Consultant Terry Jones, best known as the founder of Travelocity, doesn't think the global distribution system execs should be concerned about
Google's planned acquisition of ITA Travel. He also said people in his circles expect Google to spin off ITA's reservations business. Here are some tidbits from my interview with Jones, also a Rearden Commerce board member, chairman of Kayak and former CIO of Sabre, at the National Business Travel Association convention last week.
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Campbell: What do you make of Google's move?
Jones: It's interesting. Travel, from everything I've heard, is their largest single market for advertisers. Is it $1 billion, is it a $2 billion market? It's a big number. But with airlines, what will you search for? What can you advertise? So whereas I think they've been getting a lot of money out of various pieces of the marketplace, they haven't been able to get much out of air. So the purchase of ITA will allow them to do that. It's going to be paid search and it's going to be wicked fast and they will have to do something like Bing. Never forget, they're an advertising company, so how will they optimize that? ITA has nothing to do with cars and hotels; it's all about fares. They're smart people with a lot of money and they paid a lot of money, so they're not going to forget they did this. They'll be focused on it. It doesn't mean they'll be good at it. They haven't succeeded in all areas. It's a difficult business.
Campbell: Another reaction people have had to the Google-ITA announcement is that
GDS people should be scared. Transaction processing to me doesn't sound like a Google thing to do. What's your impression?
Jones: They do a lot of science projects but they're pretty clear about what they are. They are an advertising company. I guess you could say a GDS does that, but it's much more of a transactional engine. Look at the GDSs. Why are they private companies? Because they're shrinking, and it's hard to be a public company when you're getting smaller. They're throwing off a lot of cash, but they're the perfect private company. It's not a business you can get everyone excited about. Some have gone public, but it's a hybrid. GDSs should be afraid of senility. It's just an older business.
Campbell: But most of the shrinkage has already happened. That's been mostly consumer, but the business stuff stays there. In corporate travel do you see any big threats for them?
Jones: No, there's nothing that will supplant that piece. Rearden uses ITA but we also use GDSs. I don't think they're going away any time soon and they have right-sized their companies and that will continue. The next round of [
airline] negotiations will be interesting as they always are.
Campbell: I have read about
Google and cloud computing with ITA and the res system, and someone talked about the res system in the cloud. To me that was just ridiculous.
Jones: All the speculation around the acquisition was that's going to be spun off. That's not going to stay. Jeremy [Wertheimer, ITA Software co-founder] wants to do that. It's what he's interested in. I don't think they'll keep that business. Everyone I know who is talking to them is talking about that as a separate piece.
Campbell: He has to
get a customer.
Jones: He does and he will. They have rewritten it so it's in pieces as opposed to the Big Bang, so it's better to sell pieces. It's the Rearden strategy: go in with travel and then start selling them other stuff. Jeremy doesn't care about money; he wanted to make his people happy. He just wants really good science projects and he's very good at it. So they will continue to be a force; I don't know what his deal is, whether he's staying.