Posts tagged ‘GDS’
August 1, 2015
ECTAA the umbrella organization for the European Travel Agencies on July 24th 2015 filed a legal complaint to the European Commission. In this direct complaint the ECTAA group is claiming that the Lufthansa action in imposing a 16 euro fee for each booking with its DCC – Distribution Cost Charge made via the GDS directly contravenes several European Commission statutes. A full copy of the press release about their complaint can be found here.
Specifically ECTAA’s board charges that the DCC programme contravenes the European CRS Code of conduct. The full text of the regulation can be found on the European Commission Site .
ECTAA claims the following:
Following a detailed legal analysis of the Lufthansa announcement, ECTAA has decided to file a complaint with the European Commission Directorate-General for Mobility and Transport as Lufthansa’s action constitutes a breach of the EU Regulation N° 80/2009 on a Code of Conduct for GDSs. in particular in what concerns the provisions of the articles 10.4 and 10.5 of the Regulation. Indeed, if the Lufthansa’s Agent booking platform falls within the definition of a GDS as defined in article 2.4 of the Regulation, Lufthansa as a ‘parent carrier’ must comply with parent carrier’s obligations as specified in articles 10.4 and 10.5.
Further the organization is evaluating further action under EU law:
“ECTAA and its Members are further pursuing legal investigations to see whether Lufthansa’s actions infringe European competition rules (Articles 101 and 102 of the EU Treaty).
In the first instance for their complaint against Lufthansa Group there is one clear statement in the regulation that would appear to invalidate the position of ECTAA. Namely and specifically there are questions whether Lufthansa in operating the website Lufthansa Group Agent.com would be in breach of EU regulation. Under the act’s definitions (Article 2 section 5) it states:
5. ‘system vendor’ means any entity and its affiliates which is or are responsible for the operation or marketing of a CRS;
EU CRS Code of Conduct Articles 10.4 and 10.5 which were quoted by ECTAA state:
4. A parent carrier shall neither directly nor indirectly discriminate in favour of its own CRS by linking the use of any specific CRS by a subscriber with the receipt of any commission or other incentive or disincentive for the sale of its transport products.
5. A parent carrier shall neither directly nor indirectly discriminate in favour of its own CRS by requiring the use of any specific CRS by a subscriber for sale or issue of tickets for any transport products provided either directly or indirectly by itself.
It would appear that ECTAA is trying to argue that the new airline platform is indeed a CRS as defined by the code and therefore there is discrimination going on vs the other CRS companies – namely Lufthansa Group Agent.com is favoured against the competing platforms of Sabre, Amadeus and Travelport. However on close examination of the CRS Code of conduct there is a clear exemption which would appear to invalidate the ECTAA claim.
Specifically Article 5 we believe exempts Lufthansa’s direct channels as follows:.
5. This Article shall not apply to a CRS used by an air carrier, or rail-transport operator, or a group of air carriers, or of rail-transport operators, in its or their own office or offices and sales counters or on their own websites clearly identified as such.
As we can see from the attached screen shot this would seem to confirm the view that the site is clearly identified as being branded by Lufthansa.
With regard to ECTAA’s view that Lufthansa is in breach of the main competition law of the European Commission, the invocation of Articles 101 and 102 of TFEU. The complaint could also fall afoul of such European regulation itself.
Here is part of the text of TFEU Regulation 101 in particular one should examine the key provisions of Article 101 which states:
(ex Article 81 TEC)
1. The following shall be prohibited as incompatible with the internal market: all agreements between undertakings, decisions by associations of undertakings and concerted practices which may affect trade between Member States and which have as their object or effect the prevention, restriction or distortion of competition within the internal market, and in particular those which:
(a) directly or indirectly fix purchase or selling prices or any other trading conditions;
(b) limit or control production, markets, technical development, or investment;
As has been seen from the recent hotel price fixing allegations against Sabre’s hotel system with rate parity clauses being essentially outlawed – any attempt to force rate, fare or fee parity would appear to be in conflict with 1.(a) above. This would tend to support Lufthansa’s stated view that it would be against the law if the airline was not being able to change rates by channel and type and also to charge different prices by different channels.
