Larry Smith of Thematix has previously written several excellent posts in Tnooz about semantic technologies in the travel industry.

In particular, their potential to create truly personalized offers by adding distinct value to travel offers based on customer data.

At OpenTravel, we’re turning the abstract into the concrete by building a semantic ontology for the car rental industry, including thinking through what it takes to actually plan for a semantically enhanced booking experience, what we call semantic offers.

So I thought we’d share some of the lessons we’ve learned by using a basic online transaction as an example.

I should note that this example is based on the supplier company not knowing who the customer is, so it is not able to present a “personalized” offer, that is, an offer to a known individual.

This example is based on non-personal but still actionable data passed from one trading or traffic-referral partner to another. For all the talk out there, personalized offers in the travel industry are a future phenomenon.

It’s much more common currently for partners to exchange information about a transaction, not about a person.

Semantic offer technology: a not-too-distant scenario

Although there are lots of ways to implement this technology, let’s look at a semantically enhanced web booking experience that shows how semantic offers might be integrated into availability processing on a travel supplier’s branded website.

In this example, an airline supplier has partnered with three car rental suppliers, but only one of them, ABC Car Rental, has implemented semantically enhanced services in their booking path.

Ted Smith needs to take a one-day business trip to California but has decided to extend the trip by a week and bring along his wife and children for a family vacation.

Ted starts his trip planning by going to the XYZ Airlines website and entering his dates and airports. Ted reviews flight availability options, makes a booking and selects four seats in proximity of each other.

Included with his online booking confirmation is the option to “add a rental car” to his trip.

Ted needs a rental car so after selecting the option, XYZ Airlines sends an availability request to three of their car rental supplier trading partners to request offers, which the airline will present in a single car rental offer page.

In addition to core information about Ted’s flight, the availability request contains other information that a semantically enhanced system can use during car rental offer processing.

The two car suppliers without semantic systems use the core information to determine availability of their inventory, and their availability results include three classes of vehicle with varying prices.

When ABC Car Rental receives the availability request, their semantic search engine takes charge and looks at all the data in Ted’s reservation request, including the number of tickets booked, the class of the tickets, loyalty program participation and the fact that there are two adults and two children.

An assumption is made that this is a family trip and accordingly their three car offers include an “Ultimate Family Vacation Vehicle”.

Ted looks at the nine rental car offers returned by the three rental car companies and immediately selects and books the “Ultimate Family Vacation Vehicle”, which is a minivan with a family entertainment package – even though this offer has the highest rate.

So how did ABC Car Rental, which basically has the same fleet inventory as the other two car suppliers, create the offer that most appealed to Ted?

Planning for semantic search technology: adapting your inventory to appeal to your customers

A diverse and complex collection of factors influence consumer trip planning and purchasing behavior, and while semantic technology can’t provide a crystal ball for each one of your customers, it can help you sell more product by categorizing and describing your inventory and services in a way that is aligned with your customer travel segments and scenarios.

The process of adapting your inventory to appeal to your customers does not mean that you’ll be making any physical changes to it; instead you’ll have to re-think the features and services associated with the inventory and how they pertain to what you know about your customer and their trip.

Keep in mind that a successful semantic technology implementation needs data – the more the better. For travel suppliers, this can be challenging for two reasons:

1. Your data is not neatly packaged in one central repository; bits and pieces of your data are spread throughout disparate data sources and systems
2. The majority of information you are storing and maintaining is in an unstructured (or unknown) form to a semantic engine.

To address the first challenge, travel suppliers may want to consider third-party companies that create centralized data warehouses.

The second challenge can be resolved by implementing an ontology, which is a structured way of specifying a variety of data elements (such as rental cars or hotel rooms), and identifying the abstract associations and relationships between them.

Step 1: Understand what you sell and how you sell it

This first step is a great example of why marketing and IT teams should collaborate from the onset of the project. You will need to know both the details about your inventory and the complexities of how the inventory is sold through different sales channels.

Considerations include:

• Corporate Purchasing Restrictions: You may be contractually obligated to offer specific types of inventory and services to your corporate clients due to negotiated rate agreements.
• Locality-Based Purchasing Restrictions: You may have limitations on what inventory and services can be sold locally versus internationally.
• Loyalty Program Promotions: You may have a loyalty program that your customers participate in that guarantees upgrades and/or preferred pricing based on program levels.
• Marketing Initiatives: You may have ongoing (time-sensitive) marketing initiatives that offer a specific type of inventory and services at a promotional rate.
• Trading Partner Agreements: Similar to corporate purchasing restrictions, you may be contractually bound to offer specific types of inventory and services to various trading partners.

So why is this exercise necessary? Your semantic engine will need to know about these types of restrictions so the appropriate rules can be applied before, during or after semantic offer processing.

ABC Car Rental IT and marketing teams collaborated to make an “inventory to sales channel model” that described specific data fields that could constrain offer processing by either including or excluding inventory, and in some cases, such as time-sensitive marketing initiatives (perhaps identified by a promotion code), bypassing semantic search processing entirely.

As part of this exercise, they determined a rules engine component capable of invoking semantic processing constraints was required and its basic functional elements should include:

• A GUI-interface to allow the marketing team to enter time-sensitive promotional information
• An automated feed from the sales and marketing system to manage rules associated with corporate accounts and trading partner agreements
• A real-time interface to their loyalty program system to determine benefits associated with various program levels

How did this step affect Ted?

He did not enter any information that would have triggered the rules engine component, such as a promotion ID, corporate ID or car rental loyalty program number, so he was eligible for a semantic offer.

Step 2: Determine what you know about your customers

This step is a two-part process that includes:

• Understanding what data you already have about your existing customers and where that data resides
• Understanding what data you can derive about unidentified customers and how you obtain that data.

Let’s assume your company already has some type of data about your existing customers – stored booking and itinerary data, customer profile data and/or loyalty program data, etc.

From a semantic technology perspective, this is known as explicit data because it is based on information that a customer has either given you or on their past purchase behavior.

Your semantic engine will want to know about explicit data for two reasons. The first is that past behavior and purchases can be a great indicator of future behavior and purchases.

The second is customer profiles that include travel preferences are a goldmine of information that can be used when processing a semantic offer.

For example, a customer’s past purchases may indicate they typically fly economy class, but their preferences may show they prefer business class and have opted-in to marketing offers from an airline supplier.

• From a semantic offer perspective, a quick check can reveal that when the customer has flown economy class there has been an associated corporate ID in the reservation, indicating their company has a negotiated rate and restrictive travel policy.
• From a semantic processing perspective in this example, if the customer has not included a corporate ID in an availability request, no constraints need to be applied to the processing and they would be eligible for a semantic offer.

For the second part of this process, the task at hand involves identifying all the methods your company uses to receive inventory availability requests and what data is contained in the request so you can determine what data may be significant for semantic engine processing.

If you’re using XML or another structured data format, you have a head start as each of your sales channels will be sending data in the same format. From a semantic technology perspective, this is known as implicit data because it is based on dynamic information (versus stored or factual) that an unidentified customer has provided.

Why is this exercise necessary? Your semantic engine will need to know how to weight or influence the information that it receives to create a semantic offer.

Explicit data typically has a higher weight on the semantic offer processing, but in cases where explicit data is not available, the semantic engine needs to rely solely on implicit data, and it is important to the engine to know if some portion of the implicit data is more significant than others.

For this step, the ABC Car Rental IT team:

Identified all sources of stored (explicit) customer data, including:

• Determining whether or not they had a pre-existing interface to the data or would need to create one
• Creating a consolidated map of all of the available data fields with assigned data field weights between 1 and 3, with 1 being the most significant because these contained the most relevant information that would influence semantic offer processing

They then identified all of their internal and external web services that dynamically request car rental availability, including:

• Creating a data map of each service’s XML data fields and assigning data field weights between 1 and 3.

As a part of this exercise, the ABC Car Rental IT team needed to create an ontology to help them formally represent each of the explicit and implicit data fields, weights and relationships between them if appropriate.

How did this step affect Ted?

He did not enter any information that would have triggered the semantic engine to look for and process explicit data, such as a car rental loyalty program number, so the offers were processed within the ontology using data fields in the availability request passed on from the partner airline.

