence of Travel 2.0 technologies in the consumer market, how are corporate providers reacting to these trends? This study will take a look at key TMC and corporate travel software applications reviewing current functionality with an eye on future development. The research will showcase unique product offerings from software developers and TMCs reviewing vendors' plans for adding Travel 2.0 features such as user generated content and rich Internet UIs using technologies such as AJAX.

The World is Flat

In his 2005 book, The World is Flat, Thomas Friedman describes the unplanned cascade of technological and social shifts that effectively leveled the economic world, and “accidentally made Beijing, Bangalore and Bethesda next-door neighbors.” I experienced this phenomenon first hand recently evaluating suppliers for a consulting engagement. When it came down to the short list of suppliers that met this DMO's requirements, two companies emerged providing the best fit for my customer's needs. Both of the companies have headquarters in the US, but have approximately 90% of their employees in Asia (India and Sri Lanka). Over last two-three years the majority of travel software companies have either outsourced part of their development to off-shore centers or formally opened branches in places like Bangalore or Saint Petersburg. Eastern Europe and Asia are not only catching up fast, but are quickly passing the US in highly skilled software engineers. To better understand the global impact of the flatting of the world phenomenon take a look at this video: http://www.scottmcleod.org/didyouknow.wmv

Are corporate self booking tools becoming a commodity?

I have been involved with corporate self-booking tools since their inception in the early 1990s. At that time companies such as TravelNet and TTG (now TRX) pioneered a new concept allowing business travelers to book online, but restraining their activity through policy enforcement. Now in 2007 where corporate booking tools have become a mainstream part of a good travel management program, innovation has stalled resulting in a common look and feel across vendors. Many of the corporate tools have embraced the familiar consumer matrix approach pioneered by Orbitz (and quickly copied by Expedia and Travelocity), but other emerging trends are slow to come to the marekt. This is in contrast to new consumer oriented Travel 2.0 companies such as Kayak, Farecast and Farecompare are who are blazing new territory incorporating tools such AJAX and mash-ups to change the stale booking flow common on the big OTAs, but what about the corporate market? Where is the next innovation in corporate tools? My belief is that innovation has already begun and lies in the underlying platform rather than the UI. Yes corporate tools should embrace drag and drop capabilities enabled by AJAX, but at the end of the day you still need to enter your dates, select your flights, hotel and car. How these tools integrate disparate sources and user generated reviews and content will be a space to watch in 2007.

Mobile Photo Sharing

M:Metrics released some detailed stats on 3G usage that should raise a flag for all in the travel industry. If you don't know, 3G refers to the third generation wireless networks that provide more features and faster speeds than 2G networks. What caught my eye was the stat which concerns photo-sharing, which skyrockets to 45.1% monthly penetration among 3G users, up from 17.1% of non-3Gers. The bottom line is that next generation cell phone users are increasingly depending on their camera phones. What does this mean for the travel industry?

If you combine the growth of user generated content with this increased photo-sharing usage, the picture should be clear. Travel suppliers, especially hoteliers, need to be sensitive to the fact that an upset customer will not only blast the hotel at review sites such as Trip Advisor or IGUGO, but will increasingly use their cell phones to document short comings of a property augmented by real- time pictures posted to blogs or photo-sharing sites such as Flickr. The old cliche that a picture paints a thousand words says it all.

Peer to Peer Computing in Travel?

First they brought us Kazza and then Skype. Janus Friis and Niklas Zennstrom are now working on a new peer to peer (P2P) application that is taking on TV. Their Venus project, expected to be called Joost changes the playing field again by allowing users to view video content though on demand P2P network

Is there any value of a P2P network in the travel space? Absolutely! The current trend to create a site for online travelogues is a common Travel 2.0 business model. What if the content did not need to be uploaded to a single site, but rather accessed pictures and video content housed on an individual's hard drive. Unlike the Kazza implementation, Friis and Zennstrom are working with content owners to launch Joop with targeted advertising as part of the delivery. Behavioral targeting is a major trend in Web advertising. A P2P network could deliver targeted ads based on information extracted from multiple computers. The new Joost network is based on this type of targeted advertising and a similar application could be developed for online travel.

Article for The Beat

Today, the Beat (part of ProMedia http://www.promedia.travel/) released an article I created regarding the gap between emerging technologies and the travel industry. The focus of the article is on how the corporate travel industry continues to be behind the technology adoption curve.

If you are not a subscriber to the Beat, I strongly encourage you to become a subscriber. The team at the beat is lead by Jay Campbell, Chief Content Officer. While at Business Travel News (BTN) Jay constantly pushed through the barriers within the industry to uncover the underlying key issues in the corporate travel world. At the Beat, Jay is joined by David Jonas and Mary Ann McNulty two seasoned journalists who know the industry inside and out. Jay founded the Beat just a few years ago, but it has clearly emerged as the number one source for breaking news in all sectors of the travel industry. It was my privilege to contribute this article to the Beat. Let me know if you have any feedback.

Eye for Travel CRM Part II

I am glad to report that the remaining speakers at the recent Eye for Travel CRM conference in San Fransisco improved significantly from the first panel, (my prior blog entry). Eye for Travel still doesn't get some of the basics of running a conference in 2007 (free WiFi, plugs for laptops, active blog), but despite these short comings, the Eye for Travel CRM conference was very valuable.

My biggest "aha" moment came at the end of day one with the session entitled "Discover how integrating CRM with Pricing and RM can maximize revenue" (Session Four on Day 1). My readers will recall my frequent theme concerning true dynamic packaging - hooking into existing revenue management systems (RM) on the back-end and CRM systems on the front end to deliver content that maximizes revenue for the supplier while targeting the company's best customers. This theme was at the heart of this session. Here's some highlights:

• Rom Hendler, VP of Strategic Marketing at The Venetian Resort Hotel Casino gave an excellent review of how difficult it is to identify who is the best customer. He showed various ways to measure the profitability of a given customer (frequency, amount of purchases, etc..) demonstrating that defining the best customer is not a simple measure of revenue generated by the guest
• Dave Pelter , VP of Supplier Development & Pricing at Farecast showed how their technology is the next evolution in meta-search. Farecast provides the consumer the ability to target low prices through their predictive fare logic challenging traditional RM systems
  
• Cameron Davies, Sr. Manager, Customer Centric Revenue Management, Walt Disney Hotels and Resorts showed how understanding consumer demand and requirements should be part of a comprehensive revenue management strategy

This and other sessions that featured airlines (Delta, British Airways, JetBlue, Southwest, Alaska & American), hoteliers (Best Western, Starwood, Fairmont) and OTAs (Travelocity, Expedia) provided a wealth of insight into various segment's efforts to capture loyalty and provide a common personalized approach to the customer at every touch point.

