FlightCaster

October 13, 2011

Now writing at tnooz!

Hi Everyone:

In case you hadn't heard, I'm now officially a "Node" at tnooz. That means I now write regularly for tnooz, the go-to place for all travel industry news and debate.

It's a great honor, but it does mean this blog is now second fiddle to writing quality pieces for tnooz. I will still try to post here from time to time, but you should follow what I write there also.

Visit my profile page: http://www.tnooz.com/author/ekonwiser/

There you will find my latest articles, and make sure to also read what the other Nodes, guests, andstaff writers post.

And of course, if you don't already, follow me on twitter: twitter.com/evankonwiser

I'll keep you up to speed on all my writings, but general interest news, banter, and debate in the travel industry.

Thanks for reading and safe travels,

Evan

Posted by Evan

Comments [0]

July 19, 2011

tnooz guest post: Google entering travel could be nothing to worry about

I wrote a piece for tnooz about Google's acquisition and threatened domination of air search to be overhype.

You can check it out here: Google entering travel could be nothing to worry about after all

Agree? Disagree? Comment on the tnooz post to add to the discussion.

And make sure to follow me on twitter: twitter.com/evankonwiser

Posted by Evan

Comments [0]

June 2, 2011

Why Expedia had to deal with Groupon (and what made Groupon say yes)

Big news from the travel industry yesterday as Groupon and Expedia have announced a joint venture: Groupon Getaways

These will be typical Groupon deals ("up to half off") distributed through e-mail via the Groupon Getaways list. Groupon handles the user interface and deal distribution, Expedia will source the deals.

So here we go, a new frontier! Innovation like we've never seen before!

Or, is it more of the same? Groupon offered a Virgin America deal a few months ago and it appears the world is still turning. More so, it didn't even get abnormal buzz (anyone know how many they sold)?

In reality, I think Expedia was forced into making this deal by market conditions, strategic needs, and competitive threats. In short, they had no choice but to do this, and do it with the #1 player in the market. They were unable to succeed in this space on their own and they have a pricarious hold on the top spot in a market with iffy long-term fundamentals. To be fair, I do think this will be a good product and could do quite a bit of sales. But I don't think it's all that big news to the travel industry. I see it as a fancy new marketing channel for Expedia -- not necessarily changing how we purchase and get inspired for travel, but more just adding an element to how we interact with an OTA.

Here are the big questions and my stab at answers:

1) Why partner at all?

Expedia is the biggest travel brand in the US and Groupon already has a big salesforce that knows how to sell. Are you telling me Groupon sales reps can't sell to hotels? Or don't know how to put together packages? Living Social does it, so why can't they? Expedia, on the other hand, has already tried this with SniqueAway, which apparently isn't doing all that great. Expedia's failure to innovate is well documented. It took them years of their own mediocre mobile development before they bought Mobiata. I'm glad to see they figured out they couldn't do deals right alone, either. As for Groupon, they can go door to door to small hotels and certainly has the clout to call up Starwood and Marriott. What does Expedia really bring to the table? Maybe enhanced distribution and a marketing agreement to get members of both companies signed up for each other's lists. But to make this big deal just for marketing seems like a lot. My bet is it's the marketing dollars and existing booking engine that made this deal good for Groupon. With Expedia, they don't even need suppliers on board, Expedia simply can do it themselves by funding deals and providing a booking platform to execute. That is a deal that Groupon couldn't turn down.

2) What's the business model?

They didn't answer this publicly, but my guess is Groupon is getting a really sweet deal from Expedia. Part of it likely includes Expedia acting as the merchant itself early on and promising to fund many of the deals. Perhaps the deal breakage will help them re-coup losses, or perhaps they'll just use their really fat margins with some properties. The result makes this agreement free money for Groupon to leverage their mailing list and build a great user experience.

3) What are the competitors going to do?

By competitors, I mean Priceline. I have a hunch that Priceline was sniffing really hard on this one, and Expedia did something drastic to make the deal happen and keep them out. Priceline has quite a bit of money -- almost $2b cash on hand and a market cap of $25b! Expedia also has a bunch of cash (~$1.7b), but with a market cap of only $7.6b -- that's a lot less stock to give out in an acquisition or strategic investment. Am I saying Priceline was going to acquire Groupon? Probably not (although I wouldn't have been shocked to see something that big), but they could have made a major investment, or inked a big partnership. Or perhaps Priceline is about to buy someone else big in the space and Expedia needed to act first.

