What is the most painful problem the travel industry has today?
NB This is a viewpoint by Maksim Izmaylov, founder and CEO of roomstorm.com.
For the majority of airlines and hotels it is the fees charged by online travel agencies (OTAs) and global distribution systems.
It's so painful that Lufthansa Group has decided to add a €16 surcharge to every booking made via the GDSs in a bid to reduce its yearly GDS costs, currently coming in at "a three-digit million euro amount."
It's also painful for hotels. The hospitality industry's response to the problem was creation of Roomkey, a hotel search engine conceived by six major hotel brands.
It's unsurprising that Expedia's acquisition of Orbitz provoked such a negative reaction from many of the industry's players, because this transaction creates a Expedia-Priceline duopoly that controls 95% of the online travel agency bookings in the US and a dominant position in other markets around the globe.
Another problem is outdated technology that travel companies are using. Just this summer three major US airlines experiences system-wide software outages that affected hundreds of thousands of passengers.
Mind the gaps
Outdated technology and a lack of standards allows space for a multitude of third-party vendors to exist between hotels and distributors.
In many cases, information from the hotel has to make 5-10 hops through such systems before it reaches a travel agent, incurring an extensive lag, measured in minutes rather than milliseconds, as one would expect in 2015. This increases the cost of transmitting information from suppliers to end users dramatically.
The travel tech ecosystem is incredibly complicated. Most new companies' have to fight their way into it. It can take just minutes to make your software to accept credit card payments or send text messages, but significantly longer if you want to your app to show and sell hotel inventory.
The underlying problem is that we don't have a master plan for travel, there are no standards and the market leaders and established players want to maintain the status quo.
Raise the standards
Consider the following use cases - virtually non-existent today - but which, with simple industry rules and open standards should be very easy to implement.
- You could book a true door-to-door business trip, including flights, train tickets, taxi and hotels. The system would automatically adjust your schedule, if your flight is delayed, or book a hotel room for you, if your flight is cancelled.
- You will be able to choose a single mobile app for travel from hundreds of third-party solutions. There will be no need to install five different airline apps, ten airport apps, seven ground transportation apps. The ideal situation would be to have a universal travel app, connecting multiple carriers and airports, and a separate app from the airline that you a loyalty program with.
- Hotels would be able to just give a third-party developer an API endpoint, where they will be able to access hotels’ prices and availability. In case the hotel doesn’t like their distributor or OTA, switching will be very easy.
- There will be multiple marketplaces for hotel rooms, where companies will be able to buy individual rooms and room blocks as well.
Making an exampleWhat are the examples of the standards that would make the above possible? Here's just a few:
- Traveler Data Sharing Standards
- Realtime Hotel Availability API
- Flight Load API
- Trip ID (PNR for all parts of the trip)
But first we have to admit that we have a problem. The current system is too old and though you can repaint a house a few times to make it look nice, but eventually you will have to move to a more modern dwelling.
We have to start working on open standards and APIs today. There are standards bodies out there who are doing a decent job, such as IATA with its New Distribution Capability initiative. But those organizations move slowly – it took three years for the first NDC standard to be released.
We have to start working on open standards and APIs today. There are standards bodies out there who are doing a decent job, like airline lobbying group IATA, with its New Distribution Capability and, now, with One Order.
I salute the many previous efforts to create standards, such as the efforts by OpenTravel Alliance and by Schema. Other sectors of the industry also deserve credit for trying to work toward inter-operability, such as the open booking efforts in the travel manager ecosystem.
Yet there is more work to be done: Our industry needs more standards if it wants to evolve as fast as other tech sectors.
What our industry needs is to organize all these standards and APIs into one place, make them open for use, for improvement and for contribution from the community. This model is known as open source, or open collaboration, and it’s successfully applied in a wide variety of fields.
After all, the internet is powered by open source. Right this second you are using tens of open-source technologies and products just to read this article: Linux, WebKit (engine for Chrome and Safari) or Firefox, Apache, MySQL, just to name a few.
Why is this approach better? We've already seen how slow and inefficient big organizations can be. There is an argument for a someone such as Google or Amazon to take over and solve travel tech problems once and for all, but that in turn will create a new monopoly and in five years we'll be in the same situation as we're in today.
The conversation has already started and there are hundreds of people in the industry who think and talk about this. The only question is how to organize all these people and start working on these problems. But I'm sure we'll see it will happen very soon.
NB This is a viewpoint by Maksim Izmaylov, founder and CEO of roomstorm.com
NB2 Main image by Shutterstock. The infographic was created using icons from Print Express