Eye for Travel CRM conference

I am attending a new conference today in San Francisco: "CRM and the Travel Industry" organized by the Eye for Travel organization. So far, the main focus of the speakers has been on customer service (training employees on the importance of the customer). There is no doubt that the human interaction element of CRM is a key in keeping customers happy, but so far there has been limited discussion of technology that is needed to provide the infrastructure to support CRM at every touch point. Jon Marnela from Fairmont did mention the fact that a consumer's profile is sent down to the property's PMS system. British Airways establishes a score based on corporate relationships and influence to develop a score for each traveler

In my view is that CRM is more than customer care. Yes it is true that technology is not a CRM solution, but without the proper infrastructure, executing on CRM will likely fails. So far there has been no mention of Web 2.0 and the new role of customer generated content on the CRM process.

Dynamic Packaging or Shopping Cart?

When I authored the report on Dynamic Packaging I had high hopes that we were on the brink of a new era; one which the value of a customer and the need for inventory management were both satisfied through an end-to-end solution. I apologize for using this hackney phrase, but my reference to the concept of end-to-end in this context means satisfying customer needs in a profitable manner. In that research study I described the ultimate dynamic packaging system where the users preferences were stored, filtering content, while supply levels had a "just in time" quality, controlled by direct connections into revenue management software. Well its 2007 and we've had some movement such as the success of HBSI in connecting to a variety of PMS. Some of the Travel.2.0 start-ups have implemented personalization techniques using AJAX, but overall no one has implemented a true end-to-end implementation

A question prompted by some work with a new client concerns the true nature of a dynamic packaging system verses a travel shopping cart. The ability to simply put items in a basket with opaque prices that adjusts the total based on a rules engine is a typical way "dynamic packaging" is being implemented today. Examples of this style of shopping cart based dynamic packaging can be found at a number of sites using a variety of technology solutions. The key element missing in these implementations is not dynamic packaging, but dynamic pricing. The ability to adjust the overall price based on relationship between the components and ultimately the value of the customer is missing from most of these implementations. This vision of the ultimate in dynamic packaging is still an admirable objective, but so far the market has not reached this ultmate goal.

Sabre and G2 Collaboration

Travel Weekly reported today that Sabre is exploring possible collaboration with G2 SwitchWorks. This is based on a comment made by Sabre CEO Sam Gilliland in response to a question from a Sabre employee on December 12th. Texas Pacific Group one of the private equity companies that purchased Sabre also holds a 20% stake in G2 Switchworks. What does all this mean? This could be a good test on whether the equity buyout truly impacts Sabre's strategic direction. Some pundits have voiced their view that the equity buyout will free up Sabre from the constraints of public ownership allowing the company to innovate. Another camp, looks at the acquisition as a short term cash cow for the new owners, who will likely seek to reduce costs at Sabre while positioning the company for a future sale. Remember that private equity's primary interest is bringing a good return back to its investors. If Sabre does pursue a relationship with G2, this would be a sign that the traditional "not invented here" philosophy is changing. G2 has been struggling to differentiate itself in light of the new GDS/airline agreements. How could the two really work together? If G2 continues to position their solution as an aggregation tool a layer above the GDS it would not be in Sabre's best interest to partner with a company who is essentially eliminating their traditional single source GDS model. On the other hand where the aggregation point lies is not as important as who owns middleware. G2 could benefit if Sabre where to endorse the G2 travel agent point of sale tool and help distribute it to the large Sabre subscriber base. This is an interesting story to watch as we enter the new era of private equity owned GDS.

Sabre and Private Equity Buyouts

The announcement today that two private equity firms are buying out Sabre is part of a bigger trend. Over the last two years, investors have been putting billions of dollars in private equity firms. Recently private equity has bought out firms with such well known brands as Clear Channel, Readers Digest, Eddie Bauer, Burger King, Hertz, Domino's Pizza and AMC Entertainment. What is behind this trend? There are two camps of thought. The first highlights the benefit of removing a company such as Sabre from public scrutiny where financial details are required to be shared as a publicly traded company. The other view of this trend is a bit more skeptical. One needs to remember that the private equity buyouts are intended to provide a profit for the equity investors. This is often realized when these buyout companies are in turn sold. The first step the equity owners take is to cut expenses at these companies. Often, private equity firms borrow money to buy a company and then keeps on borrowing. The private equity firms can borrow the money in the company's name and then can keep the money themselves. This saddles the company with the debt while the private equity firms continue to siphon money out of these companies. This is all fine and well as long as the company continues to bring in a substantial cash flow, but if things change the heavy debt could be a problem. So which scenario drove the Sabre deal? When private equity offers an acquisition price above the current stock price, companies such as Sabre have no choice but to accept the offer as the short term benefit to shareholders is clear. As with the Blackstone buyout of Travelport and the subsequent purchase of Worldspan the jury is still out on whether this will truly be good for the travel industry. My concern is that with the focus of private equity in cutting costs, the new owners of Sabre, Galileo and Worldspan may decide to eliminate needed R&D and slow the process of moving off legacy mainframe technology to more open systems.

TRX buys Hi-Mark

Today's announcement by TRX on the acquisition of Hi-Mark marks a significant step in the area of corporate travel data management. Over the last 6-7 years Hi-Mark has successfully marketed their data management solution to many large corporate buyers. Despite this success, Hi-Mark's position in the market is strongest with second tier TMCs and corporate buyers. By acquiring Hi-Mark, TRX expands their reach to the mid to lower part of the market. TRX's DATATRAX is an extremely robust platform with a price tag only affordable to the high end of the market. With this acquisition TRX not only expands its reach, but eliminates a major competitor. It is clear that corporate travel data management is still a wide open market, particularly as procurement takes a more active role in travel management.

Travelport Worldspan merger

After years of speculation, today's announcement of the merger between Travelport and Worldspan came as no great shock to anyone in the industry. The only surprising aspect of the deal is the lack of a competitive offer from Amadeus. As far as a fit, Amadeus and Worldspan would have been more complementary. Travelport has been suffering pre and post the Blackstone acquisition from an inability to easily integrate disparate entities and systems such as eBookers, Gulliver's and Galileo. The task of integrating Worldspan and Galileo is huge, and most likely will result in the Worldspan platform and brand fading from the marketplace. The biggest winner in this transaction is Rakesh Gangwal, whose golden parachute from the transaction is substantial. Considering his missteps at both USAir and Worldspan, his multi-million dollar payout seems unjust, but clearly reflects the benefit to Worldspan's stockholders not the industry at large. During his time at the helm at Worldspan, Gangwal saw the errors of his continued support of the "Worldspan inside" strategy with the loss of business from Expedia , Priceline and Orbitz. Worldspan's insistence to "stay the course" in regards to not launching their own online retail brand was a key factor in their demise. With executive compensation not reflecting actual performance, no wonder the traditional players in the industry are unable to anticipate the next wave of technology disruption.

Amadues introduces Meta Pricer

Amadeus introduced a new technology service this week called Meta Pricer. The service "allows airlines to optimise marketing and distribution reach by making cost-efficient use of travel search engines". This is a clear effort to re-insert the GDS into the travel booking value chain in an era of increased fragmentation of content. There is no doubt that there is some benefit to suppliers on reducing hits on their Websites from site scrapping technology. In an era of disintermediation, this major distributor is trying to diversify beyond segment revenue and add value in a new way. Interesting move, let's see if airlines who have successfully dintermediated Amadeus by negotiating deals with meta search engines (SideStep, Kayak, Mobissimo) would be willing to add another layer in their distribution strategy in order to reduce automated hits on their sites. Kayak has implemented an alternate strategy using ITA software to calculate fares (with a cache of availability from a GDS) limiting the query to booking only. If more meta-search vendors adopt this strategy, the opportunity for Amadeus will be further diminished.