However where ECTAA may have a point in that Lufthansa could be seen to be attempting to undertake behaviour which is specifically outlawed under TFEU section 1.(b) above. Additional support for ECTAA may be the question of whether Lufthansa is trying to leverage its dominant position. Further an examination of TFEU article 102 states:
(ex Article 82 TEC)
Any abuse by one or more undertakings of a dominant position within the internal market or in a substantial part of it shall be prohibited as incompatible with the internal market in so far as it may affect trade between Member States.
Who will win?
This is going to be interesting. There is a certain sense of urgency since Lufthansa’s DCC charge goes into effect on September 1st 2015, for four members of the airline group’s legacy carriers – Lufthansa (LH), Swiss (LX), Austrian (OS) and Brussels (SN).
My opinion is that Lufthansa is on solid ground with its process and decision. Further this movement has put a significant focus for the agency community who must now face the more urgent need to build deeper relationships with their providers.
The opinions and analysis expressed here are of the author and the examination of the available information. I am at pains to state that I am not certified as a legal expert and all views and writings expressed here should not be regarded as formal legal opinion and therefore must not be relied on as such.
July 6, 2015
Amadeus last week fired a salvo in the war with Lufthansa Group over the DCC. Read my very lengthy review of the detailed points with a surprising recommendation at the end. I believe that Amadeus needs to come clean about its own practices before it starts flexing its muscle against its former founding airline.
On 2nd July 2015. (copy attached below) i received a letter sent from Amadeus North America President and CEO – Scott Gutz. I would like to address the points raised in the letter.
It’s a Holiday weekend in USA. Lots of food and celebrating. Cries of “Liberty” and “Let Freedom Ring” are everywhere as we celebrate the Independence of this great nation. As a recent citizen, I tend to take the hard fought freedoms and liberties offered by this country quite seriously.
If I may – I would like to challenge some of the assertions made in the letter. Clearly there is a major difference of opinion between Amadeus, its CEO Luis Maroto and Mr Gutz and Lufthansa. Amadeus has shared its opinion how it believes the Lufthansa Group (LHG) Distribution Cost Charge (DCC) programme “will mean higher prices for travelers and how this is not about technology, but about commercial strategy.”
Interestingly I would say that Amadeus as a GDS owning company that they are right but perhaps unwittingly so.
If this is purely a commercial issue – I have to ask why Amadeus is not coming out in favor of a truly open commercial system? The argument Amadeus appears to be making is perhaps disingenuous. The commercial strategy of Amadeus is world domination. Already the largest GDS, and in a short while (unless a regulator wakes up one morning and realizes what is going on) it will be by far the largest PSS company owning 3 businesses:
- Amadeus ALTEA
- Hitit (Turkey)
- Navitaire NewSkies
I would like to ask that Amadeus needs come clean and shows a standard contract for an airline with global distribution agreement (GDA) and the full content agreement (FCA) terms completely explained. This includes the pages and pages of commercial restrictions that are apparently one sided in favor of Amadeus. And these restrictions have nothing to do with technology. I doubt they will do that citing some “confidentiality” clause. However why not ask Lufthansa or another other airline, hosted or not, to disclose the non-financial terms of the contract. Despite quite a number of efforts for disclosure, Amadeus seems to show that the company actually has something worth concealing. What is it, I wonder?
It would seem that the company is playing a bit of a shell game. The letter from Mr Gutz claims that Lufthansa Group is raising the price to the public. Has any GDS come to the public in recent years and announced they are raising the cost of distribution either directly or via unbundling certain products that it now charges for? It would seem, through analyst reports and the press that we have formal evidence of price raising tactics since yield and profits on the GDS and PSS businesses show rises every year. Has Amadeus let the market know that the full content agreement actually prevents many airlines from offering lower prices via certain channels? A practice that has been found to be largely illegal in the hotel industry?
Within the content of the letter, the statements would seem to imply that Amadeus has no restrictions on how Lufthansa distributes its product. Is that correct? Let me ask explicitly – does Amadeus allow LHG to freely direct connect any user to its content hosted in ALTEA with no restrictions and without any commercial penalty? And another question: “Was there any part of the GDA (the now expired contract for distribution with Lufthansa) that prevents or restricts LHG from distributing its content?