Step 3: Rethink (and classify) your inventory and services

Now that you know what you sell, how you sell it, and what kinds of customer information you have access to, it’s time for some serious thinking about your inventory and services. This step involves creating “synthetic classes” for your inventory and services.

Although it sounds complicated, it’s basically an exercise to identify what may motivate your customers (or prospective customers) to buy a product, and then map and/or assign new categories (or classes) to your inventory.

Why is this exercise necessary? Your semantic engine wants to think out of the box and present offers based on an abstract collection of information.

For this step, the ABC Car Rental IT team:

• Created new synthetic classes for their inventory that would appeal to their customers personalities and trip goals, including “Power Car”, “Green (or eco-conscious) Car” and “Family Vehicle”
• Identified known inventory and service characteristics (data fields) that would pertain to their new synthetic car classes (such as transmission type, fuel type, mileage per gallon, horsepower, seatbelt quantity, luggage capacity and entertainment packages)
• Mapped these data fields to their existing inventory through their ontology

Step 4: Make the necessary changes to the descriptive information presented to your customers

The last major step is to review how you would describe your inventory and make adjustments to descriptive information to be consistent with your new synthetic classes.

For example, if you have created a synthetic class called “Family Vehicle”, you may want to adjust how you describe this vehicle by including an offer title such as “The Ultimate Family Vacation Vehicle” and include some description of the features that put it into a family vehicle class, such as seating capacity, car seats and other similar amenities, entertainment packages, etc.

Why is this exercise necessary? You created a great semantic engine, but your customer’s perception of and response to your semantic offers will ultimately determine the success of this initiative.

For this step, the ABC Car Rental marketing team created new offer titles and descriptions based on their new synthetic vehicle classes so the customer would see this alternate descriptive information if the semantic engine determined that one of these offers was appropriate to an availability request.

As a part of this exercise, the ABC Car Rental IT team needed to:

• Create a GUI-interface that allowed the marketing team to enter the alternate synthetic class descriptions for their inventory and services
• Update their application presentation (and availability results) logic to include the targeted semantic offers and ensure that they appeared in priority order in availability results

How did this step affect Ted?

He was offered three vehicles from ABC Car Rental, with the first vehicle titled “The Ultimate Family Vacation Vehicle”. The other synthetic classes defined by ABC Car Rental did not meet Ted’s criteria, so two standard vehicles were also included in the results.

Summing up

We’ve used a fairly basic scenario to illustrate these steps but the structure can be applied to almost any type of description and inventory in the travel industry.

• The benefits to the consumer are clear – his shopping experience is much better.
• The benefits to the travel company are clear – generating higher conversion AND incremental revenue – and customer loyalty.

NB: Additional analysis by Bonnie Lowell, specification manager at the OpenTravel Alliance.

NB2: Image via Shutterstock.

That past also led to high development costs, slow time-to-market for new products and new partners, and continuing consumer frustration with the travel research process.

To support innovation and satisfy consumers, as Stephen Joyce points out in an earlier Tnooz post, APIs need to be open and fairly simple to use (and I would add scalable, but that’s another post). But I would argue we need to add one more adjective here – standard.

The proliferation of open APIs is a welcome change, but it’s a double-edged sword. It’s marvelous that access to data is so easily available, but now companies will have to write to multiple APIs if they are interested in aggregating similar products and providing unique offerings.

And if every API is different… well, shall we go back to talking about high development costs and extended time-to-market for new products and partners?

What is the problem?

Open APIs serve the needs of one company. Just one. And just because a company has an open API doesn’t mean it’s any good.

Sure, XML and other modern messaging languages are so much easier to work with than, say, EDIFACT, but every Joe and Jane out there now thinks they can write a decent message. And many of them can’t.

The obstacles that face companies trying to launch new business and/or products in an industry as noisy and competitive as travel – limited resources, lack of familiarity with the industry, pressure to launch – are daunting, so adhering to a voluntary distribution standard can, and does, fall down the priority list.

The attractiveness of writing an API that best serves the needs of your product, and writing it quickly to get it out there and into production so your company can generate revenue, can’t be underestimated.

I get that.

But what happens when your company moves past just getting your product to market, when your company needs to grow and move into new markets?

Here’s what will happen – when your product set or market expands into other segments in travel, one of the factors potential partners will evaluate is how rational it is to connect to whatever information or inventory is shared.

An open API will only get you so far. A standard API, created with the consensus of the industry in a transparent and collaborative process, will get you farther.

How?

The use of a standard message gives potential trading partners, up front, an idea of your API’s structure and validity. It also gives them an idea of the level of effort that will be needed to connect to your company.

The use of standard messages provides your company with technical credibility during the initial conversation with a potential trading partner. And credibility, especially for a start-up, is critical to being taken seriously by the market.

Setting a standard

Now let’s talk about how participation can benefit companies more than just writing to a standard.

Participation in a well-organized standards body is especially beneficial to smaller companies because in many standards bodies, including OpenTravel, each company (not each participant) gets a vote.

So small companies wield just as much influence as larger companies. Several small companies participating can also provide a common voice for requirements or considerations that are specific to smaller companies (for example, larger companies tend to like more complex messages).

And one can’t overlook access – standards bodies tend to be supported by large players in a given industry, players that smaller companies may not easily have access to.

In a work group meeting, your company works side by side with industry leaders in a collaborative and open environment, a perfect opportunity for your company to impress others with your commitment and brilliance… without having to cold call.

NB: Image via Shutterstock.

But which technology or use of technology really provides strategic value for a hotel or hotel company?

The answer depends on many factors, but a group of hospitality associations has identified three key technology issues that are having, and will continue to have, a direct strategic impact on the hospitality industry:

• PCI (payment card industry) compliance
• Unique identification numbers for hotels
• Support for guests with disabilities

The HTSIC (Hospitality Technology Strategic Initiatives Council) is an informal affiliation of associations and other entities whose combined memberships represents every aspect of the hospitality industry – not only hospitality professionals, and hotels and hotel companies, but also most companies that provide technology and technology services to the global hospitality industry.

Because of this, the organizations on the council have a full and broad view into the technology issues facing the industry.

1. PCI Compliance

One of a hotel CIO’s biggest nightmares is getting a phone call that one of their systems has been hacked by credit-card thieves. The fragmented nature and location of hotel systems means a guest’s credit card number could exist in multiple systems in formats of varying security in locations of varying security.

PCI compliance across all levels of a hospitality company has become critically important for the financial stability and market credibility of the hospitality industry.

Members of the HTSIC have addressed this issue in a coordinated approach:

• HTNG has set up a workgroup that will a framework that will enable hotels to concentrate the storage of sensitive card data in a single system, managed securely by a vendor or the hotel company. The objective is to get every other hotel system out of the scope of PCI by shielding it from real credit card numbers. The initial goal of this workgroup, which is limited to hoteliers for the initial phase, is to document the framework so that all hotels can present it to their preferred vendors and partners as their vision of the path forward.
• HFTP has set up a taskforce aimed at educating hoteliers about the implications of PCI compliance on property-based operations and systems, including building a knowledge base, an ongoing series of articles, and a series of educational boot camps and conference sessions.
• Other council member organization initiatives include a white paper authored by AH&LA, a payment technologies committee established by HEDNA, and the support by OpenTravel of needed XML specification changes as required by the industry.

2. Unique Global Identification Numbers

The idea of a single global unique identifier for a hotel has been around for a long time, one of those ‘holy grail’ items like single-image inventory or the mythical super-PNR.

Originally, it was seen as a benefit for distribution channels that aggregate information and inventory from hundreds or thousands of properties, and for payment processors to more efficiently collect commissions from hotels.

The prevailing argument for the initiative’s slow progress has been the lack of a compelling commercial reason for a hotel to care about this kind of identifier.

HTSIC believes the changing nature of the travel business has provided those compelling reasons. Search is one (I wrote about this more in depth recently); it has become critical for hotels to appear correctly and accurately in search results, as search engine sites have essentially become the gateway to travel research and inspiration.

Search engine optimization is a great thing, but not when the property’s address is incorrect in Google, or the property is still listed under its previous flag in Bing.