Nile Project Personalized Trip Planning

This week I met with Josh Steinitz, CEO of a new start-up called the Nile Project. The Nile Project uses personalization techniques enabling the consumer to create a more customized tour of a city. The consumer explicitly choosers an area of interest, then by using Ajax, the Nile project presents the consumer a limited number of preferences related to those interest. The application uses an Ajax slider (chose a value within a range) allowing the consumer to rate an attribute on a scale (e.g. cost from budget to most expensive). These than act as dynamic filters that present content that meets a consumer's requirements. Additionally the site acts as an aggregator of ratings from other sites (e.g Trip Advisor, Travelpost). As with other Travel 2.0 sites, trips can be shared with friend, relatives and travel companions. Once the itinerary is set, the Nile Project creates a customized itinerary in a PDF file so the consumer can take it along with them on the trip. The Nile Project represents a great example on how personalization can filter content to drive a more customized travel planning experience.

Recap of PhoCusWright Executive Conference 06

It has been my pleasure to be associated with PhoCusWright over the last 7 years. I met Philip Wolf in the late 1980s and I have always repected Philip's ability to understand emerging trends and push the industry towards a more user centric approach to online and offline travel. I have been attending Philip's conference since its inception. Each year Philip and his team strive to provide an innovative approach to conference execution and this year was no exception. With a theme "Travel 2.0 Confronts the Establishment" the PhoCusWright team again pushed the envelope by breaking down the barrier between conference content and networking opportunities. Each attendee was able to listen to the on stage content through a wireless ear bud while still interacting with tradeshow participants. I applaud the PhoCusWright team for another successful innovative conference.

VC Forum panel at PhoCusWright

The VC panel this morning echoed a theme I have heard a lot over the last 8 months: VCs will only invest in online travel companies that have already established customers and revenue. The important thing to remember is that the true disruptors in the online travel market where not funded by VCs. Expedia was an incubator at Microsoft, Travelocity was launched with funding by Sabre and Orbitz was founded by the airlines. History teaches us that VCs are not very good at understanding the next online travel trend and with the current climate most will likely miss the next disruptive application

Corporate Travel Panel

Listening to the corporate travel panel, it is very clear that these executives don't get it. Travel 2.0 means disruption. This panel is still sticking to the same themes they've used for years.

OTA panel at PhoCusWright

Wow, listening to Expedia, Travelocity, Orbitz and Priceline reinforces the fact that they are really the legacy online players. Nothing new from the panel and a characterization of Travel 2.0 as "tools" misses the fragmented nature of the every increasing number of new travel sites. Will Expedia et al be able to capture the Facebook/My Space generation?

Live from PhoCusWright

I am listening to the opening panel at this year's PhoCusWright Executive Conference. The Wall Street panel seems to be missing the Travel 2.0 wave by labeling the new move to social networks and other Travel 2.0 brands as not worthy of investment and incapable of stand-alone success. The attitude expressed seems to be missing the next disruptive impact of true Travel 2.0 apps. I am not surprised that this panel is blind to the shift as they all cover the traditional 1.0 companies that has gone public, who in general also are not understanding the latest trend.This group probably ignored Google's growth in the early 2000's because the "search area" was already established. There is a tidal wave a foot and Wall Street is still focusing on traditional 1.0 companies, what a shame.

See You in Hollywood!

A little later today I will be off to the PhoCusWright Executive Conference in Hollywood. As an PhoCusWright analyst , I will be blogging both on the PCWI blog site and on this blog as well. With the focus on Travel 2.0, this year's conference promises to be packed with lots of announcements, engaging presentations and controversy -
o Are Travel 1.0 companies ready to embrace Travel 2.0?
o With the recent buzz about Web 3.0 ( the semantic Web), how will that impact this week's discussions?
o What new alliances will be announced at the conference?
I will keep you posted.

See you in Hollywood!

The Consumer as the Ultimate Aggregator

Much has been written about the changing travel distribution landscape. The four GDS have been forced to lower their fees in exchange for "full content" agreements with the airlines. A closer look at these agreements reveals loopholes regarding special promotional fares. Recently there has been some rumbling from the major hotel chains about going direct. TMC platforms such as TravelBahn (Amex) and Symphonie (CWT) are being promoted as the ultimate solution for total content. GNEs have emerged as viable aggregators and alternate distribution platforms.

Within this context, old models continue to be the dominant theme as the traditional distribution players promote their definition of total content. A key point missed by this familiar discussion concerns the very nature of the Internet itself. So let me ask, how many travel Websites are there on the Web? What percentage of these sites have content in a single system? This facetious comment does have a point. There is no limit on content on the Internet. One might argue that there are a limited number of airlines, hotels and car rental companies so therefore there is a limit on the number of potential content sources. That may be true, but once you add new Travel 2.0 sites that promote user generated content, predictive modeling or mash-ups of fares and maps, the true nature of content is revealed. I believe that no single system will ever have total travel content. Ultimately it is the consumer who acts as the ultimate aggregator. The continued discussion which paints content as finite, misses the very nature of the Internet. Travel 2.0 will be followed by Travel 3.0, 4.0 and beyond. The way we think about online travel may be radically different within 10 years. Let's abandon the archaic notion of total content access and recognize that the travel industry has been permanently changed by the Web. Expecting any one source whether GDS, OTA or GNE to have full content is not only outdated, but ignores the very nature of the Web. At the end of the day it is the consumer who decides the relevance of content sources.

Using the Virtual World for Real World Business

Second Life is a virtual world where you can explore and interact with other online players. Initially Second Life was similar to other online multi-player games where an avatar representing your real or desired self can teleport to anywhere in the virtual world. Second Life gained additional prominence when it was featured on the cover of the May 20th Business Week. In last 6 months Second Life has attracted more traditional corporate entities. Last month my former employer, Sun Microsystems held a press conference in Second Life. Howard Rheingold author of such visionary books such as Smart Mobs, recently gave a talk in Second Life.

The travel industry has also made their mark in this new virtual world. "Starwood, owner of the chic W brand as well as the Westin and Sheraton chains, became the first real-world hospitality company to open in Second Life, and joins a growing list of other companies who are using the online world to build their brand name, test products, or simply sell merchandise (albeit digital merchandise). You can't check into aloft, Starwood's new line of moderately priced, loft-style hotels, until the first quarter of 2008. Since September , you can wander into the lobby of its digital version inside the popular online world of Second Life."

How else could real world travel companies use this virtual world? By definition, your avatar is constantly traveling, though teleportation is much faster and does not cost any money verses an airline ticket in the real world. Who provides a guide for exploring Second Life? The search functionality can be used to pinpoint particular places of interest, but what if a large travel agency developed enough knowledge of the virtual world to create tours? This is only one example. Given the recent corporate focus on Second Life the travel industry needs to pay close attention this virtually world as a way to promote their brand and provide services at a fee.