4) Will consumers like it?

If I knew what consumers would like, I'd be spending my evenings counting my money instead of writing a blog (see Jason's blog for our philosophy on that: Don't give bulls$^t advice). But I do think that the: "Pay $25 for $50" model might be more challenging for travel. You don't just buy credit to a hotel in Cancun in case you decide to go there in the next year, you plan a trip! The dollar values are higher and the trips take more time investment. This could be perfect for weekend getaways -- I see that as a major niche potential. Lots of sites have tried to inspire vacations in the past, but there is a reason Expedia and all the OTAs start with a destination box: It's what they're good at and why people use them. If I get e-mails from Groupon with cool destinations (as I do with Jetsetter et al now), it definitely piques my interest, but aside from a weekend getaway I'm not liable to purchase. Also remember the repeat business model is completely flawed here. In theory, people buy restaurant and local service Groupons many times over. Travel is a once or twice per year thing for most people. So even if you do successfully inspire someone to buy, they are only going to do it on occasion. Despite a higher average purchase, the scale here doesn't exist like it does in your local deals. Also, the entire merchant incentive to give 50% off is to get repeat customers. Do you think a Barbados resort thinks that by giving 50% to Groupon it will get repeat business? Likely not. That segues into my last question below:

5) Will suppliers like it?

Suppliers are already doing what they can to discount inventory. Like restaurants, travel inventory is perishable. Once the date passes, it's over. That is why revenue management became big in travel and is now ubiquitous for airlines, hotels, and car rental agencies. You might say that this will work just like restaurants, who currently give carte blanche Groupon deals all the time. Turns out, not so much. Despite also having perishable inventory, restaurants do not revenue manage! When you go in on a Friday, the menu is not more expensive than a Thursday. (Yes, they do very basic revenue management like early bird deals, and happy hour specials for sure, but not nearly as sophisticated as the travel industry). So my issue here is not that travel suppliers will not like the idea of Groupon promos, but that they'll want them to be revenue managed, which means a clash is coming. Andrew Mason in this video said explicitly there would be no restriction deals, but I'll believe it when I see it. Look for a mixed reaction from suppliers trying to figure out the long-term impact. In the meantime, expect Expedia to foot the bill. I bet they'll plow a significant marketing investment in funding early deals to show suppliers that it works. Then it will be up to them to make the pitch. For a while, I'd expect us to see great hotels and resorts in the marketing material, but really just Expedia credit that makes up the deal. Innovation? You be the judge.

I do not expect this deal to change any fundamental in the industry. It could be a great new marketing channel, but I'll eat my hat if in 12 months I'm expecting to use a Groupon to get 50% off coupons before buying my United Airlines tickets. To me, this is an opportunistic marketing arrangement for Expedia in an age when the long-term climate for OTAs is poor and Expedia wants to ride the daily-deal wave ahead of Priceline. Do I blame them? Nope. Kudos for making it happen. But just like local merchants will eventually rebel at consumers expecting 50% deals, I suspect the travel supplier is going to approach this like a lagoon full of alligators. Carefully. And with a shotgun.

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I'm Evan, the co-founder of FlightCaster and travel industry incendiary.

You should follow me on twitter at: twitter.com/evankonwiser

Posted by Evan

Comments [0]

May 31, 2011

Five Steps to Innovating Around a Big Slow Travel Company

I want to draw your attention to a great tnooz post by Alex Kremer today:

Travel industry gatekeepers should open their APIs to breed innovation

I whole-heartedly agree with everything Alex says, and it reminds me of some of the key points I tried to make in a post of my own last year.

In a talk I gave at The Beat Live biz travel conference in Chicago, I talked about how corporate travel companies had to open up their ecosystems, instead of being these walled gardens that are overprotective of their users and stifle innovation. See that post here: The future of corporate travel: How to change your approach to become truly traveler-centric

But I want to take it one step further. If Alex's post is for the big travel company who has an internal API and data cache that they are protecting, let this post be for the travel entrepreneur who wants to take them down. If they don't want to open up, then you'll just have to innovate around them until they either a) Have no choice but to play ball, or b) Become irrelevant to you (and inevitably, to the market at large).