Interestingly enough, PCI compliance is emerging as another driver for the global identifier initiative, as hotels work with their trading partners through the lifecycle of the transaction to ensure compliance.

Here’s a likely scenario as an example – when a distributor creates a guaranteed reservation for a hotel, they will need to contact the hotel’s designated token issuer for a token to replace the credit card. This requires being able to unambiguously identify the hotel so the hotel is able to charge the card and receive funds.

HEDNA, HTNG, HFTP, HSMAI and OpenTravel are all directly supporting this initiative and holding conversations with interested companies, with the objective to identify possible partners and governance structure and organization.

3. Support for guests with disabilities

In both Europe and the US, regulations are being released and revised to provide support to guests with disabilities. These are requiring hotels and hotel companies to review most aspects of their operations, from distribution to construction, to ensure compliance.

With the increase in electronic distribution of hotel information and transactions, hotels are working to provide better information and service to guests with disabilities.

Initiatives specific to distribution include the creation of standard room definitions and descriptions, guaranteeing accessible guest rooms and removing the accessible guest room from inventory when booked. HEDNA has worked on creating this vocabulary, and OpenTravel has revised its hotel schema, annotations and code list to reflect these changes.

As regulations evolve in 2012, HTSIC expects the hospitality industry to have to address more technological change to ensure compliance and provide service to this market segment.

Why HTSIC is a good thing

I can hear some of you now – what good can possibly come from creating an ‘association of associations’? Aren’t we just creating more overhead, more cost and more bureaucracy? In a word, no.

We are an informal group with no charter or legal standing, and our one requirement is that members of the group have decision-making authority. And our biggest strength is our commitment to work together, to eliminate redundant work or conflicting positions, to be transparent and open in our dealings with each other, and to address the most important technological needs of the hospitality industry.

From my own perspective, as CEO of OpenTravel, participation in HTSIC has allowed me to coordinate our work with that of other organizations so we don’t waste OpenTravel’s time or our members’ time – I hate wasting our scarce resources, and worse, wasting the resources of our members who volunteer their time to work for us.

Could this model work for other travel segments? Oh yes indeed. Will other segments adopt this model? Stay tuned…

NB: Here is the full list of HTSIC members:

• AH&LA – American Hotel & Lodging Association
• ARDA – American Resort Development Association
• CIC – Convention Industry Council
• HEDNA – Hotel Electronic Distribution Network Association
• HFTP – Hospitality Financial & Technology Professionals
• HSMAI – Hospitality Sales and Marketing Association International
• HTNG – Hotel Technology Next Generation
• OpenTravel Alliance

Such details would include name, address, postcode or zip code, contact number plus the primary brand/chain ID to which each property belongs, according to the TTI.

TTIcodes, chairman Peter Dennis says, will solve the “de-duplication nightmare faced by every travel company that takes several bedbank feeds,” saving travel companies, generally tour operators, time and effort.

What a swamp the TTI has waded into!

A unique identification number for every hotel worldwide has gone from being a nice-to-have idea when there were less than a dozen distributors worldwide in the 1980s, to a must-have 25 years later, with the explosion of distribution channels and points-of-sale, and the increasing sophistication of search.

But it’s not easy. As a past director of data for a worldwide hotel company, I can tell you from experience that each of our hotels had the following:

• Multiple “unique” ID numbers in their property management/reservations systems
• One for every GDS
• One for every OTA/bedbank/wholesaler
• One for every switch
• One for every major tour operator
• One for every representation company
• … plus a few others I’m sure I’ve deliberately forgotten.

In today’s environment, add commission payment processors and gateways, direct connect partners, channel management tools, local booking services and DMOs, not to mention Facebook and TripAdvisor, and you’ve got a massive identification data headache.

Managing these multiple identification numbers was hard enough on hotels, but it has been even harder on distributors because of the multiple points of sale a distributor might serve – GDS, OTA, TMC, switch, etc. – so distributors had, and still have, the unenviable task of creating endless mappings from hotels to points of sale and back for both booking and commission reconciliation.

The search for a unique hotel identification number is an old one.  A written proposal was floated in 2002 by Hsyndicate outlining the commercial case for such an initiative, and was championed by Worldwide Payment Systems, a Spain-based commission and payment processor serving the hotel industry and travel agencies.

The business pain was to better track, assess and distribute agency commission payments through the establishment of a “unique global identifier”, a hotel equivalent to the IATA travel agency number.

The Hotel Electronic Distribution Networking Association (HEDNA) agreed to support the initiative and committee work began in 2006.

In the interest of full disclosure, OpenTravel Alliance was originally approached to host this work but as it didn’t fit into our charter, we demurred. We have, however, had a seat on the HEDNA committee since its inception.

By 2010, the UGI committee in HEDNA had not made substantial progress, so HEDNA brought the initiative to the Hospitality Technology Strategic Initiatives Council (HTSIC), an informal affiliation of hospitality organizations whose work includes technology (including HTNG, AH&LA, HFTP, HSMAI and OpenTravel amongst others).

HEDNA wanted to enlist the other organizations’ support to leverage their abilities and members to move this project forward.

HTSIC believes that for a true global identification number program to work, hotels must be able to control the data.

The data does, after all, reflect the property information from flag to owner to operator to address to website to proper name, and can extend to history of the property (previous names, flags, etc.), and who better to own the data than, well, the owner?

And with the quickening sophistication of search algorithms and the aggressive move of search companies into the travel industry (see Google acquisition of ITA Software), it’s becoming imperative that a single “master” identification code exist.

But this isn’t some boring B2B problem. This directly affects consumers.

I recently had to go to Brussels for a meeting, and I found a hotel with a great location and decent reviews.

But I found it listed by three different but very similar names, with three pins at the same address on the Google map. Why?

Because Google was pulling information about the hotel from three different sources. This is confusing for the consumer and endlessly aggravating for the hotel operator.

TTIcodes is a white label of a product that already exists from GIATA, a Germany-based content provider for travel agencies, tour operators and hotels, and was created to provide a valuable solution for tour operators who struggle with access to updated hotel information.

According to GIATA CEO Andreas Posmeck, GIATA will be “responsible for the management, update and distribution of the codes. GIATA is continually researching and updating property information & more importantly cross referencing property information between its master property catalogue and the operators’ systems”.

While this initiative may serve a clear commercial and simple need for tour operators, it’s less clear that TTIcodes will address the larger problem faced by hoteliers – the ability to fully control information about a given property across multiple distribution channels and points of sale.

Nibbling at the edges will work in the short term, but kudos is due to TTI and GIATA for broaching a solution that appeals to at least part of the travel industry, and putting it into the market.

But for hotels and distributors, the TTIcode is just another number to add to the list.

Here’s a rundown of some of the more compelling ideas.

1. It’s AND, not OR

Well, duh. Haven’t we seen this movie before? With all the posturing between the GDSs and the airlines, what’s being ignored is what the customer wants.

Sure, booking on Airline.com is the cheapest channel with the best opportunity for ancillary sales, and sure, a booking made via an intermediary has costs and limited opportunity for ancillary sales.

But guess what – in general customers do not care about those costs or opportunities.

So far, airlines that are present in the OTAs and GDSs haven’t made it worth every customer’s while to book direct. And there is an understandable reason: the lack of functionality is still seen as a supply issue rather than an intermediary issue.

Despite the number of years airlines have been selling products via the web, it’s still largely about access. Plus searching multiple airline sites for pricing and schedule comparison is a time-consuming headache. (Most) airlines must follow a multi-channel solution for now because it’s what the customer wants.

2. How direct is Direct-Connect?

Not so much. It is a clear misnomer. No supplier with a multi-channel distribution strategy wants to connect directly to every single trading partner without some sort of intermediary, which is the true meaning of direct connect.

Multiple direct connects are expensive to set up and expensive to maintain. GDSs and their competitors like Farelogix have direct connects between their applications and the airline but not from the airline to the end customer.

The industry needs to call a spade a spade here and stop misusing the term direct connect – it’s a deliberate obfuscation of the real issue at hand which is the airlines’ unhappiness with the GDS’ technology and financial models.