Loki - A new twist on Location Based Services

Traditionally, most software developers think of GPS or A-GPS as the preferred technology to pinpoint your location and deliver relevant content related to that location. Loki an application developed by Skyhook Wireless, uses the ubiquitousness of Wi-Fi networks to determine your location. Between the movement to provide wireless connectivity throughout a city (e.g. San Francisco, Philadelphia) and the integration of Wi-fi into portable devices (e.g. smartphones), the ability to use Wi-Fi to deliver location based services (LBS) has become a reality. In a recent article on LBS I authored for the PhoCusWright's GDX subscription service, I talked about the "walled garden" that exists at the wireless carriers which inhibits the advancement of broad distribution of applications. Despite the fact that the wireless carriers are gradually dismantling their "walled garden", companies such as Verizon and Cingular still make it difficult for travel software developers to use their network to deliver services that are specifically targeted to the business or leisure traveler.

Why is this important for the travel industry? The business and leisure traveler are by their very nature the best target for LBS. Business Travelers often are the early adopters of new technology. By enabling location identification through Wi-Fi access points, the traveler can benefit from a whole host of services. These may range from identifying restaurants in their immediate area to locating family members at a resort or theme park. These services can help suppliers and intermediaries bond with their customers while they are on their trip enhancing the travel experience and reinforcing the supplier or intermediary's brand.

Skyhook Wireless has recently opened up their API to allow software developers the ability to create location based applications on top of the Loki application. I encourage travel software companies to take a good look at Loki. Here is a link to a CNET video which describes the Loki service.

An Automated Travel Assistant

Every since I first viewed the historic Knowledge Navigator video produced by John Scully CEO of Apple in the late 1980's, I have believed that an intelligent assistant would truly be a killer app for the travel industry. As originally envisioned, Knowledge Navigator was going to be a tablet, the size of an opened magazine, and would have very sophisticated artificial intelligence. The machine would anticipate your needs and act on them. The Apple Newton was the first generation of these types of tools, but as anyone familiar with technology knows, the Newton was a resounding failure. (Though Palm a few years later did make PDAs a reality).

I have been involved with various AI scientists since the mid 1980s while I was still at United Airlines. A friend (the husband of one of my wife's bridesmaids) worked for a company called MAD Intelligent Systems here in Silicon Valley. Steve and I would spend hours talking about how to apply AI to the travel industry. Sadly Steve passed away in the late 1980s dying of leukemia at the young age of 35. Steve inspired me to continue to explore the possibilities of AI in the travel space.

We are now in the future (certainly in 1980s terms) and AI applications have been used in a variety every day activities. Examples include control, planning and scheduling, the ability to answer diagnostic and consumer questions, handwriting, speech, and facial recognition.

Over the years I have worked with a variety of clients who have tried to use optimization technology, constraint engines and other pieces of AI software to improve the travel process. Disruptive technology such as the Orbitz fare matrix was built by the AI scientists at ITA Software. My partners at Fetch Technologies represent some of the brightest minds in AI today. Once we are funded I plan to use AI techniques to fulfill the dream first described in John Scully's video. The creation of a master itinerary will allow us to run background queries to search for better fares, rates, and travel research items based on consumer preferences. In the early 1990s TMCs touted their mid-office software (such as TRX's CoRRex) as a quality control tool and as a way to search for better fares and seats against the GDS inventory. We are now in a much more fragmented, Web-based environment and the ability to use AI "agents" to perform similar tasks against Web information is not only possible, but can truly change the travel shopping experience.

Fetch Collaborative travel planning tool

I wanted to provide you an update on my efforts to launch a new company based on the extraction applications from Fetch Technologies. As a reminder, through the use of a Web browser plug-in, the application will allow the consumer to Collect, Organize and Share travel planning, research, shopping and purchases across all the major travel Websites. Travel Tech Consulting, Inc. and Fetch Technologies will be the founders of this new company (name TBD). Fetch will have a minority equity position in exchange for a perpetual license of their patent-pending "As U Browse" technology. The new company will own the source code and have field of use exclusivity (travel industry vertical). The new company will be based in the San Francisco Bay area.

I am currently in discussions with a number of VCs and Angel investors who are considering investing in the new start-up. I also have begun my search for potential employees who have experience in the online travel industry and are interested in participating in this new venture. If you know of someone who would be interested in either investing or joining our team, please email me at norm@traveltechnology.com.

Web 2.0 - Travel 2.0

The buzz about Web 2.0 and as a subset Travel 2.0, continues to get stronger. The flow of investment money into new start-ups in this area has been growing every month. As my readers know, I am always on the look out for emerging technology, not just for the "cool" factor, but with an eye on how it may change the underlying business practices in the travel industry. So apart from all the buzz words (social networking, mash-ups, user generated content) what does Travel 2.0 really mean to the underlying economics of the travel industry?

Any new wave of technology is often misunderstood upon its initial entry into the market, particularly on how it changes the economics of the business. That being said, a common cycle always occurs in respect to new waves of technology driven changes. The now hackney phrase of a "paradigm shift", still has an important underlying lesson that is still often overlooked: No dominant player in any market can simply rest on its laurels ignoring, or bad mouthing new technology driven by Travel 2.0 initiatives, while continuing to march at a snails pace in regards to innovation. For travel planning, the number of choices to shop fares, read travel blogs or search for packages has never been greater. The underlying message of Travel 2.0 should be setting off alarms at any Travel 1.0 company or application. This is true for the online travel market in both the consumer and corporate space. In fact, the corporate travel industry suffers from a long history of ignoring overall travel technology trends, suddenly to be awakened by their economic impact. In this sense the incumbent OTA giants (Expedia, Orbitz, Travelocity and Priceline) as well as the corporate online booking players (GetThere, Cliqbook, eTravel) must embrace new ways of thinking and if not risk being swept away by a new consumer driven trends. The economic impact of these changes is unknown, but the near term effect of an expanding universe of choices is clear: the old model where a single site or application can provide all information and comparative shopping capabilities for users is fading fast (if it every existed at all!). How can these single silo sites and applications embrace this new world? The first step is acknowledging the fact of the limitations of the single source concept, while seeking out partnerships that help bring the company's offering into more of a holistic solution.

AA/Sabre Deal, A big sigh of relief?

The last minute agreement reached between AA and Sabre has many in the corporate travel world breathing a sigh of relief. I fear that TMCs and corporate customers will quickly return to a state of complacency regarding the radical underlying changes happening in travel distribution. Yes this agreement avoids the additional imposed fees, but by its nature the new agreement also reduces the amount of "financial assistance" available to TMCs and corporations (provided there was a pass through). Anyone who believes that this announcement means the end of the content issue between suppliers, distributors and customers, is being blind to the fact that a major restructuring is underway in travel distribution. As I have stated in previous blog entries, the issue is one of control over distribution. The desire of airlines to dynamically price their inventory in different channels still exists. The work of companies such as ITA Software and Datalex to change the underlying systems used by airlines is providing a new opportunity for channel management. I encourage all parties in the corporate (and leisure) value chain to be wary of any message like "mission accomplished". The story is not over yet.

