Eastman's Off-The-Wall Comment(S)

There is a chunk of stuff to cover … but not much to talk about. Still, OTWC tends to self-spawn itself as the various thoughts surface. Ahhh, but where to start?

Eastman's "Off-the-Wall Comment(s)"© ...

Beyond the fact that the two stories suggest different intended levels of funding … Worldspan remains an enigma in the new evolving hyperarchy of digital information.

When Citibank and Teacher’s Merchant bank bought Worldspan in March of 2003, I speculated on three possible strategies for Worldspan – (1) a need to shed its airline ownership in order to re-direct its investments to meet new-world demands; (2) the possibility that the buyers were an interim step to facilitate a third buyer’s (like IAC) ultimate acquisition or (3) as an entry-point for the banking industry to assimilate the settlement processing functions of the travel industry as the world goes digital.

The new owners named Rakesh Gangwall to head the company. This is a man with a reputation for “taking a new look” at problems, and turning companies (airlines) in trouble, around. I had expected to see new initiatives early but media stories suggest that the sale was not complete until July of 2003. Accordingly, I expected to see some clear-cut new strategic or tactical initiatives toward the end of 2003 and early into 2004.

Thus, it was interesting to me that Genesis announced a Worldspan contract to power its private distribution system in November (USTAR Nov 20, 2003). And there was a lot of media about the Orbitz/Worldspan (dis-)agreement throughout 2003; which ostensibly reached some sort of mutually acceptable resolution in January of this year. In February, Gangwall announced that Worldspan would not be in the fulfillment business (BTN Feb 20, 2004). Early this month, he suggested that Worldspan is reconsidering the direction of Trip Manager, its online corporate booking product; implying that it would not compete with travel agencies (BTN Mar 4, 2004). And on the 30th of March, Worldspan files for an IPO!

So … you tell me; what is Worldspan’s strategic direction? If Worldspan were headed down the first scenario noted above, it is unlikely that it would be considering the repositioning of Trip Manager. If Worldspan were headed down scenario two noted above, it is unlikely they would be filing an IPO on their own. If Worldspan were headed down scenario three noted above, it is unlikely they would not be turning their back on the fulfillment process, since fulfillment is a gateway element to ensuring new settlement alternatives.

Please re-read the stories about the IPO at the head of this comment. Is there a reference to a new strategic direction? Is there a new tactical direction? Increasingly, it looks like Worldspan is simply going to do more of the same thing its done in the past … in a world that is increasingly abandoning centralized host/switching, vendor-funded segment fee transaction processing, and structured legacy technology platforms.

Perhaps I missed the boat. Perhaps this whole Citigroup/Teacher’s gambit has been a financial stock play from the start! In fact, in an story that appeared in the Atlanta Journal-Constitution (2/26/04) last month, Gangwal is quoted, “The investor’s ultimate goal, after making the company as lean as possible, is to make a profit by taking it public.”

Note, “… make a profit by taking it public;” – not, make a profit by “ … running it more efficiently,” or “… providing new distribution solutions,” or “… offering competitive distribution for buyers,” or anything strategic or tactical. Gangwal makes it sound like the only purpose for Worldspan’s existence today is financial manipulation.

There is the saying, “actions speak louder than words.” The Worldspan actions we see seem to still be entangled in the hub-centric model of the airline business … unable to find an effective exit strategy into the new digitally networked world. Being a centralized Internet switch to airline hosting platforms … burdened with the legacy processes and inherent costs of supporting the large mainframe platforms and code … appears to be increasingly risky path in the 21st century.

The only real strategic or tactical actions I see emanating from Worldspan are that of a financial vehicle for clever investors.

Eastman's "Off-the-Wall Comment(s)"© ...

Richard’s comments on consolidation reminded me of a premise that Peter Drucker, the management guru, expressed to a meeting of Deloitte & Touche partners a few years ago (Deloitte was a client at the time … and I used this comment once in a 2001 OTWC).