Is the argument Amadeus is making that it truly wants to provide Lufthansa with a totally free and open agreement for the airline to distribute the airline’s product anywhere? This would seem to be the implication with the letter. Or did the GDA and FCA agreements actually restrict what the airline can distribute, where and to whom? Further does the contract set (since you unbundled them in 2011) place restrictions on an airline selling its product? Does the contract even go as far as has been rumored specifically naming companies that an airline cannot do business with? Are the contracts with other airlines similarly restrictive and against the interests of a free and open market?
Returning to Mr Gutz’s letter, it states “The market has also rigorously opposed LHG’s surcharge, with strong reactions from travel agencies, corporations, their respective associations and consumer protection associations.” Further you state that “Travel agencies have felt deceived by LHG and this has led many to question their relationship with LHG.” I would say that there are a lot of airlines who would disagree with that statement. Perhaps the deception really is from Amadeus.
I really liked the part where the letter says how “A number of industry participants have questioned the legality of LHG’s approach, and the impact on consumers’ and corporations’ ability to compare airline offerings in a transparent and neutral manner.” The bit I really like is the statement “Amadeus supports initiatives that protect consumers, and the principles of comparison, transparency, and neutrality, and we have been explaining our position to travel associations about the impact the surcharge will have on such principles.” I would like to see how you have clearly explained everything including how Amadeus proposes to demonstrate this commitment to transparency and consumer protection.
Continuing on the letter it states: “Meanwhile, the feasibility of LHG implementing the surcharge in such a short timeframe is still unclear given that LHG has yet to share the details of the surcharge with Amadeus. We have raised a number of questions to LHG as a result.” So let me ask – do you share the Amadeus travel agent contracts with Lufthansa or any other Participating airline who has signed a GDA? Does Amadeus share its airline agreements with the agencies? So what are those questions you seek answers to? Can Amadeus please be very specific about them? With regard to the time Amadeus has implemented major new programmes in the past in just as short a time. 3 months is not such a short period of time.
I find the section where Amadeus questions Lufthansa’s approach is very interesting: “In terms of LHG’s commercial approach, we have seen that not all markets or agents will be subject to the surcharge.” In the spirit of fair play and equality does Amadeus charge universally the same fee or impose the same fees on all airlines and all Travel agents in all markets equally? Perhaps LHG is saying that the fee will be charged only when it is legal to do so. So does this actually differ from Amadeus behavior?
On the subject of Direct Connect, the letter states: “LHG has also hinted that direct connect alternatives might exist, sometimes offering commercial benefits for their adoption. LHG has already engaged with some of you and you will have already experienced the increased workload this means for you and the airline. As discussions evolve, you may also be tackling new topics such as content and economic guarantees, readiness and ease of alternatives, integration and maintenance costs, or approach to data. All these are important elements of your decision making. You are right – there is a price for disruption and change. The alternative point must also be asked. Is there a price for staying with a system that demands so much effort to actually produce a PNR? Has Amadeus ever done a study that shows that on the average ticket that it is faster/cheaper/easier to produce one via an agent or via an automated service? It would be great for everyone to see the actual costs associated with each channel. Will Amadeus share this data that it would appear the company possesses.
It seems that Amadeus North America is none too fond of the idea of IATA’s NDC – New Distribution Capability. Although some of the comments coming from Amadeus airline IT teams’ side have been sounding super enthusiastic. Lufthansa’s own announcement made it clear that they are supporting the standard. Which is it, does Amadeus feel – as it appears the letter implies that – NDC is bad for agents?
I think it is benevolent that Amadeus is committing to its monopolistic position. “Amadeus continues to strongly believe in the GDS and the service offered by travel agents to consumers and corporations. It is an efficient and cost effective channel, providing very significant value to travel agencies, travel providers and consumers alike.” Can you show how this works with regard to a fair apple to apple comparison. Since you have all the data (owning both a GDS and a PSS) perhaps you can give us metrics that show if this is truly the case. Or is the system so complex that such an analysis is not possible?
