NB: This is a guest post by Gautam Lulla, chief operating officer at Travel Tripper.
I recently wrote about a massive single point of failure in our industry: the Pegasus switch which connects hotel reservation systems to the GDSs and other online channels of distribution.
Around 86,000 hotels depend on a single industry switch to connect them to travel agents worldwide.
Conversely, travel agents depend on a single industry switch to gain access to 86,000 hotels.
Aside from the risk involved here, while this may seem impressive, 86,000 is just about a quarter of the total number of hotels worldwide.
The situation is also highly undemocratic and monopolistic
Certification and set up fees for any new hotel/Central Reservation System (CRS) easily run in excess of $25,000.
This is undemocratic because it raises, financially, the barrier to entry and only larger companies would have that kind of money (and clout) lying around.
Moreover if a new reservation system represents a serious competitive threat to Pegasus, Pegasus is in a position to make life difficult for the new company by slowing down it’s time to market.
Some of this might even happen inadvertently – just because Pegasus will have a long queue of reservation systems awaiting certification and it has a finite bandwidth to handle the process.
Although Pegasus as the only switch provider is not technically considered a monopoly, it practically is.
Technically, the GDS all offer (or have been “about to offer) direct connectivity for CRS’, the reality is that GDS have only made that option available to systems that represent a certain critical mass of hotels.
And so younger smaller companies have no choice but to go through Pegasus, which is how and why they essentially end up controlling access to the GDS’.
The current status-quo impedes innovation
The hotel companies, their CRS providers and the GDS are all beholden to a single company, Pegasus, for functional evolution.
I know first-hand – I’ve worked at Pegasus as well as a GDS (and a hotel company as well for that matter) – and have been part of laborious meetings and workshops between the GDS, Pegasus and the largest hotel companies any time something new needs to get implemented.
And if any new suggested feature or functionality is not to the liking of Pegasus, it can easily claim insufficient resources to implement it, slowing things down tremendously.
New CRS entrants, including companies with new and innovative solutions cannot get to market quickly and everyone knows that innovation in the technology industry is the forte of young companies and startups, that have the biggest incentive to do new things.
And if Pegasus does like the new feature, and finds it in it’s own interests to implement, as also a CRS provider, it also has unfair first access to any new feature. This goes back to my point about the situation being undemocratic and monopolistic.
So what do can be done?
I think the time is ripe for an open source switch for our industry. Such a project, can be supported by the industry at large – hotel companies (small medium and large), CRS providers (such as Travel Tripper), the GDS companies and even travel agencies.
Bodies like HTNG and Open Travel Alliance can be ideal forums for regular touchpoints that such a project would require.
Moreover most of the relevant messages are already part of their specifications.
The GDS could play a very important role by publishing their (XML) specs and making end-to-end test systems available for any relevant technology provider to test against.
While the above suggestions do not chart out the entire framework for how an open source switch project can be started, run and maintained safely, it does propose a couple of good starting points.
Everyone would win
An open source hotel industry switch, an alternative Pegasus, as a means to connect to the GDS and online travel agencies would benefit virtually everyone in our industry.
- It would be beneficial to the GDS because they be able to quickly gain access to smaller leisure hotels that are critical to entry into the leisure market and also distribute them through their traditional travel agency network. Traditional travel agents would of course benefit as a result.
- Larger CRS companies and Large hotel companies will be able to make faster progress to get new features implemented.
- Smaller CRS companies would be able to get to market faster with new an innovative solutions that are badly needed in our industry.
- The more established small and medium sized hotel companies would benefit by having wider access to new innovative CRS service providers.
- Smaller family owned lodging establishments will benefit because they would have access to the GDS, a new channel of distribution, classically cheaper than the OTAs through which to distribute their inventory.
And of course costs would go down for everyone since every transaction that goes through the Pegasus switch is a billable transaction.
An attack on Pegasus?
This is not meant to be an attack on Pegasus. I have no beef with them. I graduated from Pegasus, as so many others in our industry did, and learned a lot there – and I cringe each time I see it lose a customer (even though my company now competes with them).
There is a lot of goodwill for Pegasus in our industry and I think it can capitalize on it. But how?
The role of Pegasus
Pegasus has an opportunity to reinvent itself. It can donate the switch to the industry by making it open source so that it can be modernized and expanded functionally – or contribute knowledge and resources to build a new open source one.
And it is in the unique position of being immediately able to offer value added services around the switch, not different from how RedHat offers enterprise support for Linux.
NB: This is a guest post by Gautam Lulla, chief operating officer at Travel Tripper.