Paraphrased, Drucker said, "When major players in an industry buy smaller, growing companies, the industry itself is growing. When major players in an industry merge ... the industry is topping out and profit margins are incrementally improved only through consolidating overhead."

Last month OTWC discussed the search by some GDSs for mega-travel agency partners. The mega agencies are, for the most part, extensions of the GDSs (or vice versa); one cannot do without the other (yet). Thus, mergers or acquisitions of mega agencies by the GDSs also fit the profile.

Worldspan’s IPO effort that appears to be a pure financial play further adds creditability to Richard’s thinking … for it is much easier to merge, acquire, or be acquired as a public company than if one is a tightly owned company of that size – particularly if the industry segment is “topping out” as Drucker suggests.

Is there anyone that doubts that the traditional GDS travel distribution model is topping out … being supplanted by demand-driven information and service-responsive solutions?

If I were to take issue with anything Richard says, it would be the “little longer” timeframe for milking the cash cow. And then we’re into the issue of semantics!

Eastman's "Off-the-Wall Comment(s)"© ...

Unsaid in this announcement is the fact that Sabre wants/needs to be on a level competitive playing field with the likes of Orbitz, Expedia, and IAC … the emerging powers in travel distribution. The Sabre technology will, over the next few years, allow Sabre to be a competitor with these Internet outlets … but they would be at significant risk if they were operating under DOT guidelines while the others functioned under FTC criteria.

Like so very much of the communication within the travel industry, the references and comparisons tend to reflect the traditional way the industry has always done business – rather than include aspects of business that have, historically, been outside the travel industry’s zone of concern.

The travel world is changing, and most rapidly within the distribution sector. The airline-owned structure (airlines originally owned the GDSs, and the settlement process … and agents were agents of the airlines) that once ordained travel distribution as a unique circumstance requiring its own set of regulations and rules – is gone! It is important to look beyond the traditional models that the industry expect.

Equally important is that Sabre took the initiative. As noted in my contemplation on Worldspan above, “actions speak louder than words.” Sabre’s initiative suggests a strategic or tactical direction that will soon take Sabre into new business arenas – arena’s where DOT oversight versus FTC criteria might be meaningful. Sabre did not wait for DOT to come after them … but seem to be seeking to build a business environment that gives them an equal footing with the Internet moguls!

Eastman's "Off-the-Wall Comment(s)"© ...

The four pieces above are representative … representative of the diversity that now engulfs travel distribution as vendors and intermediaries evolve and test, in real-time dynamic fashion – new and disparate ways to market travel product.

Consider Southwest Airlines, the established and one of the two dominate low cost airlines in the U.S. – semi-direct marketing cruises on its proprietary airline site!

Consider how Expedia (fronting for IAC) is rapidly evolving into an interactive distribution host – not unlike the GDS of the past; but with an inverse revenue stream solving the non-air vendor outlet needs while back-ending the air into the package.

Consider how Orbitz, the airline-owned Internet agency … is evolving into the agent-service aspect of providing corporate travelers with problem resolution.

Consider Richard Noon’s comment on the investments being made in Internet enabled search engines relative to just the three references made above – not to mention the fact that virtually every meaningful travel vendor in the world now has a web site!

Air travel once dominated the travel distribution … in part, because the airlines were the first to build an electronic distribution solution (first to market concept); and in part, because travel of any significant distance needed air first … plus a place to stay (or visit) once the traveler arrived. Thus, the agent of the airline became the source of information for all aspects of travel.

The Internet has replaced the agent as the information source about travel. It has actually reversed the role of the agent. The agent is no longer an agent of the airline; no longer an agent of anybody for the most part! While the title and the role as an information source remains – the information provided is reversing itself. The agent no longer needs to tell people about destination sources – rather, the agent needs to assist the buyer in deciding which of the many alternatives available to the buyer best meets the buyer’s needs. The agent no longer works for vendors – the agent now works for the buyers!