I think it would fair for Amadeus to show that the following really is true. “As you know, Amadeus is also an airline IT provider, offering direct connect solutions as part of our Airline IT Solutions”. Actually surprisingly there are still many agency customers who have been led to believe that the hosting services of Amadeus gives superior content to those who are Amadeus subscribers, even though there is supposed not to be any differentiation via the GDS channel. While there is no GDS regulation within this country, there is in Europe where Amadeus is based.
The letter states “LHG has had this technology for a long time but never deployed it, presumably because agencies never had an economic justification until now to adopt it.” Allow me to posit an alternative answer or answers to this analysis. Perhaps either the commercial terms were not pleasant. Or perhaps the Amadeus Direct Connect solution is not so technologically advanced which is why so many other companies are keen to try and improve on it and develop products that are really innovative and customer valuable. Indeed some are now in the marketplace.
Regardless of the IT provider, this would be a LHG controlled channel commercialized, managed and supported under LHG’s full responsibility.” I struggle with this last statement. Is there something wrong with a product’s owner controlling how their product is commercially offered? Is it not actually quite arrogant of Amadeus to imply that they (and only they) should be the arbiter of what is commercially good or bad for the market? This part seems to be at direct odds with your opening statements that include: “…Luis has shared how the surcharge will mean higher prices for travelers and how this is not about technology, but about commercial strategy.”
Commercial issues will mean that there has to be a change in the commercial structure of the market – perhaps this is not a bad thing. “Some of the key concerns travel agencies have raised with direct connects are: the agency’s ability to seamlessly service their end customers’ needs (given that the PNR would be owned by LHG, for example); the agency’s ability to seamlessly integrate direct connects to enable true fare comparison; the very high costs of integrating customized solutions for airlines; and the higher cost of managing many diverse content definitions compared to today’s standardized world of full content.” In any case is this a fiction? What is the percentage of services worldwide offered by airlines that are available through Amadeus or any other GDS? Is there a truly seamless solution in the marketplace? Is there a right of anyone in any market to have unilateral and unencumbered access to another company’s property?
LHG has chosen an aggressive strategy, using an approach that is unilateral and dismissive of the needs of travel agencies. We can only hope that LHG will listen to the concerns of the market, and earn back the trust of the industry. While I cannot and will not speak for LHG, I can only surmise that this position has been deemed to be aggressive because Amadeus was not informed first and that the announcement caught Amadeus unaware. Has Amadeus too, been aggressive both in the marketplace and also in the direct dealings with the airlines and travel agencies alike? Basically the PCA (GDA) and associated contracts from my understanding can be described as one sided and quite commercially aggressive. The same can be said for the agency Subscriber agreements. Some might say oppressive. The concerns of the marketplace – if the marketplace is deemed to be the travel agents – are that they are in a difficult position – squeezed on all sides. Yes, this was initiated by the Airlines. However, there is no need to hide the behavior of the GDS behind the skirts of the Travel Agents. They are really quite capable of taking care of themselves I would surmise. Given the size of the larger players such as Expedia and Priceline – I don’t see this as an issue. As Intermediary ticket sales have fallen to less than one third of the total airline ticket production – perhaps there is a clear message to the GDS marketplace that restrictive practices are not driving a positive market environment. Would you agree or disagree with that statement?
The Amadeus letter says: “We are committed to work together with our partners to find a resolution. If you have any questions or comments, please do not hesitate to contact us.” I am contacting you with just this set of questions. Does this mean that Amadeus is willing to open up its contracts and commercial practices to an open and transparent view and verification that they without punitive restrictions to either the airlines or the Travel Agents? If so – and Amadeus provides the best technology and solution – then surely there would be no need for Amadeus to have restrictive clauses nor a need to pay incentives to use their system. Is that a fair statement?
So let’s talk further about transparency and neutrality. Is Amadeus really trying to imply that it is transparent and neutral? I believe that there are many discriminatory contract clauses (for both airlines and agents) but I cannot divulge them – nor should I. Amadeus why don’t you do this, if you wont show the contract why not come out and give a solid pledge to the marketplace. And put teeth into by allowing an independent body to verify these statements and contract terms.
