Travel Innovation

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

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

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

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

Travdex

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

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

Innovation in Online Travel

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

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

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

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

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

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

Mobile Travel apps for 2009

A major New Years resolution for me this year is to blog at minimum once a week! During the last two months of 2008 I did not blog at all and I am determined not to repeat this long absence. My apologies.

A recent post by Tim Hughes of the BOOT (and VP of Orbitz in Australia) predicted that 2009 will NOT be the year where the travel industry embraces mobile.

I could not disagree more! Having now completed the PhoCuWright "The Future of Mobile Travel" special report, I strongly believe mobile travel applications will flourish in 2009 despite the global economic crisis. The two primary drivers of this mobile trend are the adoption of smartphones and the implementation of next generation networks (3G, LTE & WiMAX). The research clearly showed a correlation between frequent business travelers and smartphone adoption. Take a look at these two slides from our Special Report:





The key statistic here is that as of November 3, 2008 18.9% of consumers are now carrying a smartphone.










Compare that with our research results which found that 71% of Frequent Business Travelers own a smartphone. Additional research showed that 90% of frequent business travelers have owned their smartphones for less than 2 years, showing that smartphone adoption is a recent trend. You combine this with the explosive growth of 3rd party apps stores from not only Apple, but RIM Blackberry, Google and T-Mobile and it is clear that 2009 will see tremendous growth in downloadable travel specific applications.

These applications will be location and contextually relevant. The affinity between emerging mobile technology and frequent travelers will change the business and leisure travel experience 2009.

What do the Expedia PPC agreement and the Kayak acquistion of Sidestep have in common?

Two stories from late 2007 and early 2008 signal a shift in the online travel model. In November 2007 at the PhoCusWright conference in Orlando, Expedia announced a new agreement with IHG that included a pay per click (PPC) compensation model. The acquisition of SideStep by Kayak this month is another significant development. How are these two announcements related? The Kayak/Sidestep merger is a clear validation of the referral model, but also demonstrates the need for scale to be an online travel player globally. The Expedia PPC contract element reflects the simple fact that many people shop OTAs and end up buying at supplier sites a phenomenon that has been validated by PhoCusWright and Forrester research. For Expedia, being paid for referrals represents a new and important revenue stream. You then add Travel 2.0 players such as Farecast, Kango and the Nile Guide, and the value of search and travel planning tools represents a major growth area for online travel here in the US and globally. As the economy softens the value of the referral model is likely to increase as suppliers scramble to fill airline seats and hotel beds.

PhoCusWright - Expedia CEO part II

During his closing speech at PhoCusWright, Dara mentioned briefly an effort at Expedia to re-platform their technology infrastructure. So what does re-platform mean? Often the plumbing aspects of travel technology are not a common topic at any show including PhoCusWright, but here the re-platform initiative has a direct bearing on how Expedia works with suppliers. It concerns re-engineering their middleware to better match customer needs with supplier content. In today's online world, OTAs need to provide more flexibility to all their suppliers to manage the delivery of dynamic pricing based on different customer segments. Dara talked about this in relationship to hotels, but airlines are also are demanding a better way to showcase and target their services to specific travelers. This includes selling premium seat assignment or other amenities that can help differentiate their products. A great example is Virgin Atlantic's upper class which provides unique seating and amenities at a lower price point. Traditionally Expedia will show Virgin Atlantic the same as other airlines. Expedia's re-platforming initiative will help suppliers better target customers and use differentiated services to influence the sale at the time of booking.

PhoCusWright - Expedia CEO

Dara began with a nod to the new media based deal with IHG. He said Expedia's focus is to change the traditional impersonal relationship with consumers to be more individualized. Three areas of focus: (1) email (2) Segmentation (3) Search experience - lodging search experience to the next level.
(1) Email - described Amazon's email follow-up after search. Booking window, length of stay, impacting next visit at Expedia. Email as upsell opportunity. Purchase behavior impacts the type of email message generated. Occasion or event triggers for emails are more effect - 20X as effective. Air search with permission send email - 30X conversion rates
(2) Segmentation - demographic mailings. Unique content based on segmentation - Expedia Elite Group - premium service levels - no cancellation or change fees and other services
(3) Personalization - Optimization of lodging sort. Previously anyone would get the same sort. Built an algorithm sorting hotels with goal sending hotel partners more likely to convert and enjoy that hotel. Personalized predictions based on conversion - 30 attributes - kids, which site, length of stay, adding factors for partners inventory levels. Customer reviews

Summary - Long Tail - world is flat. One to one relationship with every traveler.

My comments - All this is not new, but does show a new level of maturity for Expedia in order to better target customer segments verses a vanilla approach traditionally followed by Expedia.

Live from PhoCusWright Private Equity - Karl Peterson TPG

The PhoCuswright conference kicked off with discussion of private equity investment in the travel industry with Karl Peterson. Karl emphasized that PE is in for the long run. He disputed the theme of the recent Business Week article which used the term of "strip and flip" referring to the process where PE buys public company, extract profits and then splits up the company into pieces. Philip's questioned Karl's assertion that they are in it for the long haul, as no doubt many in the audience agreed, as a spin rather than a fact. The Business Week article went on to say that the recent credit crunch due to the collapse of the sub prime market has tightened available financing for PE. I believe we have not yet seen the true impact of PE on our industry. Blackstone now owns two GDS brands and three mainframe reservation systems (Apollo, Galileo, and now Worldspan). Sabre is owned by PE. Though all the GDS have offloaded a lot of their content to more inexpensive server based technology, the primary customer information is still tightly bound to the transaction residing on the mainframe. With PE owners now controlling Travelport and Sabre, the true impact of cutbacks and technology overhaul is still not known.

Corporate Travel Technology: Today and Tomorrow

I am pleased to announce the release of my new study: "Corporate Travel Technology: Today and Tomorrow". The study is now available for immediate download at the Travel Tech Consulting online store: http://traveltechnology.stores.yahoo.net/cotrtetoandt.html

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.