BTC's Position Paper

My apologies for being off the radar for a few weeks. I've been called back by the U.S. government (GSA eTravel project) to assist with a major software procurement. I can't go into much detail, but the solution has the potential to save some significant dollars (as in Billions) for the U.S. taxpayer.

I wanted to comment on the position paper published by the Business Travel Coalition (BTC) in April and which has acted as the organization's talking points concerning corporate buyer's view of the current changes in travel distribution. For those not familiar with BTC, the organization has been around for approximately 10-15 years. BTC's leader Kevin Mitchell is a well known advocate of corporate buyers. The BTC membership consists of some of the largest U.S. corporations. Mr. Mitchell came to prominence in the 1990s when he took center stage at a NBTA convention calling on the major U.S. airlines to abandon their frequent flyer programs due to their counter productive effect on corporate policy compliance.
BTC's latest stance has some valid points. There is no question the current distribution changes may have a negative impact on corporate buyers through additional fees and lack of total content. Where I disagree with Mr. Mitchell is BTC's complete dismissal of the issue of U.S. airline health. Over the last 4 years the major U.S. airlines have racked up more losses than all other prior years combined. During that same period we've seen consistent profits from the GDS and large TMCs. It is in the best interest of U.S. corporations to recognize the need of these airlines to cut costs through distribution so that they can remain profitable . The key point missed by BTC's position paper is the need for corporate buyers to gain control of the distribution of their travel expenses. Whether this involves traditional methods such as switching (or threatening to switch) GDS at a particular location(s) or working with the so called GNEs who have the ability to direct sourcing at a segment level, the key message has to be purchasing leverage. Alfred Kahn's (the Father of airline deregulation) comment at the NBTA conference in the 1990s regarding the airlines still applies: the definition of "yield management" is "you yield to my management". Rather than complaining about the evolutionary changes happening in distribution, BTC should be focused on educating their participants and corporate buyers in general on strategies to regain leverage in airline negotiations by controlling distribution.

Microsoft Live Labs Photosynth technology

Microsoft's Live Labs has introduced a new technology that synthesizes photos of a single destination from a variety of sources to provide an immersive experience for the user. Photo tagging is already a big part of Travel 2.0 and this technology has the potential to provide a travel shopper a true virtual experience of a destination by integrating photos taken by different people into a 3-D view of the location. By allowing travelers to experience a destination as part of the travel planning process, travel sites can utilize user generated content in a new way. I encourage you to check out the short video at http://labs.live.com/photosynth/video.html

BlackHistoryTours

For the last 8 months I've been working with BlackHistoryTours (BHT). The company was founded 6 years ago by Eric and Lisa Alboher. Since its creation, the primary focus has been on escorted bus tours for inner city youth to African American cultural sites. By creating tours around African American heritage sites (e.g. National Civil Rights Museum, the National Voting Rights Museum) BHT is using tourism to educate and inspire African American youth. In September, BHT will launch a new Website and booking capability (using EzRez) to position the company as a major African American travel portal for heritage travel. The National Trust defines cultural heritage tourism as "traveling to experience the places, artifacts and activities that authentically represent the stories and people of the past and present." According to the Travel Industry of America, 81% of the 146.4 million U.S. adults who took a trip of 50 miles or more away from home in the past year can be considered cultural tourists".

The nationwide launch of BlackHistoryTours (BHT) will serve as a model for a family of companies that will include other ethnic segments (e.g. HispanicHeritage Tours, HolocaustHistoryTours) all focused on cultural heritage tourism. The company is currently seeking additional investment. If you know of any potential investors please contact me at norm@traveltechnology.com

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GDS contracts

I thought I'd chime in on the current industry focus regarding total access fees and the renegotiation of GDS contracts. I tend to look at this issue in a very black and white fashion:

• Financial incentives for travel agents (and TMCs) are going away. Whether this is the first step (e.g. Sabre, Galileo) or a complete elimination (Worldspan) of these payments, it is just a matter of time until these funds disappear
• No travel agent or TMC can depend on total content from a GDS no matter what happens with the remaining hold outs (e.g. AA and Sabre, DL and Worldspan)
• Larger TMCs have already implemented technology (e.g. CWT's Symphonie, Amex's TravelBahn) to aggregate content. Second tier TMCs and below need to lean on their consortium to find a solution to this aggregation problem
• The Air Canada Tango issue is only the tip of the iceberg of the coming changes in how airline inventory is distributed. With all due respect to BTC, I am not hopeful that a negotiated solution to this issue will be reached.

At the end of the day the bottom line is that the airlines are continuing to bleed and the intermediaries and in some cases corporate customers will ultimately have to pay the price.

HP's "Memory Spots"

Yesterday HP announced a new "inexpensive, wireless, battery-free microchip that can store documents, audio files or video clips. The memory spots are similar in some ways to the more simplistic radio-frequency identification tags. But they are far smarter and more secure: They can store more than 250 times as much data as RFID, transmit data more than 20 times faster and encrypt it, sidestepping many of the privacy concerns over RFID tags." This new technology has significant implications for the travel industry. In the Mercury News article the reporter describes the new microchip as "an electronic Post-it note" that can store" dozen of pages of text, a 15-second video clip or other data" and that the results can be viewed on a screen of a cell phone that's waved in front of the chip, doing away with the need for a computer or Internet connection." This technology will be a crucial step towards what Howard Rheingold has described in his book Smart Mobs as "sentient things". The ability for anyone to annotate a physical location such as a restaurant, hotel or guided tours, places social networking into our every day lives. For example, I was on vacation the other week in Monterey California and my wife and I took a whale site seeing tour. Unfortunately during the 3 hour cruise we saw only two whales for about 4 seconds. If this tour company had memory spot at its offices I could have looked at reviews of this tour from other travelers and probably would have learned that whale sightings was rare that week. Now take that same line of thinking and expand it out to other travel spots such as hotels and restaurants and you can quickly see how HP's new memory spot technology will radically change our travel experience. The new technology is 2-5 years away from mass production, but has the potential to permanently change the way we interact with the physical world.