Here is my challenge to Mr Gutz and his colleagues at Amadeus. Put your money where your mouth is (in German, Spanish, French or any other language you like). Come with a pledge and say the following:
(Please repeat after me)
I, Amadeus do solemnly swear that all my contracts are in the best interests of the consumer, my airline and travel agency customers and the betterment of the Travel Industry. I confirm that none of my contracts break any laws nor do any of my agreements place a burden on my customers that may cause them to break any laws. I further promise that I do not in any way harm competition and neither prevent nor restrict access to my customer’s content on any of my commercial facing systems. I promise that my employees act in the highest possible ethical standards and have not in the past nor are today nor in the future will be aggressively pursuing either airlines or travel agencies with threats or coercive tactics. Further I promise to show a neutral consumer advocacy group every year my contracts to ensure that there are no commercial consumer restrictions in any of my agreements. Finally I promise to work with my partners to find a resolution to the long term cost of airline distribution and to work on the development of new technologies that will benefit everyone.
Go on – I dare you.
Thanks for reading this.
Managing Partner VaultPAD Ventures.
For a copy of the letter from Mr Gutz to which i refer in this post please click on the link below.
October 19, 2014
Rod Serling the writer and creator of that iconic TV show used to start each of his episodes of the famous TV show with a little monologue. Here is one:
“This highway leads to the shadowy tip of reality: you’re on a through route to the land of the different, the bizarre, the unexplainable…Go as far as you like on this road. Its limits are only those of mind itself. Ladies and Gentlemen, you’re entering the wondrous dimension of imagination. Next stop….The Twilight Zone.”
In San Diego this week at the IATA World Passenger Symposium. I really felt that I had entered this bizarre place. After directly witnessing (and feeling) the GDS companies ire, obfuscation and direct attacks on NDC for years and the Open Axis Group before that, it seemed as if I had stumbled on the campfire round which everyone was singing Kumbaya. The very companies that were warning of the dire consequences of NDC, paying high (and low powered) consultants, lobbyists and others to kill NDC even before it was born now embrace it with open arms.
Well not quite – picking through the well rehearsed lines and statements was a large bit of fudge. But frankly I don’t care how they got here. THEY ARE HERE. Yes ladies and gentlemen the bizarre and the unexplained has happened. The GDSs now believe that NDC is the best thing since sliced bread.
However, not so fast. We do not appear to be going into the land of the “different” quite yet. And this is my big concern. NDC is becoming shrouded in legacy processes and structures. This is where we could see the effort go off the rails. In my view the initiative is at a quite precarious state. There is a significant danger of the industry not taking advantage of the opportunity that has been afforded to it with the adoption of NDC (the communication standard not the panacea).
NDC is not new. XML is not new. Dynamic pricing is not new. Ancillaries are not new. But that does not mean that NDC cannot bring change and positive benefit to all levels and potentially ALL stakeholders in the Travel eco-system. The problem has to be now that adoption will require rethinking processes and long held assumptions about Airline Product Distribution.
The marketplace is dividing into three distinct groups.
# The early adopters and market movers. They are clearly out front and trying to distance themselves from the laggards.
# The great middle group who are confused.
# The sheep – those who must wait till its all safe and there is a clear model to follow
The first group is clear. There are airlines and IATA who are doing hard at work and have clear direction to adopt NDC not just in their indirect distribution but also they see there is value in the direct distribution area as well.. Companies like Farelogix, OpenJaw and Datalex who are IT providers are clearly in. And now it would appear that the GDSs are here too.
The second group is confused and the vast majority of players. Most Travel Agencies have no idea what it means because their primary source of knowledge has been the GDSs. Now that the GDSs have moved towards adoption – they need to spread the gospel to the Agency Community.This group is going to be thirsty for knowledge and will expect a high degree of coaching to get to the next level – adoption – of NDC.
The third group is waiting and waiting in finding a model that they can understand and adopt so they will wait until this process is well under way. The concern I have is that by waiting and hoping that it will go away – they will have a significant challenge to incorporating the new processes of NDC into their organization.
