NB: This is a guest article by Ashley Raiteri, an industry consultant and former-chief technology officer at Everbread.
Have you ever met anyone who has climbed Mount Everest? Have you ever met anyone who has been to Base Camp, the launch pad for the haul up the mountain?
I haven't, but if I did, I'd definitely think "Wow, that's cool".
I'd probably think that the emotional reward of such an arduous journey would be amazing, even if you didn't actually make it to the summit. Just reaching Base Camp is way more than I've ever done.
I suspect many of us would think this. And that's pretty much how most folks feel about the adventure and the risk associated with creating an web startup company.
They've quit their jobs, they're living on Raman noodles, they're coding through the night with no sleep.
They just launched a really amazing new way to look at "travel search" or to "plan my trip", or "share my experiences from my trip". And they've already got 50,000 users. That's like climbing Mount Everest!
Except, getting to Base Camp on Everest only costs about $1,500, takes less than a week, and isn't particularly difficult.
The main thing required to get to Base Camp is DECIDING to go to Base Camp. After that it's just a matter of turning intention into a few concrete actions.
That's the innovation at the heart of most travel technology startups, except reaching the summit of Mount Everest in travel tech is simply a LOT HARDER and a LOT MORE EXPENSIVE.
Much has been written about how the GDS model of data distribution is the barrier to innovation in travel.
Everyone complains about how they can't get data in the way they want to, or that it's too expensive, or that the APIs from the GDS don't answer the questions they want to ask, and if they could only just get access to the raw data, they're sure they could do a better job than the GDSs.
I'm pretty sure too - but it's not going to happen, especially as the reason is a lot weirder than you'd think
Let's examine the basic costs facing a startup that want to "play around" with raw travel Data.
Fares (the prices and rules for airline inventory), this will cost you a minimum of $35,000 per month, no matter how you slice or dice it, directly from ATPCO.
Schedules from OAG, while not as expensive, are still in the $10,000+ per month range.
Taxes and geography data from IATA are the cheapest, but they're still more expensive than most startup's entire monthly payroll.
And if you want to get fares for the 20% of the world's airlines (like Air Bulgaria) that ATPCO doesn't carry, expect to pay SITA a comparable amount.
Loose mathematics here, but we're talking about in excess of $100,000 for raw data access, before you can even write a single line of code.
The disappointing part of this little secret is that it serves only to benefit the GDS's. This tremendous barrier to low layer innovation only serves to keep players out of the primary innovation space.
So for all of their whining about how they're being held hostage by the GDSs, it is airlines which control the data (they create it after all, and they jointly own ATPCO).
If hundreds of startups had access to the raw data, the GDSs would face real competition (not just from one or two players like ITA Software, Everbread and the other startups that are attempting to scale Mount Everest).
This would return the power of market forces back to the airlines (the product after all) and their customers.
GDSs can still provide a valuable service, but they might have to actually work for their market share, if the raw data was more affordable to the hundreds of two guys in their garage who want to start a travel startup.
My proposal: startup friendly raw data contract models.
ATPCO already supports a revenue sharing contract model. Unfortunately, that still sits on top of a base monthly fee of $35,000 per month.
The best and easiest thing all the airlines can do is to vote to change this structure.
If the monthly fee was as low as $5,000 with a high 5% revenue sharing model, ATPCO's customer base would likely swell by an extra 100 companies tomorrow.
They'd make up in volume what they get today from a handful of companies who can afford it. It would not require technical changes on ATPCO's part.
The most difficult part would be getting the airlines to agree to do it.
[I fully expect the first comment to be: "But AIRLINES do not want lots of companies having access to their fares"].
NB: This is a guest article by Ashley Raiteri, an industry consultant and former-chief technology officer at Everbread.