And that role is true whether the buyer is dealing with a traditional agent, an electronic agent, or through a human or digital third-party intermediary! The demand-driven e-business model is forging a monumental swath through the historic supplier-driven channel focused supplier controlled distribution system.

Eastman's "Off-the-Wall Comment(s)"© ...

These last three quotes are there to spice up your technology life a bit.

If you’ve heard of VoIP, more than likely, you have a “geek” friend … a hobbyist or a telecoms person. Voice over IP (Internet Protocol) is finally maturing. This is important in our travel business because so much of the business is linked, directly or indirectly, to telecommunications.

In my view, one of the reasons for the rapid ascendance of e-mail as a business tool is its low-cost of transmission factor. It still costs a lot of money to pick up a phone and call somebody long distance; particularly if the call is international. VoIP bring telephone call costs down into the realm of e-mail costs.

An interesting aspect of VoIP is that the IP protocol can carry both voice and digital messages OR pictures. New cell phones have digital cameras imbedded. A digital picture of you along with your voice print will become as legally binding as any signed paper or digitally verified document is today.

The WiFi piece provides an equally dynamic perspective. One will no longer have to be someplace where there’s a physical link to the Internet … because WiFi will enable ubiquitous communication via any of the contemporary communication forms from virtually any place one stands. The world of travel marketing becomes truly context focused.

Your WiFi link will tell others … based on whatever level of security you have in place … where you are; and potentially, what your need is. Vendors monitoring the region … or vendors monitoring your needs … will see you online and respond interactively – digitally or using VoIP.

Gartner says this will come to pass by 2008 … four years from now. That is probably an optimistic time frame for many markets – but conversely, there will be many markets and particularly, for frequent travelers and major travel destinations, where context communication with your travel buyer will be commonplace long before 2008.

Which brings me to the Blogging piece. Blogging is, as the Economist story alludes, a running log of thoughts or activities. In fact, I referenced a piece found on Richard Noon’s Amplify Blog … and Richard suggested I take a look at http://www.blogger.com/. As the Economist points out, Blogging has not yet evolved into a full-blown business model yet.

But when one looks at the travel business and how people travel … the evolving technology that is increasingly a part of our every-day lives … VoIP melding with WiFi and serving the needs of travelers in an ever-changing and dynamic world of information – the concept of Blogging one’s activities and needs takes on a whole new dimension.

For example, a travel agent (now serving the needs of the buyer as outlined above) can monitor the Blog of his world-wide traveler … recognizing immediately when a travel itinerary or activity is “in distress”; and begin immediately to resolve the problem – leaving the traveler to focus on his business or leisure activity while the work of ironing out a glitch in the travel plan is taken care of by “his/her” agent – a person schooled in knowing what the traveler wants and needs, well accept or not.

Orbitz introduced its three-tiered service levels to compete with Expedia – both of whom are striving to take corporate business away for the traditional mega agencies like American Express, Navigant, and Carlson Wagon-Lit. And now airlines and hotel companies are stepping into the “control the corporate traveler” mix. Tracking travelers using some Blog-like tool is less than two years off.

Lest the folks out there who serve the needs of Leisure travelers feel shorted – consider the group packages of the future. With the evolving base of available destination information, group packages will evolve into related interest sub-sets – and group managers will need to track and respond to glitches in problems encountered by those sub-set groups.

Can anything less be expected of the high-end individual family traveler … particularly the experienced business traveler that is now on holiday? Will people en route to cruises … or even on board … be tolerant of lower levels of personalized service?

It’s coming … in giant leaps and bounds. What technology platforms must you evolve to serve those kinds of needs? What technology tools will your competitors put in place to pirate your customers?

Just as the future is unknown, some things about the future are very clear. No matter what base technology platform a company elects to bet its future on … some key competitor will use a different platform with different capabilities and service levels. No matter how big your brand-name, some competitor will cleave a niche service level from it. And, big or small, the more stagnate or traditional your platform, the quicker your competitors will slice up the remains.