For those of us in technology, what we are sensing is that the users both internal airline and travel agency must step up their game. The agent community over the past decade did not go through the same extensive re-purposing of their roles and corresponding training that the airline staffers did. Can they? Will they? Every Agency now needs to have a technology person on staff or available to bring different content into the displays. The GDSs have clearly stated they cannot provide ALL content ALL ways ALL the time?
Where to from here?
The complete switch over by the GDSs as laid out during IATA’s WPS sessions must be turned into action. The GDSs must bring their customers into the 21st century. This includes extensive new products for the agency community and corresponding training and education.
So to end as Rod Serling would do allow me to end ……
On the road to sustained acquiescence and stupor, the GDSs didn’t quite make it. Something happened that changed their lives and those of all around them. The signposts were ignored about the end of the road. And there they found themselves and a different road. A detour through the Twilight Zone.
October 11, 2014
Ah – let us consider the humble airline seat.
Many start-ups question me on the complexity of Travel based applications. For many there is a quizzical tone in their voices as they struggle to understand why Travel is so hard, so complex and has so many variations. Let’s look at one of the most fundamental of systems that Travel has to interact with: the airline reservation system or more correctly PSS.
If you must go and look this up in Wikipedia – you will find unfortunately a fair amount of incorrect and misleading information. Sadly there is a lot of horse output spoken about the PSS systems. But sorting through the effluent – here are some salient things to know from a Technical perspective.
- PSS system are based on one way asynchronous “fire and forget” type messaging. A core concept is that the transaction is assumed to be successful unless you get a rejection message.
- Most availability functions are now cached at some level.
- The construction of an available price is comprised of a Fare, Rules and appropriate availability.
- Each state is out of date as soon as served up.
- Only GDSs have guaranteed results. For which the airlines pay a hefty fee.
- All XML type messages are never the full answer. They are ALWAYS a subset.
- A human can always find an alternative result (and in most cases at a lower price).
- Do not forget the add-ons for example seats and bags
- Consider data privacy
- Consider financial fulfilment
- Optimization is the best you can ever hope for.
The current standard for message interaction for transactions is the Open Travel Alliance (circa 2011 b) is probably the most representative of what is in the market. One can find various flavours of this floating around the web. However this is being replaced with the NDC standard. Current ratified version is IATA’s NDC 1.0 You can download the Schema here. This is about to have a baby, (which may be a sister or child – we haven’t quite figured that out yet.)
In looking at how this can be interpreted – there are a number further cautions I will provide.
- There is no universal source of airline supply. Both technically and commercially there is no ubiquity of service delivery.
- Make sure you have your own customer and transaction file system. Do not rely on the host to provide that service
- Be prepared for managing a constantly evolving set of services. Be prepared for constant change.
- Make sure you have considered the operational aspects. IE what to do if something goes wrong. Who will fix it? Don’t assume the airlines will help you out here.
- Selling on the web requires some form of commercial license. This means that selling airline tickets (if that is what you want) requires approval and there are many local and international rules that govern this.
- Whatever time-frame you think of – Add 6 months.
And where to go if it goes pear shaped?
This is where it gets ugly. Sadly there are few very good places to go for advice. I can offer some of this directly. And will answer the first question. But after that finding a reliable partner who truly understands the vast complexity of airline system interaction will require a lot of patience. There is no master class on this.
I wish you the best of luck on your quest. This is not for the feint of heart.
December 28, 2013
2013 has seen some clear indications that we are reaching a level of maturity in many parts of the Travel Startup ecosystem.
For startups things are humming along nicely. The world of the sharing economy seems to have pushed new life into the moribund world of truly different and innovative. Many people are taking a run at Tours and Activities again. And of course inspiration and planning seem to have been on a lot of people’s minds. And what is my take on this state.
In my view 3 things defined 2012:
- The blockbuster acquisition of Kayak announced
- The settlement of the Sabre vs AA lawsuit
- The launch of NDC
For 2013 – there was not as much going on. We had no real blockbuster events. Yes there was still a fair old amount of money pouring into the world of startup and innovation. Not a lot of it smart. I was singularly unimpressed with the crop at PCW’s First Philip-less Innovation Summit. (I suspect I am not alone there).