3. Airlines aren’t merchandisers, yet

Two presenters at the conference, from Dell and Geary Interactive, a marketing agency, talked about merchandising from non-travel perspectives.

Meant to be interactive, some questions like “how well do you know your best customers”, elicited dead silence in response. Given that it was a roomful of competitors, one could make the argument that no airline wanted to show its hand, but the general consensus at the cocktail reception that evening was that the silence indicated a lack of knowledge about customers and how to sell ancillary products and services to them.

Airline organizational charts contribute to the problem.  Commercial, loyalty and IT departments are often siloed, with little communication between them, and there still seems to be internal arguments as to which department actually owns the customer. It’s hard to get a complete picture of the customer with incomplete knowledge of that customer.

Part of this debate included a conversation on the difference between multiple channels and multiple touch points. Many questioned if it was just an issue of semantics, but one attendee said that if the industry can’t define the difference, we’ve all got some work to do.

The difference is actually pretty clear. The customer has interaction with the airline at different touch points – researching, booking, payment, check-in and on-board. Customers to access those touch points prior to on-board on whatever channel makes sense for the airline and for the customer.

To become effective merchandisers, airlines will need to know more about their customer and the dialogue of the interaction across these multiple channels and touch points.

Airlines, as Datalex using the term “personas” pointed out, need to interact with their customers more completely.  That lack of personalized customer information via today’s GDS-powered intermediaries is a sore point for the airlines (although in most cases the airlines’ web sites aren’t there yet either). It also represents the value that, say, a Google could (if they so chose) provide.

Shifting from the concept of effective merchandising to the reality is hard work and not a core strength of the airlines, and only focusing on the distribution side of this shift is an oversimplification of the issue.

4. The cost of change

It’s not sexy, but it’s a reality – the cost of change will have a significant impact on the merchandising of ancillary products and services. There are lots of travel agents out there who like their green screens, lots of software still depreciating, lots of existing long-term contracts, lots of employees who will need retraining, and lots of regulations that will need to be addressed in multiple jurisdictions.

But we are at a cusp – the cost of maintaining the current solution is also rising. Datalex CEO and conference host Cormac Whelan asked what is the cost of the green screen when airline customers want more than the green screen can provide?

All industries can and must evolve to meet changing market needs, but in an industry like air travel which has many, many moving parts and layers of regulation, glossing over the cost of change for suppliers, intermediaries, distributors and technology providers in the distribution debate is dishonest.

5. An industry problem needs an industry solution

Finally, as much as the airlines paint this as the problem of GDSs and vice versa, it’s not. This is a market problem – airlines want to offer more services to their customers, and customers want access to those services on different channels – B2C and B2B.

Those channels have a financial stake in offering value to their users, and technology providers have a stake in offering value to their customers – airlines and intermediaries.

This isn’t a problem the airlines can solve by themselves by dictating process, standards or requirements.  There is a need for a cooperative solution because the customer doesn’t always buy directly from the airline.  Somewhere along the line that thought seems to have been lost.

As one speaker admonished the audience: if Henry Ford had asked his customers what they wanted, they would have told him a faster horse. What the industry needs is not a faster something, but an altogether new something.

The only way forward is to recognize that all parties that have a stake also have a right to fully participate in the solution so that we as an industry can address the most important thing at hand – what the customer wants.

This hasn’t changed much over the years.

Nor has the target market – the super-majority of hostel users are still between the ages 18 and 25. What has changed in the last five years in hostelling is the way that super-majority wants to research, book and interact with hostel operators.

“The percentage of online bookings for hostels is skyrocketing,” says Michael Tumminia, CEO of Gomio, a hostel booking and social portal. “Users plan their trips on the internet, they research on the internet and they expect to be able to book on the internet.”

This trend is forcing hostel operators to change the way they think about distribution and distribution technology.

Property management systems (PMS), even for smaller hostels, are becoming the norm, and there are literally dozens of PMS providers in this market, ranging from basic functionality like Backpacker Online to PMS’ for high-end and complex hostels like GuestCentrix.

What operators want now is interoperability between their own websites, third party booking websites and their PMS, and the channel management tools to manage it all.

This is starting to sound familiar, right?

Automating connectivity in a way that doesn’t break the bank or increase headcount while allowing the operator to have inventory available on multiple sites is the holy grail of all travel segments.

But most hostels still manage inventory on various sites through multiple extranets, a time-consuming process open to human error.

“There’s a real need for technology to bring about operational change to increase efficiency and effectiveness in hostel inventory management,” says Tumminia.

New booking engine providers and integrators are popping up every day, exploiting the burgeoning demand for online distribution.

Brian Manning, CEO of CMS Hospitality, a PMS provider to the hostel market, agrees.

“This market is ripe for more sophisticated reservations and operations systems, especially as smaller operations consolidate and become more complex.”

What’s driving these changes? The travelers themselves.

“Our customers are getting more savvy and demanding,” says Maria Argyropolous, COO of USA Hostels Inc, a hostel group with 500 beds in three properties in California.

“We saw an amazing jump in direct bookings after a complete redesign of our website,” says Argyropolous.

“We built a more sophisticated and intuitive site and implemented SEO practices, and now we’re working on optimizing the site for multiple device presentation. Now we’re worrying about ‘the fold’ on these devices as younger users tend not to scroll.”

USA Hostels is aggressively pursuing a direct booking strategy, as it saves the company money. “As direct bookings go up, third party bookings go down, along with the fees associated with them,” says Argyropolous.

But third party sites are important to USA Hostels.  They have a direct connect via their PMS to hostelworld.com, and accept reservations from others. “Those sites are really useful, an unbiased source of reviews and good information for potential guests,” Argyropolous adds.

The use of devices is on the upswing by hostel users, and that is having both operational and distribution impacts.  “We’ve had a hard time keeping up with the bandwidth requirements on-property,” says Oriol Badia, CEO of Equity Point Hostels, which has eight properties in Spain, England, Portugal and Morocco.

“Everyone used to lounge around in the internet café on desktops, but now they lounge around in the lobby with their devices,” tapping into the generally free on-site wifi.

There isn’t much booking opportunity available on mobile devices.  There are a handful of iPhone apps for hostels and only one iPad app that I could find, but most in the industry believe hostels need to be in that space.

“Mobile devices have a social aspect and hostels are all about socializing, so we should be there,” says Badia. “Plus the more tools the hostels offer for last minute booking, the better.”

As with other long-tail segments like golf or vacation rentals, the hostel industry is incredibly fragmented with small suppliers spread out all over the world. “The market is so fragmented, and that’s good and bad,” says Badia. One way to address the bad part of fragmentation, he says, is to focus on brand.

“Branding is becoming more important to the traveler, and it’s good for business,” he says, citing a year-over-year doubling of visitors to Equity Point’s web site as they focus on building brand. “Brands are growing, and becoming more sophisticated in SEO and online marketing.”

The big brands in the hostel segment, Badia points out, are not suppliers but Hostelworld and Hostelbookers, for whom supplier fragmentation is a good thing. Like USA Hostels, Equity Point also believes these online players have a role to play, but Badia would like to see some leveling of the playing field to support Equity Point’s branding strategy and growth.

There’s been a lot of movement in this space recently, with Rough Guides announcing that Hostelbookers would provide accommodations on its site, and Hostelworld recently becoming the budget accommodations provider for VisitBritain.

Certainly these two will remain dominant players, but as hostels seek to streamline distribution operations and make inventory available where their guests shop, the demand for interoperability and easy access to supply is creating a market opportunity for technology providers and new distribution channels.

I think it’s fair to say that the airline industry, while not actually in disarray, could be said to be in a period of violent evolution.

At an ATPCO meeting last week, the airline industry started talking about the impact of several organizations – ATPCO, IATA, Open Axis and OpenTravel – each working mostly in silos to create standards to solve the various issues in the electronic distribution of airline inventory.

There are some relationships between these organizations – Open Axis and OpenTravel have executed a memo of understanding, ATPCO sits on the board of Open Axis and is a member of OpenTravel, IATA and ATPCO have joint working groups – but nothing formal or consistent.

So there was a fair amount of confusion, and a bit of frustration, in the roomful of airlines, distributors and technology providers over which organization did what under whose governance to meet which business needs.