ITA Software's Focus

The travel press have been playing up ITA Software's recent announcement with Air Canada as a sign that the GNEs have been unsuccessful in their quest to replace the GDS. Again I must reiterate a theme from my prior blog entries: this shift in distribution is not about us verses them (GNE verses GDS) but about the ever increasing likelihood that a single GDS will lack total travel content. Why is ITA focusing on airline automation? The answer is very simple. The majority of airlines still run their reservation platform as a partition of a GDS and thus some of the same inflexibility that exists in the GDS mainframe infrastructure also exists in the airline reservation systems. The underlying message here is that airlines want control over their distribution platform and there is no better way to seize control than to implement an entirely new airline reservation platform that is independent of the GDS. I've known for some time that this has been a main focus of ITA and thus the announcement was not surprising. Airlines want to control the level of fare inventory through different channels. It is this underlying desire which will likely increase the level of fragmentation in the market. Despite all the flurry of GDS announcements regarding their new airline contracts, no single GDS has signed all the major carriers. In addition, as details of the distribution deals surface it is likely that some of the travel agents may opt-out of the deal limiting their ability to gather complete content. The major TMCs (American Express, CWT, BCD) have already built (Amex TravelBahn, CWT Symphonie) or are in the process of building (BCD Project Renaissance) their own internal systems to aggregate content. At the end of the day the need for a GNE (with a focus on 2nd tier TMCs) will be more important as a tool to aggregate content across GDS as it will be for direct connection inventory. Both G2 Swtichworks and Farelogix recognize this and each has promoted this capability. By the end of this year, some of the smoke will clear giving us a clearer picture of who has what inventory and at what price. Who pays for this access is still unknown as TMCs will struggle on whether to pass on this cost their corporate customers. The bottom line is that fragmentation is here to stay. This will not only impact the corporate market, but the leisure market as well.

Reuters Interview

Last week I was again interviewed by Kyle Peterson of Reuters. The article entitled : "Internet Travel Agencies Losing Some Luster" talked about the drop in stock price of the leading OTAs (Expedia, Orbitz and Travelocity). My comments were primarily directed at the underlying technology and UI of these large players and the fact that there has been little innovation in the way consumers interact with OTAs in the last four years. With the emergence of Travel 2.0, the OTAs are starting to look like old school players. Their ability to embrace and integrate other sources of planning content is at the heart of my comments that OTAs "need to think of more creative ways for people to take advantage of all these new sources of information". Most OTAs seem content to simply continue to push a model of a single stop shop. Finding a way to benefit from new Travel 2.0 trends such as vertical search, mash-ups, user generated travel blogs, picture tagging and collaborative planning tools is an essential evolutionary step for the OTAs.

JetBlue Wins Air-Ground Wireless License

JetBlue pioneered Direct satellite TV services and now seems poised to offer Internet and new phone services on board with the successful winning bid on Air-Ground wireless license announced on Saturday. For some time I and others have been talking about U-Commerce (ubiquitous connectivity). The idea of the always connected consumer is quickly becoming the reality and it is nice to see JetBlue lead this innovation. Of course wireless Internet is nothing new as Boeing's Connexion has been deployed on long haul international routes for some time. Every segment of the travel industry needs to start planning today for the U-Commerce wave developing applications and strategies that assist the leisure and business traveler while they are in transit.

Virtual Tours

I am very lucky to have part of my family (my cousin) Marc A. Smith who is a research sociologist with Microsoft. Now rather than going off on the implications of Microsoft employing a sociologist, I instead wanted to share with you part of our conversation we had last week. Marc has been very accurate with predictions over the last 15 years. While he was getting his PhD. from UCLA he worked as a contractor with Microsoft developing a virtual world using avatars. The project was dropped by Microsoft, but we see evidence of this approach with environments such as Second Life. Also while completing his studies at UCLA, Marc created a product called Netscan, which analyzes the social trends of news groups. These are just a few things Marc has predicted, so when he provides me guidance, I listen carefully. During our conversation last week, Marc commented about how virtual tourism will play a major factor in travel planning for the future. Whether it's Google Earth, Windows Live Local, Amazon's A9 Maps or geo-coded pictures from Flicker, Marc believes that in the near term (3-5 years), Web surfers will be able to get a ground level view of a destination and take a virtual walking or driving tour. I am not saying that this immersive experience will replace travel, but by virtually experiencing a destination through ground level photos and videos, the planning of travel will permanently change.

The Death of Travel Agents?

On April 17th, 2006 the American Society of Travel Agents released a summary of a new Technology and Marketing Report which showed that the traditional travel professional spends an average of 17 hours per week on the Web searching on behalf of their clients. As part of my effort with the Fetch collaborative travel planning tool, I've done presentations and demos with many of the major travel consortium as well as leaders in the online travel world. Since the launch of the OTAs (Expedia, Travelocity, Orbitz) the mainstream media has helped foster the idea that traditional travel agents are a dying breed. As a analyst and consultant over the last 11 years, I have been involved with a number projects for more traditional travel companies, helping them develop holistic technology strategies. As a result I believe the role the offline agent plays in complex travel planning is still essential. I wanted to use this opportunity to start some dialogue within the industry on this subject. So what do you think? Are the pundits who envision a completely automated travel process correct, or is there still value in the professional travel agent? Obviously I have some strong opinions on this subject and I would have to admit part of my view is driven by what I believe is a an opportunity for the Fetch travel tool to bridge the gap between the consumer and agent Web search. May ask you comments on the subject?

Update on Fetch Technologies Spin-off

I wanted to provide my readers an update on my efforts with Fetch Technologies and the "Travelsmart" (actual name TBD) tool. As I mentioned in an earlier blog entry, the Travelsmart tool allows consumers to collect, organize and share travel planning and booking content across all major travel Websites. Recently the last capability of sharing has been expanded to emphasize the collaborative travel planning and search capabilities of the product. The growth of user generated content is increasing the importance of a collaborative travel planning tool that combines the search efforts of the traveler, their spouse, friends and relatives (whether traveling with the traveler or providing advice based on past experiences with a destination) as well the role of the professional travel or call center support agent. Let's remember that Google does not work without a human driving the search. Travelsmart combines multiple parties efforts in planning and booking elements of a trip through a collaborative search process. We have a functional demo of the product that I've presented to over 30 travel industry executives. Overall the reaction has been very positive. Our short term strategy is to fund the completion of the development through distribution partners and angel funding. If your interested in seeing a Travelsmart demo please contact me at norm@traveltechnology.com

Excellent Article on Web 2.0

I would suggest my readers check out this article by Tim O'Reilly. Though it is a bit dated (09/30/2005) it does a great job of describing Web 2.0. Mr. O'Reilly's detailed analysis of the changes a foot in content and design is at he heart of new Web pages by Yahoo! (go to the new design page). Online travel has a long way to go to truly capture the Web 2.0 movement. The key themes need to be collaboration, user generated content and aggregation of multiple sources of data. Most of the major sites have not changed in any radical way to address this trend and thus have opened the door for new applications that harness these Web 2.0 capabilities.

New Mobile article on GDX

As most of you know in addition to my own consulting practice I work as an analyst for PhoCusWright. I recently completed a GDX article on "Using Mobile Location-Based Services to Enhance the Travel Experience". The article discusses an evolving, more open mobile architecture which can enable travel companies to work more actively with the telecom carriers to deploy travel specific location based services. Here's the Abstract:

As wireless communication becomes ubiquitous, a new opportunity is emerging to deliver highly personalized services to mobile users. One of the most powerful ways to personalize mobile services is to provide applications that are based on location. Since the late 1990s, the travel industry has experimented with mobile applications with minimal success. Recent changes in the underlying infrastructure for mobile application delivery is enabling a new way to deploy location-based services(LBS), providing travel companies the ability to deploy mobile applications that can be targeted at the leisure and business traveler. By the very nature of travel, early adopters of mobile applications such as LBS are often frequent travelers. Despite this fact, LBS applications that specifically target travelers have been slow to emerge in the market. With rapid adoption of smart phone technology and the increasing availability of higher speed wireless networks, the ability for travel suppliers and intermediaries to communicate with their frequent customers while on the road has never been greater. The mobile phone has emerged as the primary device for traveler communication. This Spotlight examines how LBS are created and provides insight into how they will and should impact travel e-commerce.