Hopper finally launched and I am rather unimpressed. This could be so much better. I think much of the world has moved on. In my view – Social Sign-ins should be OPTIONAL not compulsory. This really annoys me?
I don’t want to give Hopper or ANYONE ELSE my friend list. It is not my right to share other people’s data. Nor should it be anyone else’s. I am also getting tired of the minimalist interface that already frustrates me. I think I am REALLY tired of seeing a one box entry with a pretty background.
Let’s get into the sharing economy – actually let’s not. AirBnB is an amazing phenomena it has unleashed a way for the consumer to search shop and buy a stay that is reasonable and affordable. It is also illegal in most cases and multiple instances in the same transaction. However that illegality is not stopping the consumer. I just hope someone asks me to right the Risk statement in their IPO document. Sometime in 2014 AirBnB will likely be the source of the most room nights booked by a single brand. I firmly believe that AirBnB must be held accountable for the actions of its efforts. So far few people are considering the impact of the macro economic change that AirBnB is bringing to both short term and long rental accommodation markets.
So my final note is on the consolidation of power across the board in the travel supply chain.
Cars and Airlines have now migrated into a scarce supply. I have watched as the supply of the traditional (aka legacy) airline product supply has slowly concentrated. And boy has it concentrated. In the USA we have gone from large number of players to just – 4 yes FOUR AIRLINES. And for car rental that has now come down to a much smaller number. Hertz, Avis, Enterprise. Pretty much that’s it.
There is now a new reality – the days of neutrality are dead. We are dealing with the Dealership model and we need to get used to it. The consumer has less choice than perhaps he has had to deal with in a very long time.
In conclusion – i believe that the “old” new economy is fading and we are facing a more stable and somewhat boring world. 2013 has been a maturing of what we saw as the brave new world. The year of transition from the hyper-euphoria to more mundane things belies the need to fix a large number of under the covers infrastructure changes. (More on that in my follow up article for 2014).
As a postscript for 2013 – perhaps as a tantalizing look at how we can imagine the future – check out these new UX possibilities here:
Thanks for reading and here’s to a great 2014. Lunar year 2013 was the year of the Snake. As one – I welcomed the year with a bit of trepidation as it marked a major milestone in my life. Now I have had the chance to reflect – it wasn’t too bad. I wish all the best for your loved ones. May you find the true path and of course may peace come to all of us!
February 16, 2013
Many of us are starting to doubt the hype around mobile in Travel Technology. There can be no doubt that it is critically important. However as to the level of that importance and the extent to which we should ascribe real world activity should be placed under the microscope. At the recent Future Day in Miami hosted by Farelogix to show case Distribution trends in Travel one of the presenters was Norm Rose. I have pulled one of his slides to illustrate the point. (You can see the whole presentation here on Slideshare.)
I believe that mobile is not everything. It is a part of the ecosystem but not the entire ecosystem itself. Where I do agree is in the first part of his statement but not his conclusion – namely that within 5 years the concept of mobile as a separate entity will disappear. The line is already blurred. So why do I disagree with Norm on this topic? In my view the reason is that the infrastructure to support mobile is not living up to the hype. There are many barriers to entry not least of which is cost. But don’t take my word for it. I cite the study by Localytics from 2012 which showed that only 6% of total App use was via Cellular.
But is there hope for the change and that Mobile will become as valuable (albeit a little less than what Norm is saying)? There are a few missing components and one critical one I think is about to get solved.
Virtualization has become a major buzzword in IT as the ability to adopt different entities makes management of IT resources more tolerable. The explosion of BYOD and the advance of Apple to the top of the PC tree makes Virtualization an essential part of the IT arsenal. But for mobile – there is a different set of challenges. Not least of which is the size of the screens involved. Time to learn a new term Hypervisor.