To be fair, this was the first time the four organizations have been in the same room together with the audience all four serve so it’s not like we as organizations have been ducking the issue.

And we’re all going to be together again at an IATA meeting in March, so the face-to-face conversation will continue.

But the confusion and frustration is understandable, especially when companies in the airline industry are forced to choose how to allocate resources, financial and human, amongst four organizations that have not clearly delineated, to the industry’s satisfaction, their respective roles with regard to standards creation.

So in the interest of clarification, or at least the beginning of clarification, here’s a brief statement of purpose of each organization.

ATPCO (from Tom Gregorson, Senior Director Product Strategy and Development):

• ATPCO’s mission has three components, to lead the airline industry in defining standards and implementing industry solutions, to collect and distribute fare and fare related date efficiently, and to provide products and services that help the airlines protect their revenues or grow incremental revenues.   As we currently provide products and services for over 450 airlines we have established a robust set of standards for airline fare and fare related data as well as the airline revenue accounting supporting processes.  To achieve our mission there is a need to have a set of aligned standards across all disciplines and technologies within the airline industry, we actively participate in industry forums to try and achieve this.

IATA:

• IATA is the international airline’s trade association which specializes in developing industry standards to transform the total air travel chain.  A recent example is electronic ticketing (ET), whereas currently much work is focused on e-services regarding the electronic miscellaneous document (EMD) to support ancillary services.  Since 2005 IATA has been working with airlines, airports and industry suppliers to develop XML schemas.

Open Axis (from Jim Young, executive director):

• Open AXIS Group’s primary goal is the advocacy for and promotion of XML as the optimal electronic messaging structure for airline system connectivity used in traveler authenticated content distribution. In support of this purpose, Open AXIS Group maintains a standardized traveler authenticated based set of XML schema and distribution practices, known as Distribution 2.0, tailored to the airline industry and is capable of delivering comprehensive content and functionality for use by the third party distribution channel worldwide.

OpenTravel (by me):

• OpenTravel creates XML schema and other artifacts to support passenger/guest-facing distribution functionality in all segments of the travel industry, including airlines and their technology and distribution partners.  With the direct support of the industry, OpenTravel staff creates and modifies schema, and then freely distributes the schema to anyone interested.  With thousands of implementations around the world and across the travel industry, OpenTravel has created a true industry standard.

What’s next?

More conversation leading to more clarification. Open Axis, ATPCO and IATA are all participating in OpenTravel’s airline merchandising project that just kicked off so we’ll treat that as a prototype for future collaboration and see how it works.

While all four organizations have comprehensive governance policies in place, I believe there is room for more formal structure between the organizations.

Stay tuned.

NB: Author is executive director of OpenTravel Alliance.

Also, what were their favourite posts of the year, on Tnooz or elsewhere, by themselves or others.

Valyn Perini (OpenTravel Alliance)

Prediction 2010 #1:

More niche travel content – tours, activities, golf, vacation/villa rentals – will move online in consumer-friendly form, including rich media and content, real-time availability, perhaps even transactions where appropriate.

Consumer demand will grow, which will lead to more funding and more start-ups, which may finally convince the large OTCs and GDS’ that these segments are worth pursuing.

On reflection:

While it was true that long-tail content moved online at a pretty rapid clip, I’m not so sure about the ‘consumer-friendly’ part.

Certainly Facebook and other social media sites have been a boon for niche content, allowing suppliers and providers a fairly inexpensive way to getting their messages out.

Pegasus did make a splash in the vacation rental space with its announcement of a vacation rental switch, but the large OTCs and GDSs have generally remained on the sidelines in most niche segments.

Prediction 2010 #2:

Declining costs of technology, an increased awareness of the value of messaging standards, and the constant search by distributors for additional electronic inventory, will combine to allow small-to-medium suppliers in all segments to expose their inventory cost-effectively and competitively, increasing their market share and providing consumers with meaningful travel product choices.

On reflection:

If I measure the success of this prediction by the increasing enrollment of small-to-medium companies in the OpenTravel Alliance, then I win!

However, there’s a lot of frustration by the suppliers with the lack of affordable distribution channels available for content and inventory, along with the myriad of ways to connect to those channels. And generally these small companies don’t have the financial or intellectual resources to build their own solutions, which means the technology companies have to foot most of the bill.

Because of that, there are lots of companies floating lots of different models, with the end result being consumer confusion and no rationalization of distribution costs for suppliers.

Favourite articles of 2010:

• The problem with vacation rental websites [Tnooz]
• Four types of non-destination based search and what it means for online travel [Tnooz]
• .Net nested attributes and OpenTravel Scheme [OTA forum]

Money is sloshing around, leading to the creation and aggregation of technology providers and distribution channels, putting pressure on property owners and managers to make increasingly complicated decisions about property presentation and selling.

The discomfort caused by all this is palpable at the Vacation Rental Managers Association conference in Texas.

A major topic of discussion, both on stage and off, is distribution of property information and inventory, fueled by the announcement by VRMA and Pegasus to build a distribution switch, and by the presence of a much bigger HomeAway after its recent acquisition of Escapia and Instant Software.

At the end of the first full day of the conference, VRMA held an hour-long town hall.

A majority of the questions were about the switch – who supports it, who doesn’t, who’s designing it, how will it work, etc, etc.

Earlier in the day, VRMA had put up a slide listing property management companies that had pledged to support the switch initiative.

Missing from the slide were Homeaway’s two property management systems, something immediately noticed (and tweeted) by attendees.

At the town hall, an attendee got up and asked the obvious question: “So do we give HomeAway the cold shoulder or do we go have a beer with them?”

HomeAway held its own town hall meeting later in the evening, and the switch kept rearing its conceptual head.

Carl Shepherd, HomeAway co-founder and chief strategy and development officer, expressed some skepticism about the switch project, indicating (accurately) it is a complex undertaking not to be taken lightly.

When asked about Homeaway’s support, Shepherd said HomeAway had only been notified of the switch initiative via letter the previous week, so felt it wasn’t fair of VRMA to ask for their support for something about which they had no information.

That brought a passionate rejoinder from Alex Risser, current chair of the VRMA board of directors.

Microphone in hand, he reminded the executives of Escapia and Instant Software of a meeting they attended regarding the switch back in January of this year, and accused Shepherd of misrepresenting the facts and of acting in bad faith.

The room was very quiet indeed.

Conversations with attendees about all this turned up a range of emotions from fear to skepticism to disinterest.

“We have an eight-week summer season that fills up with repeat renters so we don’t distribute,” says one property management company executive, “but we’re developing an off-season program and will have to find new channels to fill that.” She’s in the process of searching for a new property management system, and is fan of Flipkey, not HomeAway.

“It’s like junior high,” says another attendee, “with everyone jockeying for position. Who knows what the landscape will look like in a year?” A common refrain was that if HomeAway didn’t support the switch, it wouldn’t succeed.

Also heard was some concern about the underlying financials. “Margins are already so thin in this industry,” says the CEO of a niche distribution channel. “Adding a transaction fee in many cases will be difference between meeting costs or not.”

It is worth noting that, officially, HomeAway is making all the right noises.

“We know Mike Kistner and have worked with Pegasus,” says Shepherd in a written statement. “There is no reluctance in working with the company.  HomeAway considers the business model for the switch, which has yet to be defined, core to our ability to make a final decision to participate.”

“The technological challenges of creating a switch for this highly fragmented and diverse industry cannot be overstated, but the chances for success have been made greater by the selection of a company with Pegasus’ credentials.”

On its relationship with the wider vacation rental community, Shepherd adds:

“More than 3,000 professional managers, including most of the members of VRMA, choose to advertise on HomeAway websites. We believe this is the ultimate expression of support for HomeAway and all we do to increase the number of travelers staying in vacation rentals.

“While we understand the concern some professional managers may have, the majority of managers I have spoken to at VRMA express support for our acquisition of Instant Software and Escapia and hope that  HomeAway can help them become more efficient in the future.”

The only certain thing in the vacation rental industry this week is uncertainty.

The Vacation Rental Managers Association (VRMA) announced today at its annual conference in Texas that it is in discussion with Pegasus Solutions to build a “switch” for the vacation rental industry, adding to the already noisy buzz in the travel industry about the aggregation and distribution of vacation rental inventory.