Five Steps to Innovating Around a Big Slow Company

1) Use the few good APIs and extrapolate: When we were building FlightCaster and we wanted flight data, we called OAG, Innovata, FlightView, and the usual suspects. Some of them wanted a lot of money, others didn't have exactly what we needed. One company did: FlightStats (Conducive Tech). FlightStats had most of what we needed and were willing to work with us to create a package that was sustainable as a start-up and even had a self-service option (just as Alex suggests in his post). When OAG called back weeks later with some ridiculous pricing, we just said "no thank you". Similarly, we used the FAA's data feed for free.There are plenty of free APIs out there that can get you started, you just have to work with what you've got, not worry about what you can't get.

2) Scrape: When Kayak started, they scraped. Qunar.com in China scrapes. Mobissimo.com scrapes. This is the old-school meta-search tool. They didn't have fancy APIs with flight schedules and fares, nor did they have lucrative contracts with ITA. They just scraped. When Southwest Airlines said "no" to including them in search results, they scraped anyways (until they got a cease and desist, of course. But even that shouldn't stop a small start-up just getting off the ground). When we at FlightCaster found that the FAA API didn't have all the relevant info that was available on the web, we built a scraper. Suddenly our FAA "API" included several more fields that nobody else was using because they were too lazy to scrape it, including fields crucial to understanding flight delays. Similarly, when we wanted to do some analysis on fare trends, we scraped. We learned that some airline web-sites (e.g. Delta.com) allowed scraping quite easily with some basic workarounds that even beginner developers know well. Some made it more difficult, but you can either avoid those or invest in more complex workarounds. Nearly every web-site can be scraped reliably.

3) If your mouse can do it, your API can also: You can also build scripts which have your back-end infrastructure search and transact as if its a user. For example, you want to transact for one of your users on your site but the supplier doesn't have an API. Build a script which fills in all the fields on the supplier web-site and transacts as if its a user. On your site, it appears as if it all happens seamlessly. On the back-end, you're using the supplier web-site, not a fancy API. This can easily be good enough to get you off the ground and prove a concept.

4) Human-power: One of the most underrated tools for start-ups is what humans can do for you. Once at FlightCaster we were having trouble scraping fare data from a particular airline web-site. So we scaled down the data requirements and just took turns searching each hour and recording the data in an excel sheet. For our purposes, that was fine. Similarly, our earliest version of flight delay prediction was me opening up the 5 web tools I would use and manually predicting the delay (one of our early product names was "Virtual Evan". Sadly, FlightCaster was thought to be more marketable...). Even if the user enters the request online, the transaction can still be completed manually and the user never has to know. Even if this is not scalable (and you'd be surprised how far this can take you), it can get you to the point of investing in more permanent infrastructure or convincing a partner that you have the demand for their API. Amazon provides an awesome service for this called Mechanical Turk, where you pay people a few cents to complete a small task.

5) Go straight to users: Remember that at the end of the day, consumers rule. Case in point here is TripIt. They asked you, the traveler, to forward your itinerary to them and they were going to provide the value-added service of organizing your info. Now they have the data of who is traveling where on what airline, staying at what hotel, etc. And they know all the trips you've taken in the last year, and the ones you've already planned. They didn't start by asking an OTA or TMC for this info, they went and got it the old fashioned way, one user at a time. They got so much user data that TMCs were trying to protect that they were bought by Concur for $120mm.

If the travel community doesn't heed the advice to open their APIs, we will innovate around them. We're not going to wait and we don't need to. That being said, if everyone had easy to use APIs (even with a rev share pricing model), we'd probably just use them since they would make our products easier to build and more robust earlier on (always a good thing). If we do that, the API-owners can play in the upside and stay relevant in whatever new industry niches are created. Sounds like a win-win, right?

In the meantime, consider the five steps above. If you have more, be sure to let me know or add in comments.

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I'm Evan, the co-founder of FlightCaster, travel conference incendiary and industry blogger.

You should follow me on twitter: twitter.com/evankonwiser

Posted by Evan

Comments [2]

March 25, 2011

Why the mobile buzz is fizzing and how not to fall victim (for PhoCusWright)

A few weeks ago, I put together a presentation for the PhoCusWright Young Leaders Summit. The goal was to present something interesting to my fellow members of the Class of 35, something that reflected an industry trend. A tough task, for such a group of talented industry insiders.

On Friday, PhoCusWright announced that I was the recipient of their first ever Young Leadership Award as part of this program, so I thought I'd share it here on my blog. Now keep in mind this was done in January (things change fast!) and had a particular mandate, but nonetheless, I think the insights are worth sharing.