Air Canada and Alternative Distribution

Early this week Air Canada announced that no-frills Tango fares would be available exclusively through AirCanada.com, not through any of the GDS. This announcement is very significant in terms of the evolving world of travel distribution as well as the ongoing debate of GDS vs GNE. From a supplier's perspective distribution must provide low cost (something very clear to everyone in the industry) but also added value. In prior blog entries I discussed the need for airlines to implement channel management strategies which provide different pricing to different channels. I also have voiced my opinion over the last 2 years, the GDS vs GNE debate is not only about price, but also about the underlying technology. Air Canada is offering discounts of $8 one way or $16 roundtrip on Tango fares if travelers "opt out" of checking bags or changing their itineraries. The bottom line is that the GDS cannot handles this type of creative pricing based on customer preferences. Thus we've now witnessed a concrete example of how the legacy GDS environment is incapable of flexible pricing that matches creative channel distribution. I anticipate a lot more innovative pricing to emerge over the next two years exposing some of the inflexibility of the primarily mainframe-based GDS and demonstrating the true value of the GNEs. I am hopeful that the GDS will continue to offload functions from their mainframe to lower costs and provide a more flexible server technology, but until the core passenger name record (PNR) is de-coupled from the transaction system, true customer specific pricing will not be possible.

User Generated Content - Web 2.0

In recent PhoCusWright FYI pieces written by Cathy Schetzina, Direction of Information Services and Bob Offutt, Technology Analyst as well as an earlier piece written by John Bray, Vice President of Advisory Services, the authors describe a second generation Web 2.0 environment based on user generated content. I am in complete agreement with my colleagues at PhoCusWright on this issue and wanted point out a specific example on how user generated content can be tied to geo coding. Cathy and Bob mention Flickr tags in their article, but did not specifically highlight the Geo Coding aspect of these tags. If you go to http://www.flickr.com/photos/tags you can get a list of all time most popular tags. Immediately one will note the fact that top cities such as Amsterdam, Chicago and London show up on this list. Integrating this digital content, reviews from both online review sites such as Trip Advisor and IgoUgo as well as blogs, and other user generated rants and raves, highlights the need to find a way to filter this content and validate the input. Reputation systems that rate content based on the reputation created by the author is one way to sort through the ever increasing user input. Another idea is using constraint engine technology allowing the user to filter not only end user content, but all content based on a set of constraints defined by the user is another technology to consider. More on this technology in future blog entries.

The Line Between Self-Promotion and User Generated Content

Southwest Airlines has launched a blog as part of their Web strategy. This is an interesting example of how companies are trying to use newer forms of community generated content to help position their product. Southwest which has always tried to differentiate itself by its "happy" employees, is using the Blog to allow pilots, flight attendants, airport employees and management to express a point of view. Will other travel suppliers also create their own blogs? The biggest fear of any supplier is that the vocal minority of angry customers will take over the blog and thus cause some bad PR. This concern is justified, but overlooks the fact that the Web has already enabled dissatisfied customers to voice their opinions (e.g. Trip Advisor, IgoUgo). As consumer generated content becomes more ingrained into the buying process, providing an outlet for consumers through a supplier generated blog begins to make more sense, if it truly empowers consumers to have a direct dialog with management. If the blob ends up being simply a PR mechanism, it will have limited impact on shaping the consumer opinion and could ultimately anger consumers who want to express their views.

CWT and Navigant

Today another chapter was written in the restructuring of the travel industry with the dual announcements from CWT concerning the acquisition of TQ3 Navigant and the buyout of the Accor share of CWT by One Equity Partners. Was this really unexpected? Accor clearly signaled that they wanted to sell their half of CWT last month. Most pundits believed it would be very difficult for Navigant to re-create the TQ3 international presence. So clearly this should not be a surprise to anyone. The press has for years characterized CWT as a #2 to Amex's #1 position. To maintain this, (and perhaps go after Amex) CWT needed to continue to grow and acquisition was the most logical path. The next shoe to drop will concern Cendant and who ends up with Travelport. The interesting part of many of the deals of recent years is the role private equity has played with major acquisitions (e.g Worldspan, Amadeus, CWT and most likely Cendant). Private equity is looking for immediate returns and all four of these companies are profitable with solid ongoing income. Private equity is also funding the GNEs (e.g. ITA Software, G2, Farelogix). So who's right, the funding on traditional players or the embracing of new distribution platforms? Time will be the final judge. I would venture to speculate that ten years from now there will five players in the distribution game (3 GDS and 2 GNEs) and they will look very much alike. On the TMC front today's announcements means more pressure on 2nd tier TMCs and their associated consortium (e.g. Radius) or partnerships (GET) forcing them to prove that their model works and is able to compete against the new mega - mega TMCs.

Convergence and Behavioral Advertising

Back in the early days (1995) of the Internet (and my consulting practice as well) there was a lot of press devoted to the convergence of TV, the Web, and mobile communication. Today, the vision of U-commerce is slowly becoming a reality as the always connected consumer who is able to transact on multiple devices is emerging before our eyes. With travel being a top e-commerce category as well as a major online advertiser, our industry is in the midst of this permanent change in consumer behavior. As consumers are empowered to control content and the method for transactions, more personalized advertising is needed. Will behavioral advertising emerge as a mainstream vehicle to reach the new empowered consumer? There are mixed views on this subject. Some feel that former spyware companies such as Claria haven't really changed their ways and continue to load unwanted software on your computer. Obviously the VC community does not share this belief as Claria has recently received $40 Million in new financing. To better understand this subject, one has to look at what is happening in mainstream advertising. The advent of Tivo and other DVRs have a significant segment of the population skipping over traditional media advertising. TV shows are being released on the Web for nominal fees on i-Tunes without advertising or will soon be released for free by Disney, but with a technology that prevents the consumer from skipping over commercials. On Tivo you can selectively view ads that are suggested based on your viewing habits. Similar to the pitch by contextual Web advertising companies such as Claria or WhenU, Tivo clearly states in its privacy policy that it does not share specific consumer tracking behavior, but instead looks at aggregate behavior to understand overall trends and specific sub-markets. It is from this aggregate behavior, ads are targeted based on groups of consumers who have similar viewing habits. On the Web, intelligent agents capture surfing behavior and then position ads to match the subject you are investigating. Barry Diller's IAC recently announced a tool called Pronto which provides competitive offers to the consumer based on the products they are researching, another example of this trend. Overall I believe we are at the beginning of a new type of relationship between buyer and seller where advertising plays a more targeted role to purchase decisions allowing the consumer to learn about products and buy those products from a variety of devices.

