Last week I attended The Beat Live
conference in Chicago. A special recognition from my side to the organizers: they did a great job in bringing together a group of very interesting industry experts contributing to the panel discussions. For all of you that were not able to attend the conference, I want to give a brief recap of what I talked about during my presentation. [more]
I strongly believe that we have a lack of innovation in the travel industry: While we progressed from paper tickets to e-tickets, other industries put a camera, a walkman, a TV set, an entertainment palace, a navigation device, a room filling computer, tons of literature, and the whole office into one single device in your pocket. And the makers of these ground-breaking industries are now targeting the travel industry. As we all know: Google bought ITA, Apple patented an iTravel service, Microsoft operates their own travel service and then there are a few wildcards such as Facebook!
Reasons become transparent once we take a closer look at the supply chain in travel distribution. We have three steps: Inventory management, the actual distribution, and sales! In an ideal world, inventory is managed by the supplier (as it was when CRS were subsidiaries of airlines), distribution by the distributor and sales by agencies or TMCs. In our industry, however, things appear to be different: Besides a high concentration in the sales area, inventory is managed by the GDS, distribution is handled by the GDS and GDSs also provide technology used within TMCs (such as agent desktops and corporate booking engines). Some of the GDSs even operate their own online agencies. Consequently, GDSs have a very strong position in our group. If there is one entity within a group that nobody can get around, then this one entity becomes the limiting factor of the whole group.
So in summary: Our industry works, but some call it "chaos" and bottom line is, I guess we all agree it could be better. Let's take, for example, the ongoing battle between airlines and GDSs; talks about playing the G-card (or Government-Card) to regulate ancillary revenues; or PhocusWright stating that the airlines are annoyed with the inflexibility and inefficiency of the GDSs. All this just proves that we are not happy with ourselves and our recent achievements. I have talked about these problems already in 2009 in my article "Only those open to change will reap the rewards."
Meanwhile there are other strong players outside the industry who always have an eye out for new opportunities. Google is one candidate, and you might question if this applies to the corporate market. Well, the whole corporate market uses Google for searching, so I leave this question to you. Obviously Google will target the consumer first, but once the consumer likes something, he/she will bring it into the corporate environment as well. Google has a strong market position, the money and the relationship with the end user. Combine Google and ITA with a service such as TripIt and you can assume that people will use it. What do you need the GDS for? You just book directly with the supplier and Google and others will do the rest! Are Apple, Google and Microsoft to take over the travel industry?
A good example for this scenario in recent history is the music industry. Consumers wanted to distribute music online. Instead of taking advantage of this trend and reinventing themselves, the music industry decided to fight Napster and the like--claiming it illegal. Well, in the end, nobody inside the music industry won. Along came Apple and combined two things: Listen to what people want: "distribute single songs over the internet" and find a business model to make money with it.
And here we go: 20% of the market belongs to Apple today. It's the largest single distributor of music! So what does this mean for us? I think we should probably reinvent ourselves before others force us to do so. We should stop fighting each other but work together and see how we can make this industry better. Better for the user! Stop negotiating and start innovating! Also we should stop saying "no" and start saying "yes."
If you are interested to know more about this subject, I would love for you to read my new book, "Value Creation in Travel Distribution," detailing the current inadequacies and the distribution struggle in the travel industry and offering no-nonsense solutions to address them. It provides well-researched access to the complete scope of the travel industry including: Analysis of the industry's status quo as well as major trends; market research; statistics and historical tables; airlines' roles; and distributors' and travel agents' positions in the present and in the future. Please click here to purchase the book starting at $9.99.