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Coming out of PhoCusWright 2010 in Scottsdale, I was nervous about a trend I was noticing. It was pretty clear that "mobile" and "social" were the buzz words of the year. Sure, "local" and a few others are increasingly sharing the spotlight, but 2010 was supposed to be "the year of mobile", wasn't it? And yet I felt like social was already dominating the discussion without mobile reaching anywhere close to its peak.

Let's assume for a moment that PhoCusWright's Innovation Summit and Class of 35 (young leaders) are good proxies for what's up and coming in the industry (not too far a stretch, I would think). I did some quick analysis and noticed that very little of the attention either on stage at the Summit, or in the dialogue among young leaders, was about Mobile. It was like mobile was sooo 2009. Going into 2011, everyone is focused on how to integrate with twitter, or facebook.

Hold on a minute folks, what happened to mobile? Is it done? Complete? Everyone has solved it? We heard on stage for 2 straight days that mobile is still a work in progress, not a proven business model, not a massive channel, just for marketing, etc. (so essentially, not solved at all!) and yet the forward-looking buzz is now all social.

I decided to take a look into the issue -- because I just don't believe this is reflective of smartphone growth and spending. Perhaps our industry was missing something, or too manic to stay the course!

Lo and behold, I found a few things interesting.

1) Business model for mobile still unclear, but investments finally being made anyways.

Perhaps 5 years too late, but Expedia finally admitted it couldn't build good mobile products, so it bought Mobiata (announced at PhoCusWright). Perhaps they were saying to the world that they *finally* get it: Mobile is important, so let's spend some money on someone who has proven they can build tools people want. Despite all the CEOs saying on stage that mobile is not a money-maker (albeit starting to drive meaningful search volume), there are some positive movements. Since I made this presentation, I'll also note Priceline launched their mobile web-site (well done!). Now, there is still A LOT of work to be done here folks, because these tools so far just move a good UI experience onto the smartphone, they don't actually take advantage of any of the features that come with it (e.g. interacting with the traveler while they're traveling). But, hey, it's a start, right?

2) Mobile, tablet, and desktop converging at a rapid rate

Two years ago, we all thought mobile apps were the key because it was soo hard to do anything on a smartphone without one. Today, it doesn't really matter that much, does it? Aside from a lack of flash, my iPhone does everything. My iPad does even more. The reason is two-fold: First of all, the iPhone and Android browsers are awesome (and RIM is finally catching-up). Second of all, network speeds are pretty fast now, and only getting faster. Together, this means your phone is like a mini-computer, not some specialized device. I admit, I didn't realize how important this was until February when I (finally!) traded in my ancient blackberry for a Verizon iPhone. It's like I was in the dark, and now can see light. The renaissance from the middle ages. The first buds of spring after a loong winter....okay, i digress. You get the point.

But the main takeaway here is that the industry is confused. We thought we had to just make our sites smaller and easier, now maybe we don't. Maybe now it's all about local and social applications on the smartphone. Or maybe it's about tablets. Or something else entirely. But the theme that unites all of this is: mobile! And the reminder of how disruptive this is comes care of Apple. Their recent Mac OS update includes an app store on the laptop/desktop. A peek into the future: Computer applications will be bought, installed, and used like mobile apps. So at the end of the day, which UI prevails? If you think it's the desktop UI because well, it's what we're used to and people will never use silly mobile apps on the desktops --- then I refer you to all those retailers who thought their web-sites would be at best complements to their brick & mortar stores circa 1998. You can find them in bankruptcy court.

3) Social is overwhelming us with awe and unknowns

The stats are hard to ignore, every person and their mother (and their dog and the neighborhood squirrel or hipmunk it chases) are on Facebook. It's ridiculous. Sometimes I think my parents are the only holdouts (fortunately I get to say that here because they won't know I posted anything). Perhaps when my 92 year old grandmother has an account before them, they'll start to rethink things.

Anyways, simply put: more facebook users than smartphone owners in the US. Period. Does that mean mobile isn't important? No. But it does mean that if you're a travel company with limited innovation resources, you have a lot of ground to cover, you don't know where to invest, and social is too hard to ignore, so at best you have to spread thin.

So what's the answer? Stop getting caught up in the buzz words, and get your mobile head on straight. It's too darn important not to. It's life or death. IPO or bankruptcy. Center Stage speaker at PhoCusWright or that attendee desperately looking for a job in traditional media sales.