For the brief value – let me describe Hypervisor technology as a way to add virtual personalities to your mobile smartphone. Check out this article. For a person like myself who travels extensively – I suffer as I have to keep track of different and real personas for the different markets that I enter. I carry usually 3 telephones. 2 Smartphones and 1 dual SIM device. Swapping SIMs is a way of life when I am in a market. Looking at my desk today I see within eyeshot – 11 different SIMs. Virtualization can and should help to reduce this clutter and allow me to adopt different personas for work (in my case different segments) and at the same time enable me to optimize the cost of the communications device.
This will not come easy and there will be a degree of resistance particularly from the Mobile Network people. It is estimated that some time this year the number of cell phones will exceed the number of people on the planet (2011 numbers have this at 87%). Looking at the top 65 markets we can see that the heaviest concentration is Saudi Arabia where the percentage of Mobile phone users to total population is a whopping 170%. That number of subscribers could be reduced with Virtualization, so the networks are not going to be too keen to give up any revenue.
Just a little food for thought as you plan your Mobile Strategy. Just let’s say you should be a little more cautious rather than being a simple iSheep!
November 20, 2012
Several thoughts came to me as I wandered around the Westin Kierland in Scottsdale.
The usual buzz was there but also a sense that this was the last version of the event that Philip (Wolf) created. Next year’s event in Florida will be a different affair as the lock down on the team will be up. I suspect many of the PCW staffers will be off seeking pastures new. I am sure that Philip will be back to run his monologue and stoke the audience. He certainly does it well.
As for this year’s presentation – there was a lot of worship at the alter of Hafner. Congrats to the team that sold the deal and the team that bought it. I have a sense that the price was a bit too rich for my thinking. It could be justified but its a bit of a stretch. I don’t doubt that the sellers were very happy. (Despite the usual lawsuit to muddy the waters). Hafner’s irreverence after what was probably a tough night before, allowed him to openly dish some of his competitors. He was not charming about Hipmunk.
The Google team – now unencumbered by conflicting agendas – were out in force trying to make sure that the Travel Industry thinks of them as warm nice and cuddly. Google makes Microsoft look like a 90 pound weakling in the bigger is better stakes. Jeremy Wertheimer mentioned GFS – Google Flight Search almost en passant. His baby got one mention during the entire presentation. On the other hand Google Now got a centre stage billing but the one that probably should strike fear in every person trying to crack Social Travel is WDYL.com or What Do You Love? If that doesn’t scare you nothing will!
The GDSs put on a brave face as usual struggling to remain relevant seems to be part of the challenge they face. Perhaps the biggest threat doesn’t come from the usual places. But there on stage in the Innovation Summit – Concur’s Open Booking should send chills down the spines of folks in Madrid, Langley and Southlake. The first time that someone is aiming an arrow right at the heart of the GDS – the TMC players. Belt tightening next year in corporate travel will have an impact with more and more people demanding to take control of their budget and making their Travel dollars go further.
Very few seem to have paid much attention to something that will have a major impact on Travel in the years ahead. IE IATA’s NDC – New Distribution Capability. Arguably with the potential to be a true gamechanger for the whole Travel market. Perhaps most people are dismissing IATA’s efforts as slow and ineffective as previous outings of distribution change. I am keeping a close eye on it because this is a game changing moment IF the powers that be don’t mess up.
The investment community was definitely abuzz with where the next Kayak or great idea would come from. The $250K award to Tourwrist in the form of a note from General Catalyst was interesting. In the traditional world there is now clear water between the top two OTA players – Expedia and Priceline and the second players – Travelocity and Orbitz. In the smokey back rooms suites and hallways, general concern about the diminished supply of air doesn’t seem to have concerned too many people. However the hotel market is just starting to wake up and wonder where those AirBnB et al room nights are coming from. Yup they are coming from somewhere.
Perhaps one of the most telling statistics I heard was that corporate policy compliance was continuing to decline. The cost of the heavy overhead from TMCs, GDSs and the GBTA is starting to weigh on real Travel budgets. The new generation of corporate travelers are not standing for the obstacles put in their way. At next year’s TIS – I predict that there will be some true innovation occuring in Corporate Travel. And about time too.
So till next year chaps. Enjoy the discussion and the intrigue, the fun and games. I almost got the impression that the Travel Industry has matured and is ripe for a big change.