Michael Strauss replying to AA, Travelport and Amadeus about Travel Technology:
I’m honored for the many replies to my ideas. I thank Suzanne Ruben from American Airlines, Gordon Wilson from Travelport, Dwayne Ingram from Amadeus, Dennis Schaal from Travel Weekly and many more for their input on my comments. The intention was to start the discussion about the lack of innovation in the travel industry. The thoughts became however emphasized when the “last man standing” of the new entrant distributors was terminated by Sabre.
I also wanted to mention that the Beat only published a fraction of my article which might lead to the impression that the GDS’s are the only players to blame for the antiquated conditions in the travel industry. If you read the whole story on www.thebeat.travel/blog/node/360 this impression might be different.
Nevertheless, if we want to do a deep dive into the politics of distribution technology due to the recent incident between Farelogix and Sabre, I’m happy to continue to express some ideas and critical thoughts – not to blame anybody, just to continue constructive discussions.
A recent Travel Weekly report
www.travelweekly.com unveiled that Amadeus and Travelport use modern technology while Sabre relies on old technology. If that is true I can understand why to date only these two contributed to the recent discussions. Both spend hundreds of millions of Dollars in R&D to steadily and continuously bring updated technology to the marketplace – so does Sabre – but can we in fact call this “groundbreaking innovation”? Per definition “innovation” may refer to “incremental, radical, and revolutionary changes in thinking, products, processes, or organizations. Something new must be substantially different to be innovative.
In economics the change must increase value, customer value, or producer value. The goal of innovation is positive change, to make someone or something better”. “Innovation is what is going to get the industry through this difficult time, and innovation is almost exclusively the domain of smaller companies.” was a quote from a Farelogix client published in TravelWeekly. While operating out of a garage Microsoft and Google once changed how we live. But since becoming a larger well known company, we have not seen major innovations from them, have we?
“We choose third-party partnerships to be consistent with our philosophies” Sabre’s Chris Kroeger recently stated in an article in the Beat www.thebeat.travel/archives.php This basically means that smaller companies who think outside of the box are excluded in developing innovations. Consequently there will not be any asset outside of the point of view set by the big players. So the industry is stuck with whatever the R&D budget or the philosophy of the big player allows to introduce to the marketplace.
When I read that Cliqbook clients have to pay $3.75 for bookings made outside of Sabre www.management.travel/news.php – a fee BookingBuilder opposed to – for me as client it means that I pay extra if I do not use Sabre, while I get it for free when I use Sabre? Is this considered a democracy? In my office we use primarily Dell computers. We also have a Dell relationship.
However, personally I use a Toshiba laptop … shouldn’t Dell charge extra for the fact that I personally favor Toshiba over Dell notebooks since my user credentials are stored on a Dell Server? (Or shouldn’t Microsoft charge a convenience fee for each individual who uses a Mac?) I guess no CIO of any company would possibly sign off on such limitations with their hardware provider – so why would they do so with their inventory provider? Every CIO of a TMC or other company in the travel industry has to be aware of these restrictions and its consequences.
I also wonder if I am the only person who is surprised that we have never heard of terminations among the three big GDS. Getthere, E-Travel or Travelport can access all the respective other GDS without a problem. I am curious to hear BookingBuilder’s or Concur’s position on this topic. I think many people have an opinion but remain silent as to not jeopardize their relationship with the big partner. I was on the fence myself – however I think our opinions need to be voiced and our voices need to be heard – for the good of the entire industry. After reading this, people might think the Department of Justice should have a look into this, but listen: we run into each other all the time and we are all in the same boat. Let us solve our issues together and let our descendants be proud of us.
Time to market
It is correct that Travelport only bought certain assets of G2 Switchworks– however, if they were just looking to buy assets only to leverage their own technology infrastructure, wouldn’t they carry out a fair amount of due diligence before putting a couple of million on the table? I can assure you that at least one (independent) company that provides desktop solutions has never been asked. A further goal of this acquisition might have been the conversion of a believed client base or the outbid of a competitor whose lawyers could not get the deal settled in time.
In the computer industry, consumers can enjoy processing power and memory doubling approx. every two years (Moore’s law). When you consider innovation you always need to consider time to market. I want to raise a couple of questions: How long did it take for e-ticketing to become broadly available? When were G2 Switchworks assets acquired? With the help of bought assets I would expect that something will be released to the marketplace shortly thereafter. I prefer to leave it to the clients to judge what is considered innovative and whether the industry needs solutions other than what a single GDS can offer. The breadth of innovation driven by GDS providers might be breathtaking, however the speed is still questionable.
Amadeus’s Dwyane Ingram said “the traditional GDS were travel technology leaders from the day they opened their doors”. I agree! My question is what happened since then and why do they “close doors” to new entrants now? If they were as innovative as they claimed, why can’t they price a middle seat different than the isle seat? Why do most Internet Booking Engines use a 3rd party system like QPX from ITA software for shopping? Do not get me wrong, I think it is great that they do this. This is exactly how it should be! The ideal flexible and customized solution might be a combination of more than one innovator. See a recent interview with TMC Exec David Holyoke www.thebeat.travel/news.php
We all know that the next round of GDS negotiations will be around flexibility and the ability to deliver products and services quickly and not only about economics. My suggestion for the GDS is to focus on their core business and run it as efficiently as possible and let young and innovative companies provide new innovative solutions, which will make all of our trips a little easier. We all know that there will always be acquisitions, but sometimes it makes sense to acquire to innovate rather then to kill an operation.
I am sure there will be a lot more discussions about this topic, and winners or losers cannot be determined yet, but one thing I guess has come out clearly already: protecting narrow interests must be a thing of the past.
This answer is referring to this article.
02/26/09 Amadeus Americas executive vice president Dwayne Ingram on Strauss.
Image by Sfio Cracho