How to get it right? Focus on two things:

1) Functionality that is just better in a mobile environment. It knows who you are. It knows where you are. It knows who your friends are. It might know your travel itinerary. Talk about power! Time to wow us, rather than just allow us to search hotels by shaking the phone to see what deals are nearby. (seriously, how many times are you buying a hotel nearby? And if you are, use Hotel Tonight. It's a sweet app. Click here to download it and I may or may not get referral credits)

2) Think of mobile as the future of your UI. Because it just might be. Pretend in 5 years your mobile apps/site gets 90% of your traffic (including tablets). What then? If that were the case, would you survive? If you can't confidently say yes, you've got some work cut out for you.

I'll give you until PhoCusWright 2011 in Florida to figure it out. Thanks to my $10k credit from from the Young Leadership Award, I promise you I'll be there, and ready to see who's allowed their mobile buzz to fizz for uncharted experiments in LocoSocioColor. I'll call you out on it, and maybe buy you a beer. You'll need it after the long year of watching your competitor's iPad apps eat your lunch.

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Like my blog? Don't like it? Either way, you should follow me on twitter.

Posted by Evan

Comments [1]

March 10, 2011

As oil prices go up, who you gonna fly?

Up up up go the oil prices, and it feels like 2008 redux. But this time around, airlines are at least a little prepared for the mayhem ahead. Two in particular have solutions to help you avoid the perils of rising fuel prices, or benefit from the false hype around the summer oil peak.

Late last year, I wrote about Continental's FareLock program. This allowed would-be travelers to pay an added fee to lock-in a fare without actually buying the ticket. My analysis was not so flattering, as I explained how airlines were abusing the revenue management advantage they already have over customers to add incremental revenue. The apt metaphor is betting against the house when they get to deal you the cards of their choice.

Today, I wanted to highlight an alternative approach, that of Allegiant Air.

In a letter to the DOT last month, Allegiant CEO Maurice Gallagher, Jr., asked them to reconsider the rule that says airlines may not change the airfare post purchase. While this sounds extremely consumer-unfriendly, Allegiant is proposing a specific use that passengers might actually not mind so much.

In a nutshell, Allegiant would like to explore offering two types of fares for any given flight: Fixed and Flexible. The fixed fares would be as any fare is today. Once you buy for $X, that's it (until you get nailed at the airport for lots of incremental fees, of course). The flexible fares would be dynamic, and would change relative to the price of oil. They would be conspicuously marked as such at the point of sale. Passengers would get a reduced fare, but take a gamble that oil prices will not rise. If they do, the passenger is promising to pay more money later on (up to a limit). On the other hand, Allegiant may also lower the fare if oil prices go down and offer a refund to the passenger.

This is brilliant as it offsets some of the risk to the passengers if they want it but doesn't change the business-as-usual fares. Allegiant already has rock-bottom fares and serves a leisure audience that buys their tickets months out, so the fluctuating fuel prices are particularly harmful to them. Additionally, their cost-conscious consumers might be willing to take this bet. If it doesn't work out, I bet they'll be happier paying that increase than they would the baggage fee at the airport. After all, it's not the airline's fault, it's the Middle East's.

This type of product might not work with some of the larger airlines. But let us differentiate this in two major ways from Continental's Fare Lock product:

1) Allegiant would give you a discount to take a risk, Continental is charging you to not take a risk. Additionally, Continental's is pre-purchase and Allegiant's is post. So the lifespan of the "risk" is only 3-7 days for Continental, but could be months for Allegiant.

2) Allegiant would peg the increase or decrease to oil prices, which are externally set. So now you are betting against a 3rd party, like sports, horse racing, the odds of the deck, or...the oil markets. This is an established, normal, rational bet to make. As opposed to Continental, who is asking you to bet against their own revenue managers who have all the data while you have almost none.

Kudos to Allegiant for once again bringing innovation to our industry. Let's hope the DOT considers an exemption for this kind of purpose (and it is implemented in a responsible way). If we're going to make it through this summer, we may need to see quite a bit more creativity from the airlines.

What other ways can airlines innovate to survive high oil prices? Comment if you have ideas. And no, raising prices 7 times in 2 months is not an adequate answer.

Posted by Evan

Comments [0]

January 25, 2011

tnooz: Why the industry should wake up and smell the new distribution coffee

My guest post on Direct Connect was published by tnooz this morning.