ITM Study on SBT in Europe

A recent study by the Institute for Travel Management, a UK based organization that focuses on corporate travel, highlighted the disconnect between pundit predictions on the adoption of self-booking tools (SBTs) and feedback from members on a recent poll. The conclusions drawn from this survey emphasized the gap between the expectations of buyers and the actual adoption as well as the disconnect with their TMCs. Based on recent research I conducted that will shortly be published by PhoCusWright, I understand the reason for this response, but differ in my opinion on why buyers voiced these concerns. Overall Europe is at a different evolutionary stage of SBT deployment. The UK and Nordic regions are the most advanced in SBT selection and deployment, but overall the market is still below 20% adoption for corporate self-booking tools. The US experienced similar disappointment and lack of TMC integration when SBT became the major trend in 2000. A good portion of the problem with TMC relationships lies in the second tier TMCs who don't fully support self-booking viewing it as competitor to their standard services. The European market is now moving quickly to come up to speed with online corporate technology and thus it is my opinion that these issues will begin to fade as more companies embrace online channels and more 2nd TMCs come to the conclusion that Self-booking is a critical part of the travel management process.

Google Travel speculation

Some media outlets picked up as news speculation in Russell Shaw's Znet blog that Google intends to enter the travel booking market and partner with Orbitz. This story demonstrates a number of interesting trends. First how a blog can generate a "news story". The basis for Mr. Shaw's speculation concerns a job posting for a "Senior Account Executive Travel Vertical". I am amazed that Mr. Shaw would draw broad conclusions from this job posting considering the fact that Google has had similar postings on the Web for the last two years. This job posting is nothing more than an advertisement for a sales representative to target potential travel advertisers based in Chicago. To take this job listing and speculate that Google will now enter the travel reservation business with Orbitz is not only a wild jump in logic, but demonstrates how educated tech writers are not necessarily educated in the nuances of the travel industry. Don't get me wrong, I do suspect that Google is considering some sort of travel vertical initiative, but to use this job posting as evidence shows that the writer lacks an understanding of Google's current travel industry positioning. I would more accurately speculate that when Google does make its move into the travel industry it will leverage its core search capabilities to drill deep into travel Web sites, allowing more effective comparative shopping. A more logical observation from Mr. Shaw should have concerned the Google capability to search multiple travel sites when you enter a city pair (e.g. San Francisco New York) into the search engine. This feature was introduced in 2005, something Mr. Shaw doesn't even mention in his blog.

What Do the AA, CO & LH deals with Worldspan Mean to the Changing Distribution Landscape?

During the last two weeks Worldspan has announced new five year contracts with three large airlines: American, Continental and Lufthansa. Do these contracts signal the end of the buzz around alternate distribution? In my view, major structural change in distribution will continue (and even accelerate) despite these announcements. Many pundits are quick to point out that it was these three airlines that seemed to be making the most noise about alternate distribution and that their agreements with Worldspan seems to contradict their very public efforts. AA and CO were in the news with letters to travel agents saying that they may not participate in all GDS. As part of the Star Alliance, Lufthansa's technology subsidiary (Lufthansa Systems) announced a new agreement with Farelogix to power an alternate distribution platform for Europe. The bottom line change that is happening in distribution is NOT only about GDS bypass, but overall distribution preferencing. In other words, there are major changes under foot to allow suppliers and distributors to direct where inventory is shopped, priced and fulfilled. This capability goes down to the individual reservation level and can be different at each stage of the booking process. This underlying ability to control distribution is at the heart of the changes happening behind the scenes between suppliers and intermediaries. It is essential that everyone stay tuned to this issue as I believe it will permanently impact both consumer and business travel reservation processing.

Globalization of Travel Software

On Monday evening I returned from a week in Europe visiting two clients. These meetings reinforced my belief that all segments of the travel industry are evolving to be more global in nature. Despite this fact, the trip reinforced the need for travel software vendors to understand and adapt to regional and country specific requirements. It is my belief that the level of online travel adoption is the key metric to watch in determining the maturity of a given market and related strategies. As consumers embrace online travel, the traditional infrastructure of distribution becomes strained. The recent announcement by the Star Alliance airline group regarding the alternate distribution strategy driven by Lufthansa Systems Group and Farelogix mirrors the growing adoption of online travel in Europe. Another example of the inability to implement a single solution globally can be found in the corporate travel self-booking tool market. Even though vendors such as Amadeus have been pushing a single self-booking tool as the solution to global travel management, few global corporations have implemented the same tool in all locations. Other examples of the fallacy of overlooking individual market needs while developing global strategies manifested itself in the problems experienced by Cendant in trying to integrate e-Bookers into their family of online sites. E-bookers was created to address a specific regional niche (long haul ethnic travel) and thus was not easily integrated into the broader Cendant B to C family. The bottom line is that global aspirations are great, global implementations are extremely difficult. Despite our ability to instantly communicate in real-time to any place on the globe, cultural and local issues are still a major factor in implementing travel software products or services on a global basis.

High Yield Traffic

A clear battleground is emerging around the airline's efforts to capture high yield traffic through low cost distribution. First I need to clearly define what I and the industry mean by the term "high yield traffic". In a simple sense, high yield refers to the travel segment that is willing to pay a higher fare for a perceived value. This may sound counter intuitive as leisure customers browse or use meta-search for comparison shopping and corporate customers push for lower fares based on volume discounts. A focus on high yield customers is not a new thing, as I recall listening to many GDS executives at different travel conferences over the last 4-5 years who preached the benefits of using GDS distribution as a way to access high yield customers (no doubt a heated discussion this year as GDS try to re-sign the major carriers to full access agreements). At the heart of this high yield focus is the belief by travel suppliers that they can offer a differentiated product to attract customers. Historically business travelers would often choose more expensive flights based on short travel windows, schedule advantages (non stop verses connections), ability to upgrade, airport preferences or other factors. Obviously the emergence and high adoption of Self Booking Tools (SBTs) has allowed larger corporations to control and track this behavior at the point of sale. So who is the high yield customer? An obvious answer to this question focuses on the large mid-market (corporations that spend between $2M - $12M on air annually) which has been slow to adopt online booking (26% according to the latest BTN report) and where many 2nd tier and 3rd tier TMCs continue to hold on to customers. The recent resurgence of airline corporate portals are an additional attempt by the carriers to attract the mid-market to their direct channel. Rather than limiting this focus on just the mid-market, I would argue that every single customer including leisure shoppers, small and mid market business travelers and large corporate travelers are potentially high yield customers, provided the airline can truly differentiate their products by demonstrating the value associated with a higher cost. This value may be in terms of a superior schedule, the ability to sell seats at different prices (aisle or window seats vs middle seats) , inflight amenities such as satellite TV and inflight wireless internet or the ability to upgrade to a more comfortable seat. In one sense, in an effort to differentiate, the airlines may in the midst of their own version of what we've seen in the hospitality market regarding the recent "bedding wars" among the major chains. Will the airlines succeed in differentiating their products and capture higher yield customers? The jury is still out and I would love to here your thoughts on the subject.