Travel Execs Get A Glimpse Of Their FutureTravel Execs Get A Glimpse Of Their Future
The Travdex trade show highlighted new technologies and standards, making it clear that the industry is facing unprecedented change.
May 7, 2004
Travel IT executives gathered at an industry conference this week for a glimpse of what their immediate future will look like. They may have gotten more than they bargained for.
From new software tools and emerging standards to under-the-hood looks at how major players are revamping distribution systems and using customer-relationship management software in innovative ways, research firm PhoCusWright's Travdex show made one thing abundantly clear: The industry is facing unprecedented change. Travel companies are grappling with a host of new business issues. Rates and fares are being distributed through an increasingly fragmented assortment of channels. Online travel agencies such as Expedia and Travelocity are forcing airlines, hotels, and car-rental agencies to rethink everything from booking processes to revenue management. Pending deregulation of the global distribution systems that aggregate inventory for travel agents is about to redefine the relationships between those systems and the airlines whose seats they sell. And emerging search technologies are empowering travel consumers in new ways. What all this means is that travel suppliers, intermediaries, and distributors will have to stay on their toes to stay on the cutting edge. "You're going to see some experimentation over the next year," says Norm Rose, principal of Travel Tech Consulting. Among the areas of change and debate confronting the industry that Travdex attendees heard about: - Emerging standards: an update on the Open Travel Alliance consortium's effort to spur adoption of an industry-specific version of XML provided evidence that a handful of companies--most notably Cendant Car Rental Group, Marriott International, and Sabre Holdings--are using the technology to varying degrees as the messaging language behind direct connections with partners. But widespread adoption is still some time away. "None of [our distributors] have said, 'if you're OTA-compliant, you can plug into us right now,'" Spirit Airlines CIO David Anderson told the audience. "It's not getting used a lot." - Content caching: Hotels and distributors are split on whether caching is an effective way to ensure updated pricing data without having to accommodate constant pings of hotel reservations systems. Misha Kravchenko, VP of reservation systems at Marriott International Inc., says he's opted not to cache, instead configuring his system to release pricing in real time each time a reservation is made. However, Bob Offutt, senior VP and chief architect at Sabre, says that with 60 queries to process every second, he has to deliver response times as fast as 200 milliseconds, making caching necessary to avoid over-taxing the system. - Dynamic packaging: Travel distributors increasingly are bundling products from multiple suppliers to deliver packaged travel deals to consumers. Suppliers also are looking to combine their products with those of complementary suppliers--for example, an airline offering up hotel room and car-rental options to a destination city. A key consideration for suppliers is having confidence that partners and distributors can guarantee "opaqueness" so that travel consumers can't see the discounted prices of individual pieces of packages. Offering such packages is not an option, said Kennith Surdan, chief technology officer at leisure travel agency National Leisure Group. "When you're talking about a major purchase every 6 or 12 or 18 months," he said, "you better do something special if you want them to come back to you." - Advances in search tools: In the travel world, what's needed from a search depends on who's doing the searching, and a panel of travel search providers demonstrated just how specialized a field it's become. For consumers who want to see price comparisons so they can be sure they're getting the best deal, Yahoo Travel (via its partner, Travelocity) and upstarts such as Sidestep and Farechase crawl dozens of supplier sites to bring back comparison data. Travel agents want to make sure they're getting as many options as possible so they can provide the best service for their clients, and AgentWare has software that's designed to do just that. And suppliers who want to keep tabs on their competitors" pricing to make sure they're not out of sync with the market are relying increasingly on a tool such as Electrobug. The common thread, says Farechase co-founder and chief technology officer Ofer Shaked, is that a Google-style search won't cut it--users want results that let them take action rather than follow links that may or may not prove fruitful. But neither Shaked nor Rahim Amlani, director of product management at Sidestep, is about to count out a post-IPO, cash-rich Google. Says Amlani, "They realize the opportunity of travel, as do all of us." Meanwhile, Travdex attendees also got to hear about how some companies are already experimenting and innovating. Sabre's chief technology officer, Craig Murphy, detailed the company's new global distribution system architecture, which it says has cut more than 80% off of its transaction cycles, and promptly got a major endorsement in the form of a five-year deal to process transactions for Expedia. Spirit Airlines CIO David Anderson explained that he rebuilt the airline's central reservation as a Web services architecture so that he could easily deliver a variety of services to as many distribution partners as possible. "I'm happy to have everyone sell our products," Anderson said. "That was a core design principle for us." But perhaps the most eye-opening presentation had nothing to do with distribution: Tim Stanley, CIO at Harrah's Entertainment, shared how the hotel chain is using customer-relationship management to take advantage of its unique relationships with guests--which are predicated more on gaming than the provision of hotel rooms. The company's 29 million regular customers slide their loyalty cards through readers at slot machines, gaming tables and restaurant point-of-sale systems, which are then linked to a CRM system that's backed by sophisticated business-intelligence tools. The result is the ability to analyze actual and predicted customer behavior in painstaking detail. And now Harrah's is adding new wrinkles: It's added an "enterprise promotions" application that lets it manage promotional opportunities at either a property or enterprise level; bar-coded promotional coupons that can be slid into slot machines for gaming programs; and data visualization technology that allows it to view slot machine activity to determine which slots are getting the most use. Next up: completing its transition to an "operational CRM' model in which all of the intelligence it's creating will reward the customer in real time. Stanley acknowledged that the gaming aspect of Harrah's business lends itself to such an aggressive CRM strategy, but he says there's opportunity for other hotels and travel companies to adapt Harrah's approach to get a better handle on revenue flow. "The distribution model, the use of the technology, and the linking of all this together is very compelling. The revenue is so darned--knock on wood--predictable." If the travel industry can achieve that kind of predictability in its distribution, it will be well on the way to solving one of its greatest challenges.
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