Events often conspire to create some strange bedfellow. In politics, expediency brings together unlikely candidates, such as in the recent UK election.
And so it is for the marriage of Google and ITA Software and the creation of the Troogle Family where, in fact, suppliers will probably like it.
If the deal (we can start saying Troogle legitimately now) is approved by the regulators and proceeds as many expect, this could be quite good for the airlines.
In the US market, for example, the deployment of Troogle would mean that there would be pricing transparency for website-based consumer fares. These will also be stabilized but under the control of the suppliers.
It is worth considering these three elements as well:
- The convoluted supply chain options from airline to consumer and the number of different channels that are supported.
- The complexity of those channels – remember the more complex the more costly.
- The simple fact of guaranteed pricing and availability in near real time.
Many US airline websites already do this and have their search results displayed from
ITA’s QPX system.
So as long as the result is served in the same manner (with a short period to live availability of the results and their validity) then there should be no problem.
With air products, Troogle handles a lot of these complicated and expensive channels, and processes can fall away in place of a far more simple and controllable model.
A user goes to native search in a Google search box, for example, and types the following query:
Lowest fare to NYC on Sept 12th back on Sept 15th 2 people.
Google may respond with a display that shows a results box and the user selects from the list – and, Voila, the user is now deep inside the workflow of the airline's booking engine.
No messy metasearch, no expensive online travel, no blood curdling GDS control.
The price is guaranteed to be the lowest, so no surprises for the customer who now has a trustworthy result.
The airlines have little to do because all of these processes already exist in the back-end to accommodate such a transaction.
A bit of airline website tweaking and a new commercial model with Google for CPA and away you go. It is hard to see why this would not happen.
Google gets to tap into four player's revenue streams, consequently they can lower the total CPA to the airline.
- Airline direct advertising (likely increase in price)
- Metasearch – why would the airlines pay for metasearch when they can pay for the real deal in Google?
- OTA – customer gets same result lower fare and higher quality of services from airline.com than from OTA.com
- Bypassing OTAs means no GDS costs and those nasty GDS incentive fees.
Airlines look at the bottom line and are likely to think they have full pricing power again. They control the price for the market and push out approved guaranteed pricing via QPX.
There is no complicated metasearch or OTA messing up pricing plans. Airlines eliminate all the intermediaries making life a lot simpler.
They can also still handle TMCs separately as they even manage the vestigial offline channels.
They can deal with Google later and they hold the control.
The consumer is happier as he/she gets a trusted result the vast majority of the time. And it’s cheaper. Therefore this is as seminal a moment as when the OTAs first came on the scene and commissions evaporated.
If you are an airline what’s not to like about this?
Caveat statement. I do not for a minute think that all players will like it, nor do I think that it is right or wrong.
The metasearch/OTAs/GDSs will not be happy and it also does not necessarily apply outside of the US market. The theory also does not extend to other product categories such as hotels, cars and packages.
Underlying all this is how Google would have considered the business case for paying $700 million for ITA Software.
The only answer I could come up with was to consider how its travel revenues would rise and quickly. This would have to take into consideration the current ad based model and the loss of revenues from the OTAs and metasearch players.
A final and pressing thought…
What would happen if the acquisition fails approval? Don’t for one minute think that the numbers can still be impressive if Google was to develop its own solution outside of the ITA acquisition - $700 million buys a lot of developer resources.