VRMA is North American-based organization serving companies that manage, maintain and administer vacation homes owned by individuals, representing approximately 150,000 vacation homes, condos and villas in the US, Canada, Mexico and the Caribbean.

Pegasus is an established distribution services provider in the hotel industry worldwide, providing representation, reservations technology and distribution services, including an interface (the ‘switch’) that hotels and hotel companies use to distribute inventory, and information about inventory, to distribution channels.

In the hotel industry, the original switch was built by THISCO, a joint venture of several hotel companies in the late 1980s, who wanted to build a single interface they could write to, that could then be written to on the demand side by distribution channels.

The hotel companies wanted to avoid having to write direct connections to multiple distribution channels.

THISCO morphed into Pegasus in the mid-1990s and today, a number of distribution channels, including all GDS’ and large OTAs connect to the Pegasus switch to access hotel information and inventory, resulting in five billion transactions per month.

Together, VRMA and Pegasus plan to build the vacation rental switch so the industry can benefit from low-cost connectivity, inventory management and marketing, online merchandising and payment processing.

“There are several listing services in the vacation rental space,” says Steve Trover, CEO of All-Star Vacation Homes, a vacation rental management company based in Orlando, Florida, and a board member of VRMA.

“But no real way for management companies to effectively and affordably distribute rich information about their properties, control access to preferred distribution channels, and to actually transact bookings if they want without compromising their brand.”

Pegasus has built its hotel revenue model on the basis of per-transaction fee based on the value of the hotel booking.

Given the different economics of the vacation rental industry (lower per-night rates, fewer transactions because of longer lengths of stay), Mike Kistner, CEO of Pegasus, says:

“We recognize that the vacation rental industry is not built on the traditional hotel distribution model. Pegasus and VRMA will work together to find a revenue model that makes sense for all parties involved.”

Kistner says the vacation rental switch will utilize Pegasus’ primary technology platform RezView Next Generation, which currently powers the hotel switch and provides reservation services to 90,000 hotels in numerous countries around the world.

“What caught our eye,” says Kistner, “was the basic similarity of the hotel and vacation rental industries, and the fact that vacation rental properties are becoming a significant lodging alternative, and not just for leisure travelers.”

Kistner suggests the proposed vacation rental switch technology could help make information-rich vacation rental suppliers better able to distribute that information and inventory by protecting suppliers from very high look-to-book ratios expected in this segment, and by providing structured data descriptions of inventory for better searchability.

Homeway and Flipkey, two of the most-referenced companies in this space, use a listing model for their business (and pay either per listing or per lead), showing the property and whatever information an owner or management company provides, but ultimately pushing the consumer to the owner or management company via phone, email, fax or (occasionally) owner- or management company-built websites. The companies make money by charging the owner a fee to list.

Other companies, like LeisureLink, charge a transaction fee, and Instant Software, the biggest technology provider in this space (recently acquired by Homeaway) has the interesting model of charging the distributor US$5 per property, providing what seems like an obvious disincentive to a distribution channel to participate.

Pegasus is just one of many companies to recently invest in this industry. Just last week Homeaway announced that Google Ventures invested a substantial sum (purportedly US$25 million) in Homeaway.

VRMA and Pegasus say they are in contract discussion and expect to execute the contract and begin work shortly.

Kistner suggests the switch could be up as early as summer of 2011.

Sometimes I’ve rented from management companies and sometimes I’ve rented directly, sometimes a few weeks out and sometimes months and months out.

Having spent my entire career in travel, and the last ten years in travel distribution, I’m a pretty savvy (I think) traveler.

I understand travel products, how they’re presented, delivered, contracted, and operated.

I know how to effectively search for travel products, and I’m probably more willing to take risks in booking travel than the average person.

So I’m getting ready to go on vacation to France and I booked, as you would expect, vacation rentals for my accommodations

And it was an incredibly painful experience – navigating un-navigable web sites, squinting at out-of-focus photographs, looking in vain for a description (in any language) of a property, wondering if the availability calendars were accurate, hoping the owner or manager of the property would deign to return my inquiry.

What exactly are the complaints?

Site navigation

Some sites, to their credit, had filters on their left navbars (not unlike Kayak as an example), but these filters are worthless if the properties aren’t tagged correctly in the database.

• If I ask for a detached villa or chalet (and the site allows me to ask for that), I don’t want to see an apartment.
• If I ask for Chamonix, don’t show me Samoëns.  The site has just lost credibility and I’m moving on.

Cross-site listings

I’m somewhat sympathetic to small property owners who list their properties on multiple sites, but what am I supposed to think when the same property is represented differently on different sites, when photos or availability calendars don’t match?

In almost every case, if a property owner had taken the time (and spent the money) to build their own site, the information on that site was generally much more extensive and useful.

But as a buyer, I don’t want to visit 30 different sites to see all the properties that might meet my needs. I want a site that aggregates data; it’s quicker for me to find what I want. In theory, anyway.

Property information

Every hotel company worth its salt knows it has to present photos of the hotel room (at least two), exterior, important features (pool, beachfront, rooftop deck, pistes) and possibly the surrounding area if it’s a selling point (Times Square or Mont Blanc).

I wish the vacation rental industry had the same rule of thumb.  Here’s what I want to see:

• Front exterior view
• Terrace/balcony view
• Living room
• Bedrooms
• Kitchen
• Dining room
• Baths
• Neighborhood

The more photos presented, the more confident I am in the validity of the listing. I also want to see a text description of the property, and it doesn’t matter if the text is in a language I don’t speak.

There are enough free online translators now that I can get a decent idea of what the property owner is trying to say.

As with photographs, the more text I can read, the more confident I am that the listing is valid and just might meet my needs.  It also shows me the owner or manager cares about the property and about communicating the value of that property to me, the buyer.

Availability – the worst offense

Why offer a calendar function (as every vacation rental site now does) then allow the property owner to ignore it?

At least some sites are now showing a “last updated” date on the calendar so I can see that the calendar was last updated three months ago and come to my own conclusions.

If the owner refuses to use a calendar, or hasn’t updated it recently (say 14 days?), hide the calendar and indicate up front that the owner must be contacted for availability. That allows me to decide if I have the time to follow up with that owner.

Acknowledgement of inquiry

Some of the bigger sites send an automatic acknowledgement of receipt of inquiry.  That’s nice, but it doesn’t help me understand if the property is available.

A majority of my inquiries went totally unacknowledged – that’s right, a majority. That is no way to do business.

Real-time booking

It’s still very rare to come across real-time on-line booking for vacation rentals, but it’s happening more and more often on management company websites (I never saw it offered by individual owners).

And it’s a blessing.  If I’m willing to take the risk of booking online (like I do for hotels or resorts) after viewing your beautiful site with lots of photos and information, let me. Please.

This industry needs some standards, and I’m not talking just about distribution.

Presentation, description, terminology, terms-and-conditions, availability, response – there was no similarity of behavior amongst the sites I visited.  I understand there will be regional differences, but ultimately it’s still just a unit of inventory to be displayed and booked like air, rental cars, hotels or cruises.

It’s clear this is one of the reasons the vacation rental industry suffers from an occupancy rate in the 30s instead of in the 70s like the hotel industry.

Make the product easier to buy and more people will buy it. Make it hard to buy and watch your customers go to a resort.

The primary challenge is obvious – hundreds of thousands of suppliers worldwide. Aggregating hundreds of thousands of units of inventory is hard but HomeAway is working on it, buying vacation rental sites around the world at a good clip.

It’s one thing to have the inventory in one place, but quite another to have it presented in a standard, useful and bookable way.

I reckon, from start to finish, I spent 20 hours total to find three properties for a two-week trip. And I’m an experienced traveler in the travel industry.

How long would it take the average person?  Too long, I’d guess.

So what did I book finally, and from whom?

