This blog post is written by Stu Waldron from TTI's Associate Organisation: Open Travel Alliance.
Building on the November post on offer/order standards, let’s look at what this could mean to travel retail.
In summary, the Open Travel Alliance would provide a standard on data structure, message schema, and offer/order minimum behaviours. Offers and orders would be containers that can accommodate any product, price, and rules such that the offer is actionable “as is”. That is, convertible into an order. This moves a majority of processing away from the data centre to the edge of the network (cloud based). Backends handle orders much as they do today. The actual shop functions would be competitive, using this universal offer capability, where the better ones win the marketplace. Details on how this works is in previous and soon, subsequent posts.
How this may affect the travel retail industry can be explained using an example of a prior disruptive change in technology. Prior to MP3 and MP4 standards, the music and video industry was very constrained. Products were brought to market in a limited number of ways that were tightly tied to consumption technology. In the “Boombox” era, you had vinyl, various forms of tape (reel, cassette, 8 track), CDs, DVDs, video disks, and a few others. This allowed companies to constrain distribution given the limited number of channels for distribution and make high profits. Nearly impossible for any creator to distribute on their own. Consumption was a little better as there was some competition between suppliers of devices capable playing the limited formats.
The advent of MP3 and MP4 standards blew the revenue model to pieces. Now anyone could publish and given no physical assets were needed (digital distribution), this was easy and cheap. Consumption was also unlocked as nearly any device could consume the product. Companies like Circuit City failed as the majority of their revenue was based on CD and DVD sales. Once those products were gone, they could not survive on sales of electronics alone. Record companies and others had to reinvent themselves as they could no longer control creator access to distribution.
Travel is still in the Boombox era. Most obvious is airline tickets which are still severely constrained on who can sell and process a ticket. Hint, they are value bearing documents even in eTicket form.
Not just anyone is allowed to print money. As many trips include an air segment, this is limiting who can be a travel retailer. Beyond legacy air there are constraints affecting everyone.
Everyone presents their product or service via proprietary messages and APIs. This is our above example of a half dozen distribution forms on steroids. There is some consolidation as distributors may pull in products from a dozen or more formats and pass them along with their own proprietary format. The main effect however is increased cost. Any company providing travel retail to the consumer has to deal with 1000s of proprietary formats. Even worse, pricing is hopelessly complicated with hundreds to thousands of possibilities, no MSRP, and no easily accessible rules on those prices.
The constraint on the industry here is very few distribution or retailing companies have the knowledge, talent, and funding to do travel retail at scale. Any startup originator of a travel product may create a set of APIs or pay someone else to use theirs, but no distributor or retailer is likely to pick up your product. Too costly to connect to your proprietary APIs given a very low profit opportunity. You may have just built your 100 bed hotel but that’s not near large enough for any major channel to connect to you. The ones who do connect will charge large fees to recover the cost.
The net for the traveller is you are constrained to a small number of retail outlets (online or apps) and what they can sell is a fraction of what is out there to be purchased.
As a travel product/service provider, this is a hard business to break into. Crazy high fees by those that will connect to you, and you are not likely to get to the higher value customers. To be a startup with a great idea for a killer travel app, you can’t get to much content without paying large fees to an established distributor.
Like MP3/MP4 for music and video, a universal offer with a standard data structure, message schema, and offer/order behaviours, removes these barriers. Anyone can publish their travel product/service cheaply and any channel/app can pick it up cheaply. This won’t fix airline tickets, that would be another long blog how to fix that, but this addresses the rest. It’s time to move beyond 80s and 90s travel retail distribution and revenue models. Time to ditch them with the Boombox.