Please check it out: Why the industry should wake up and smell the new distribution coffee

Let me know what you think here or on tnooz. And if you haven't already, follow me on twitter.

Posted by Evan

Comments [0]

January 10, 2011

FlightCaster Acquired!

We're pleased to announce that FlightCaster has been acquired by Next Jump Inc. It's a good day here at FlightCaster HQ (freakin' phenomenal day!), and we're stoked about the new possibilities.

Before we go any further, let us address our users. FlightCaster.com will stay right where it is and continue to provide flight delay prediction for free. We're also making our mobile app free -- you can download it now. We'll continue to use our powerful algorithms to predict flight delays. We'll continue to push the envelope on getting the best travel intelligence to people when they need it.

Now, for a bit of context. While our flight delay prediction products are our most public-facing applications in production, we've actually been working on a lot of other stuff in the background. The biggest item in production over the past year has been an engine for travel discounts. We realized early in 2010 that helping travelers and businesses save on travel is as important as helping them get to their destination on-time. As we really dug into this space, we met the team at Next Jump and were blown away with their insights into discounts.

So who is Next Jump and why are we joining forces with them? For those of you who don't remember, Next Jump came out of stealth mode in late 2009. They are a leading source of discounts and loyalty programs and an increasingly powerful player in e-commerce. They power a number of web properties, such as the MasterCard Marketplace and Corporate Perks, which provide proprietary discounts and rewards to employees of member companies -- 90,000 companies in total. Think of it as a Groupon for brand names such as Best Buy, Sony, and Apple.

As proud experts in finding every possible travel deal, we were shocked to learn that we save so much money buying travel through Corporate Perks. The system works by giving you Next Jump WOWPoints when you purchase travel through your usual sites such as Priceline, Expedia, or Orbitz. You can then turn those points into cash or use them to get free stuff. We literally started booking all of our travel through Corporate Perks because we'd get the normal Priceline price plus rewards points equal to an additional 5% discount. Boo-yah, free money. After getting hooked on their product, we reached out to partner with them, and yada, yada, yada, here we are.

James, Jon, Evan, Jason, Jared, and Chase are full-time at Next Jump now, enjoying the ridiculous perks. We're in NYC for a couple of months and then we'll open up the SF office. Our bud Brad Cross is working with us part-time while he gets his newest brilliant creation off the ground.

So, what's next? Next Jump is a platform for discounts built on great data, and we love tackling data problems. We've set out to make Next Jump the best place to purchase travel and will be working on innovative travel products that best serve our consumers.

To those of you in the travel community, stay tuned for what's coming from Next Jump Travel. Evan will keep you informed on this blog, in addition to his usual ranting and raving about the travel industry.

Thank you everyone!

The FlightCaster Crew

Posted by Evan

Comments [6]

January 5, 2011

American Airlines is right! Time to move travel into 21st century only one decade late.

The travel industry is riveted by the chutzpah of American Airlines. By forcing Orbitz and Expedia to de-list AA flights, they are taking a hard stance on the future of distribution. The media storm suggests a stand-off of epic proportions -- one of the largest suppliers vs. two of the largest agencies in the world (and now Sabre is in the fray also).

But what is really going on here? Is this about fees? Is it about control? Is it about technology costs? A little of each, of course. But let me say what everyone is thinking deep down inside but few want to admit:

American Airlines is right. Expedia, Orbitz, Travelport, and Sabre are wrong.

For the OTA and GDS worlds, this is about protecting legacy, antiquated, unfortunate business models from technology that can cheaply and directly provide for us. This is like a tobacco company lobbying against anti-smoking because it'll hurt their profits, even if its good for the public (yes, I just went there, and no, I don't work for American, I don't even fly them much).

The industry is in an uproar that AA wants them to build new technological interfaces to work with Direct Connect. They are upset that TMCs won't get GDS fees if they go this route and the commissions that AA will pay them are uncertain. They claim that it is bad for the consumer, because it prevents apples to apples comparisons (really?) and other unsubstantiated complications.

Wow, could they have come up with anything else? How about those floods in Australia? Brought on by AA, no doubt. Quick, shut off Direct Connect before the floods reach Sydney!

The truth is American has been talking about this for years. They have established the API in conjunction with Farelogix, the Open Travel Alliance (and Open Axis Group), with many other carriers and industry players. They have been setting the stage that this is the future of distribution, that they want agencies to connect to them directly rather than through an intermediary. So it makes no sense to me that when they finally put their foot down and say that it's time to follow-through -- the travel technology community raises it voices in surprise, in confusion, in downright fury.