• A house directly from the French owner who has a really great website (although I found the property cross-listed on an aggregator site) with tons of photos and information and real-time availability, paying via PayPal.
• An apartment from a France-based management company who had their own website, again with lots of property information, real-time availability AND online booking with a credit card.
• A house directly from the English owner who listed the property on an aggregator website but loaded their page up with huge amount of photos and text describing the house, its contents and its environment, and real-time availability, paying via wire transfer (which cost me a USD35 fee from my bank).
• All three were immediately responsive to my requests either in the same day (if I sent my request in the morning US time) or overnight if I sent my request in the evening US time.

I expect to have a wonderful time on my trip, but I don’t expect to see much increase in the occupancy numbers of the vacation rental industry if the industry doesn’t make their product easier to understand and easier to book.

À bientôt!

In Dublin last week it was good conversation, some agreement, some disagreement, but not a lot of clarity on how to execute or fulfill merchandising of ancillary products across multiple sales channels.

Datalex hosted its annual conference for its customers and partners, with a focus on merchandising and travel retail.

In attendance were more than a dozen airlines, a few large distribution channels, travel agencies, and other players in the airline distribution supply chain.

The conference spanned two days, and included sessions on channel discrimination, commissionable ancillaries, social media and mobile, loyalty programs, standards, and the never-ending discussion about Google and ITA.

Several points came up over and over again, buoyed by equal parts passion and anxiety so I’ve distilled them down to the following:

1. Merchandising ancillary airline services is a proven business model

Similar to the CASMA conference in March, no one argued against merchandising. Checked bags, seat upgrades, lounge access and other services are being offered and sold to the tune of billions of dollars/euros worldwide by airlines, and while customers grumble about it on blogs/tweets/posts, they continue to purchase the services.

2. But airlines must do a better job at articulating the value proposition to customers

Lots of references were made to retailers – Amazon, Target, Tesco – as models for airlines considering how to market and present these services to their customers.  After all, if billions are being made AND customers don’t understand the value proposition, imagine the turnover if customers did value these ancillary services.

This means airlines have to develop some sophistication in presenting offers so all options associated with a flight are available, bundled (as special offers) and fully unbundled.  There’s nothing sacrosanct about the current booking path – disruption in the buying process can be useful.  Test presentations of offers and if it doesn’t work, do something else and do it fast.

3. To do that, the airlines have to become marketers

Some airlines have done a great job with their frequent flyer programs (Air Canada and Delta were given as examples), and several speakers suggested that these programs could be the starting point for extended marketing efforts.  Successful marketing depends on understanding the customer, and airlines have compiled extensive information about members in their frequent flyer programs.   Why not use it?

4. What’s in it for me?

It’s one thing to present and sell ancillary services on brand.com; it’s another to distribute those services and products to other channels.  Airlines are going to have to figure out how to give incentives to their distribution partners to sell these services, or decide that not all services or products are appropriate to be sold on every channel.  It takes infrastructure to present, sell and report on sold services, and intermediaries don’t have money just lying around to build that infrastructure.

4. By the way, a multi-channel strategy is the ONLY strategy

As one speaker pointed out, the GDSs are not going away. American Airlines’ direct connect initiative is “noble” in the words of another speaker in their desire to better serve their customers’ needs, but a single-channel strategy will fail every time.  Airlines must be prepared to identify multiple appropriate channels and utilize them.

Some of those channels will be direct-connect and some will be through the GDS, so build products that are flexible and can be adapted to various types of connectivity and sales channels.

5. So what could possibly get in the way of this merchandising nirvana?

Operations was cited over and over again as a sticking point, especially around the complexity of code-sharing and interlining. There are no operational standards around the reporting, fulfillment and revenue reconciliation of selling ancillary services and products of a partner airline, which puts the delivery of services sold at risk, undermining their value proposition and ultimately customer loyalty.  It may be that this level of complexity doesn’t need to be addressed first, but it will have to be addressed at some point, especially if airlines are required to offer all services through all channels.

Which brings us to regulation, also cited as potential issue (although it’s difficult to understand if politicians in the US are just posturing).  The prevailing (and predictable) sentiment in the room was that airlines and their partners should be able to offer relevant services in the appropriate channels and let markets, not governments, dictate what services and products are offered on what channel.

Overhead aplenty

As an aside, I am so sick of hearing about Google and ITA, but it was a hot topic of discussion, so I’ll dive in. There was a pretty sharp disagreement between attendees about the level of threat presented by Google.

One on side were the airlines, who said no matter what information was presented where, they still controlled and sold the inventory. On the other side were those who said Google would undermine metasearch, the OTAs and perhaps the GDSs.

No one believed Google is interested in actually distributing inventory, but as with all things Google, who can tell?

Another industry conference, another discussion about merchandising, but the conversations at this event were focused not on the concept but on the execution, even if no one is exactly sure how to get it done.

It’s official – the debate around merchandising has switched from the conceptual to the practical, meaning that it is finally being taken very seriously.

At the CASMA conference in Montreal last month, one of the most interesting sessions was on airline merchandising and ancillary revenue (can’t swing a cat at a conference these days without hitting a merchandising panel).

The arguments for and against (although no one ever actually goes on the record anymore as against) merchandising have been covered extensively, but what was interesting about this session was the audience response.

The session itself was straightforward: Jim Davidson of Farelogix, Tony D’Astolfo from Rearden Commerce, Paul Rose from PR Revenue Management and Stefan Frank from ITA Software presenting their views on merchandising and ancillary revenue.

This part of the session was about 45 minutes, and was a fairly standard company-by-company presentation of each participant’s take on the topic.

The next hour-plus was audience and panelist interaction. The most striking aspect was the tone of the questions, comments and discussion.

Unlike at past discussions at CASMA and other conferences, no one seemed to question the validity of merchandising or ancillary fees; what airline attendees and technology providers were asking were questions starting with “How do I”:

1. If I charge for baggage, what’s my liability when it’s lost?
2. Should I use the frequent flyer number as the basis of all personalization efforts?
3. How do I change our workflow to support new services?
4. What new inventory controls will we have to implement to guarantee availability of pre-sold items (blankets, meals, etc.)?
5. How can we convince consumers this is a good thing?

Tony D’Astolfo had a great response to the last point: “It’s not a fee, it’s a value-add!”. Airlines, he says, need to get over their fear of customer backlash and just deliver value.

It was obvious from the discussion that best practices need to be developed by the airlines to support merchandising; based on the questions asked, they seem to be just at the beginning of that process.

As one airline employee tells me: “It takes a lot of effort to turn a battleship but once under steam – it takes more effort to stop a battleship.”

Nevertheless, the biggest question (number six, if you like) still remains:

• When will the technology catch up so merchandising can take place across all sales channels, and in such a way that these services won’t be commoditized?

Given that several GDSs have publicly stated it will be 12+ months before they deliver functionality that can support ancillary revenues, it won’t catch up, at least on the legacy side, this year.

There’s a lot of movement in the technology space outside the GDSs, but given that most travel agents still swear by their GDS desktops, those agents (and other sites that are powered by the GDSs) will not get convenient access to the merchandising data for some time to come.

Like most travelers, when I book a trip in North America (and this generally applies to Australia and New Zealand, South America, South Africa and a few other regions) I take out my credit card.

First I book my flight (entirely pre-paid), then my hotel (guaranteed with my credit card and subject to cancellation time and no-show fee).

Then I put my credit card away and book my post-paid car rental.

And I’ve always wondered about that. Why do car rental companies make it so easy for me to stiff them?

How do they manage their staff and inventory (fleet) if they don’t know how many reservations are going to turn into bookings, if they don’t know how many cars need to be at a given location?

In the US, car rental companies have been asking themselves these same questions for the last ten to fifteen years because the financial implications are hard to ignore:

• 10-30% of all post-paid reservations are no-shows, based on channel booked (direct to supplier has a lower no-show rate, large travel portals have much higher rates)
• As a result, car rental companies, especially in high-demand markets, routinely overbook, risking a complete inventory sell-out, leading to additional cost of renting cars from competitors and engendering the ill-will of customers
• Car rental companies are sometimes forced to upgrade customers at no charge due to sold-out classes, a lost opportunity to charge for that upgraded vehicle
• Car rentals are perishable inventory units; every day a car doesn’t get booked is a day of lost revenue that can never be realized

Now at least the industry talking about it publicly.

Last fall, Avis Budget started talking to the GDSs about no-show fees.

