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.

Re-defining the Need for a Travel Booking Engine

For years a standard travel e-commerce approach to online booking involved licensing a "booking engine" for the Website. These booking engines began as a front-end to the GDS allowing the consumer to book air, car and hotel online. As travel e-commerce became more complex, booking engines often added business logic and customer profile information. An alternative trend to enable Website booking capabilities has an emphasis on the a robust middleware application. With this approach, the booking engine is nothing more than a presentation layer that sits on top of the middleware software and relies on it for all of its communication and business logic. The same middleware layer powers call center applications providing a common platform for online and offline customer interaction. A robust booking engine which contains customer profile information and business logic limits the use of the these functions for offline call center agents. Despite the hype around touchless travel, the offline customer agent still plays a critical role in travel e-commerce, especially for complex itineraries. Allowing this agent to pick up and complete partial reservations created by the consumer is an important role and turns call centers into customer care centers. This trend towards a robust middleware application continues to grow with many vendors providing this new functionality.

Personalization

When I launched my consulting practice in 1995, many of my early clients (Carlson Leisure Group, Broadvision) focused on using personalization techniques for travel planning and booking. It is surprising that now in 2006, we've still seen few efforts by the major travel players to filter queries and deliver more personalized information for their customers. There are some obvious concerns about embarking down a personalization track. Consumers have little patience to fill out detailed preference profile forms (as well as privacy concerns) and attempts to determine preferences implicitly often alarms consumers that "big brother" is watching. Despite these obstacles, I am still convinced that personalization has a role in travel planning. Currently a basic knowledge of past itineraries is not being used to predict future choices. If you are working on personalization techniques for leisure or corporate booking systems, please let me know as still believe that providing filtered content that meets customer's needs can improve the efficiency of online booking and value to the end consumer.

It's All About Aggregation

I wanted to further clarify my beliefs regarding the changing travel distribution environment. First let me make one point clear, I do not believe the GDS will "replaced" by the so called GNEs. A more realistic scenario is that both GDS and GNEs will exist as low cost distribution channels. The debate should not be framed around GDS verses GNEs. Instead the issue concerns the point at which travel content is aggregated. Whether the major industry players are willing to admit it or not, we live in an environment where inventory is already fragmented. Here are just a few examples to prove my point:
1) LCCs such as Southwest airlines cannot be purchased online other than at southwest.com
2) In Europe where 80% of the hotel inventory is from independent properties a majority of these properties are not in the GDS and therefore not available through traditional GDS-based booking engines. This applies to rail and ferry travel as well.
3) The major TMCs such as WorldTravel are investing millions in a new platform (project Renaissance) that will aggregate content from multiple inventory sources.
4) Large leisure agencies (e.g. Liberty Travel) have also been investing heavily in infrastructure changes to accommodate the new multi-source environment.
At the end of the day, suppliers (air, car and hotel) must have the right to chose how they want to distribute their product and at what price. This is basic market economics which has been masked by a distribution environment controlled by a few large entities (the oligopoly that has been the GDS). The Internet has permanently changed distribution by opening new and emerging channels. The GDS will continue to be a major source for travel inventory, just not the ONLY source.

Reuters Article

It was nice to be quoted in a today's Reuters' article. Unfortunately , the reporter became confused between the definition and concept of a GDS and that of an online travel agent. Though there is a connection between online travel and the GDS, (Travelocity and Orbitz are owned by two of the GDS, in the case of Cendant they own both Galileo and Orbitz) the way the reporter tied the two together is incorrect and misleading. The issue is about distribution and value, not online travel. Considering Orbitz's direct link technology, they themselves are already bypassing the GDS. My comment about leakage stands. I believe we will see some inventory go through GNEs in 2006. The real question to ask the GDS, is how low can you go? Is there a floor on their ability to match GNE pricing? What role does technology play in setting distribution costs? The GNEs say it plays a major role. The GDS says its all about price. We'll see who's right this year...

Dynamic Packaging verses Dynamic Shopping

Dynamic packaging has continued to be the topic du jour for many suppliers and intermediaries. In addition to online travel agencies offering dynamic packaging, many core supplier have also thrown in their hat to the dynamic packaging trend. A driving reason for suppliers to offer dynamic packaging is the underlying belief that dynamic packaging will lead to increased stickiness and greater value to the brand loyal consumer. In my study entitled "Selling Complex Leisure Travel Online: Focus on Dynamic Packaging Technology" I described the emerging platform for dynamic packaging along with some of the factors driving this trend. Despite a clear growth of packaging options, many consumers continue to shop across sites combining air, hotel, car, destination research, and activities into their own custom itinerary. Will we ever see a day where these two trends converge to allow consumers to shop across sites, but still obtain an overall package price? It is unlikely that this will happen anytime soon, but this capability should not be overlooked as the Internet travel space continues to evolve. The Web is about freedom and consumers will continue to do comparison shopping no matter the capabilities of an individual site.

New Start Up with Fetch Technologies

I wanted to let my blog readers know of a new start up I am launching in conjunction with Fetch Technologies. Without divulging too much information, the new entity is based on patented AI search technology from Fetch that indexes the "deep Web". The product will be a traveler tool that allows the consumer to "Collect, Organize and Share" information from ANY travel Web site. More news about this exciting new start-up as it develops. In the meantime go to the Fetch Website and check out the Fetch Technologies Featured on KCAL 9 News link to learn more about the company.