Let me quote Michael Strauss of PASS Consulting from a recent TNooz article:

"So here we are in a world where technology is ready to be implemented but progress and innovation are slowed down by political forces. It is as if we have this brand-new airplane that produces 50% less atmospheric pollution, but you are not allowed to use it as the revenue stream of the oil lobby would be cut in half as well."

Of course, he said that only after admitting that "it is challenging for us to promote direct connects" for at least the near term. So we all know the truth, right? We're just not collectively brave enough to act on it as an industry. That's a recipe for massive external disruption. If we can't do it, someone else will.

Agencies need to realize that they are distributors of travel inventory, and they are (whether they like it or not) at the behest of the supplier. Southwest doesn't want OTAs booking for them, so they don't allow it. If American wants OTAs to continue to distribute their tickets (which I'm quite sure they do), then they'll make the business model work for the agencies. Putting agency revenues at risk is not a sustainable strategy for a supplier who wants that distribution channel. And if they don't want the distribution channel, it's their prerogative and the onus is on the OTA to deliver more value.

The GDS needs to realize that their core business model is at risk (actually, if they haven't realized it yet, it's too late). Amadeus has been diversifying into more broad IT solutions for years. Sabre is a heavily diversified company, but the GDS is its gold mine. Travelport, well, they're getting there also, and their Universal API could be the "GDS 2.0", creating less cash, but playing a core role in travel distribution that will allow them to monetize other parts of the value chain. Of course the current GDS is a cash cow, but just like tobacco is watching their core model disappear, GDS also need to evolve. Simply saying "no" to the likes of AA won't do it. In the history of technology, it is invariably the companies that are first willing to put their core model at risk to innovate in the value chain that survive disruption, NOT the companies that put up walls.

If you don't believe me, let's examine Netflix vs. Blockbuster. Netflix put up streaming video as a free resource for subscribers, thereby making their core DVD business almost irrelevant. They put their core revenue stream at risk because they knew the future is in streaming, not DVDs. Now they have an opportunity to monetize the new model first, surviving the disruption. Blockbuster held onto its brick and mortar stores even though we knew the future wouldn't include them. Why? Because they made so much money and they thought it was a competitive advantage. Turns out, not so much. Now they're in big trouble (aka bankruptcy).

This is not an isolated phenomenon. Try Kodak. They invented the first digital camera in 1975. Yes, 1975. What did they do with it? Not much for decades, because it would completely destroy their underlying business of film and film processing. Even when they did have products, competitors had better ones. In fact, one of Kodak's first implementations of digital photography was to license it for a Nikon camera! (See Motorola, Nokia and digital phone technology for a similar story). By 2006, Kodak was the #3 player in digital cameras, with both Canon and Sony eating their lunch. They've also not managed to mitigate the impact of reduced film processing, having to cut employees.

When I look at Travelport's list of reasons why Direct Connect is bad, I think of a Blockbuster executive telling me that consumers want to always be able to go to their local store for a movie. That the infrastructure involved in delivering DVDs to their mailboxes or streaming would raise costs for consumers. That the business model of media companies will never support the digital revolution. In other words, that we're all destined to destroy the industry if we go along with this new, annoying, innovator. They'd be wrong. And Travelport et al, so are you.

Sooner or later, when this all settles, consumers, suppliers, and agencies will all win. Except for the GDS...they will lose. But the fact that they still wield so much power in 2011 is ridiculous. They should be happy their core model lasted this long and transition their businesses to lead this revolution, not respond to it.

So Orbitz, Expedia, Travelport, and Sabre -- Stop posturing for the benefit of GDS and hook up to Direct Connect already! We've heard from all your agency cronies but has anyone stopped to think what is really best for the consumer in the long-run? As a general rule, close connectivity with suppliers is GOOD for consumers. More customization, relevant merchandising, perks and rewards, etc. The notion that you need a GDS create discipline in shopping is technologically obsolete.

The delicious irony of this story is that American Airlines, the company that created the first GDS (and made billions off of it), is the company sticking out its neck to destroy them. Of course in other technology industries that would have happened in a matter of years, not the decades it took in travel. It's time to enter the 21st century --- I'll place my long-term bet with American.

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Like what I'm saying? Don't like it? Either way, you should follow me on twitter: twitter.com/evankonwiser

Posted by Evan

Comments [5]

December 20, 2010

The secret truth about holiday travel, a letter to the traveling public

Dear fellow travelers,

If you read the newspapers and bloggers or watch the evening news, you might be worried about what you'll find at the airport this holiday season. The headlines read something like an obit for air travel:

For air travelers, holidays are the season for delays

Why Flying Sucks: Beyond the TSA

Is it still 'fly' to fly?

Is TSA going to far with air security measures?

At best, it will raise your anxiety. At worst, it will cause you to adjust your travel plans, or not travel at all.

Allow me to share a different perspective: Air travel is, quite simply, fine.

Actually, it's more than fine. December 2010, I can search online for itineraries that will take me from my home to any of thousands of destinations worldwide. In a matter of minutes, I can reserve my space on any plane and pay with a credit card that will allow me to avoid actually paying for months. When I do pay, the fare will be as low as it has ever been in the history of aviation. I can show up at the airport an hour before departure and be whisked away -- traveling 6 miles in the sky at ground speeds in excess of 500mph, often while watching Hollywood movies, enjoying a beverage or a meal, chatting with a friendly neighbor or reading the book I've been unable to get through during the busy months preceding my trip.

When I land, I'll be in a new city, state, country, perhaps even continent. I'll be re-united with friends, family, acquaintances, or perhaps even better -- the pure joy of discovering an uncharted land heretofore unknown to me, with nobody to see.

Travel is what brings the world together, it's what allows us to stay in the lives of family and friends spread across continents and time zones, it's what allows us to experience (and appreciate) foreign cultures, customs, and cuisines.

So I ask you: Is even 30 minutes in a security line really that bad? Is taking off your shoes and belts going to stop you from experiencing the majesty of Venice or your Aunt Stacey's Apple Pie?

Travel disruptions happen to us all -- but is the anxiety of a delay going to ruin your vacation? And how about those body scanners?

I'm not here to say whether they're good or bad, worth it or not. Frankly, I couldn't care less. We as a people have more important things to worry about than the TSA official that gets a look at our underwear. Don't let it get to you. The media would have you believe that it's an uproar, an outrageous violation. But it's at worst a mild infraction that enables the more supreme liberation -- that of mobility. Sure, there's the principle of the matter -- but make that argument in courtrooms and policy think tanks, not in the hearts and minds of the vacationing public.

My fellow travelers, I beseech you to focus your energy elsewhere. Like what variation of latte to get at the airport Starbucks, or if you'll choose the chicken or the pasta on board (and yes, you might ::gasp:: have to pay for your meal! As if meals are free everywhere else in the world. Give me a break!).

The secret truth: Flying isn't that bad. In fact, it's quite easy.

I know what you're going to say. That even if you get over security and lines, you've still got bad weather and lengthy, uncertain delays. This is true, as anyone flying through England this past weekend would attest. And you'd be right to a degree, there is no getting around that. But remember that weather can just as easily impact the 3 hour drive to your cousin's house on Long Island, or your ski trip to Vermont. Buy a book, or some magazines, and don't show up to the airport until you know the deal. Mother nature is nobody's fault. Yes, it can be stressful, I won't deny it, but it doesn't have to be a doomsday scenario for you and it's no different today than in the past.

In fact, travel in general is no worse than it was 10 years ago, and a rather painless experience in the scheme of life. With a little patience (no more than you need for holiday shopping, mind you), let one of our industry professionals take you away to a far off land.

And as you sit back and relax on your journey once airborne, take a moment to reflect -- on the incredible feat of aviation, on the excitement that awaits you at your destination, on the hard-working employees of your airline, airport, and TSA who work holidays to enable you to travel whenever you want, on the Boeing or Airbus engineers who designed that plane for your comfort and safety.

The rest of the world might want you to believe flying is awful, hardly worth it. They're lying to sell papers, exaggerating to get your attention. It IS worth it. Because it delivers the most meaningful, transcending, experiences of life. And frankly, a couple of hours extra in an airport or taking off your coat for screening is a rather small price to pay.

To quote a line I once read on an aviation employee message board -- "You're flying. It's a miracle. Shut the ::bleep:: up."

Amen.

Safe travels. See you in the skies this holiday season, and into 2011.

Evan

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You should follow me on twitter: http://twitter.com/evankonwiser

Posted by Evan

Comments [17]

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