The American Car Rental Association (ACRA), a trade body for the car rental industry, posted an open letter supporting the initiative.

Avis Budget, along with several other rental car companies and distributors, is now leading a project team in OpenTravel to add no-show related data elements to its standard XML messages.

At the Car Rental Show in Las Vegas in April, ACRA will hold a meeting to discuss this issue with suppliers and distributors, and will hold a panel discussion on this topic during the conference.

But, as reasonable as it sounds, applying a cancellation policy and assessing no-show fees seems to be fraught with contention.

The beneficiaries of a no-show policy are obviously the rental car companies, but what if only some of them implement this policy?

Would consumer behavior change if some rental car companies charged a fee but others didn’t? And what about the intermediaries, like the big OTAs?

What if they decide not to honor the no-show policies of their rental car supplier partners by not collecting and sending credit card information to the suppliers?

The technology to support this policy is pretty straight forward, compared to the business challenges:

• Add a few fields to search, availability and book messages, and add a few fields to the databases.
• Modify the UI to display fees and terms, and collect a credit card number.

There is the not-so-small issue of full development calendars and allocation of scarce and expensive technology resources, but the actual work needed to be done is not cutting-edge.

It can be done. The hotel industry implemented no-show fees and policies in the 1970s, and while individual hotels can set their own policies (4pm or 6pm cancellation notification, one night or full-stay charge for no-show, suspension of fees based on weather or other conditions, etc), policies industry-wide are consistently implemented and experienced travelers are conditioned to give a credit card number and make sure they notify the hotel if they aren’t going to show up.

As a result, the hotel industry has a no-show rate in the low single digits and can be confident in their pricing and occupancy management practices, not to mention keeping their operations costs down.

Most of the European rental car market is pre-paid all or in part.

According to Bobby Healy, CTO of Dublin-based CarTrawler, a company that provides rental car inventory to suppliers and distributors around the world, when a consumer pays for the car rental makes a huge difference in how the consumer manages the transaction.

“Levels of no-show are almost zero when any amount of cash is taken upfront, but grows to about 20% when no commitment is made to the car rental company or intermediary.

“Often reconciliation between the supplier and the intermediary is difficult due to the black hole known as no-show and of course this makes car rental a less attractive revenue generator to intermediaries.”

Craig Parmerlee, director of business development for AceRentaCar, puts it like this:

“If we never collect a penny from a no-show fee, I would be happy. We want the no-show fee to change consumer behavior such that they cancel any reservations they don’t plan to use. Simple as that.”

Talking about technology standards can be mind-numbingly boring, and I should know – I talk about them all the time.

It’s my job, and usually I like it; sometimes though I’d rather just talk about the weather.

But talking about standards at the Tnooz #tcamp2 this week in London was not boring; it was, amazingly, fun.

You probably think I’m exaggerating or at least taking a bit of editorial license, but I’m not.

It was great to be surrounded by experts in travel distribution whose opinions were shaped by experience, good and bad, working with XML-based standards and who, with beer in hand, were more than willing to share those opinions.

We started off by agreeing on the general usefulness of standards.

After all, light bulbs work in lamps because the manufacturers agree on standard fittings and wattage, and we can all play music on our various players because of the MP3 standard.  Can’t argue with that.

We moved onto how standards can stimulate innovation, but here opinions diverged a bit.

The argument was put forth that standards could stifle innovation, but a counter-argument was made that standards are usually created for a generally commoditized product (a light bulb) or service (providing information or availability for a tour or a resort or any type of travel product via some electronic means).

Standardizing the commodity and re-using it (in our case, transmitting information via standard XML messages) frees up intellectual and financial capital to innovate the non-commodity – like the lamp and the lampshade, or more to the point, the presentation, servicing and fulfillment of the tour, resort or other travel product.

How much a given company should standardize, especially in a non-regulated industry like travel, is of course a business decision that can only be made by that company, and lots of heads nodded at that statement.

And everyone knows there is no monolithic “travel industry”; adventure travel is very different from cruising, which is very different from renting a car.

Electronic distribution is a continuum, from the most basic online information on one end (hours of operation, for example) to complex transactions on the other.

Travel products land on that continuum based on the type of product, the supplier and the market, and do not have to move toward the transactional end.

Just because the rental car space heavily utilizes standard transactional XML messages doesn’t mean eco-tourism can, or should, to the same degree.

Standards shouldn’t force a company to distribute its product in a way that doesn’t meet its business needs, and an effective standards body should heed that message.

Sounds great, doesn’t it?  Go ahead, admit it – now you wish you’d been there too.

Amadeus recently announced a partnership with the International Civil Aviation Organization (ICAO) to provide the GDS’s customers information about their air travel carbon emissions.

Given the negative environmental impact of travel coupled with widespread online distribution of travel content (schedules, pricing, images, product details, etc.), I wondered how all the GDS’ were addressing the growing demand for more specific CO2 emissions data, specifically in air travel.

First, some terminology.

In travel, a journey’s carbon footprint is calculated by how much carbon dioxide (CO2) is emitted during a given trip.

Aircraft emit lots of CO2 per passenger, followed by cruise ships, trains, cars and hotels.

Many organizations worldwide offer a way to purchase a corresponding amount of carbon offsets based on the CO2 emission of a given activity or trip.

In the GDS, I found no agent- or traveler-direct distribution of CO2 emissions information in the leisure and unmanaged corporate booking segments.

None.

Representatives from all three major GDSs say the travel segment driving emissions-reporting is managed corporate travel, because the large corporations that have lots of business travelers generally have corporate social responsibility initiatives that require emissions reporting.

For those corporate customers, Travelport and Sabre offer emissions reporting post-trip, or for trips booked for the future.

Travelport’s product is Carbon Tracker and Sabre includes emissions information in its Traveler Security & Data Suite product.

However, Sabre is the only GDS that offers any kind of traveler-facing emissions information (for corporate travelers only) in the booking path via its GetThere Green product.

Surprisingly, Amadeus is the last GDS to the table; given Europe’s generally more stringent emissions regulations, I would have thought a European company would be in the forefront of C02-related initiatives.

According to Lucas Bobes from Amadeus’ Group Environmental Offices, Amadeus will use the ICAO carbon emission calculator to create an average emission of CO2 per city pair, and like Sabre and Travelport, the data will initially only be available as post-booking reports to corporate customers.

Ultimately, Amadeus want the data to be available in all selling platforms and possibly to their direct connect partners via their XML API, although they’ve set no date on any product delivery.

So why not offer travelers information about a trip’s given CO2 emissions in the booking path?

A Travelport representative points to the market and says: “We are currently reviewing the market needs for carbon related reporting across our point-of-sale applications and at this time, we are focused on post trip reporting.”

Sabre generally agrees.  “Price and schedule are the primary drivers when passengers book flights,” says Leilani Latimer, director of Sustainability Initiatives at Sabre.

“We’ve seen no indicators that CO2 emission information would have any material impact on travel decision-making, and it’s hard to make a carbon tonne meaningful to a consumer.”

Common examples of making that carbon tonne meaningful include number of cars on the road or number of barrels of oil (although how many of you have ever seen a barrel of oil?).

A travel-specific example is emissions data for flights relative to one another.

That direct flight from Boston to Vienna might emit half the carbon tonnage as the connecting flight through Frankfurt, but it might cost 25 percent more.

Which would you book?

Given the almost total lack of traveler-facing emissions information, the GDS suppositions seem valid; if travelers really wanted it, we’d see it touted as a competitive advantage, like no-fee hotel bookings or double-mile programs.

One major airline that does put emissions information in the booking path for all customers is British Airways.

Using a calculation approved by the UK government’s Carbon Offsetting Quality Assurance Scheme, users to BA.com can select a flight and see the carbon emissions generated by the flight (in carbon tonnes) and also purchase an offset, adding the cost of the offset to the total flight cost.

“We take our environmental responsibilities very seriously,” says Cathy West of British Airways.

“So we have made it easy for our customers to offset the impact of their journey.  Forcing them outside the booking path means adding another process,” decreasing the chance the customer will actually see the emissions and offset information and be able to act on it.

BA says it has received positive customer feedback and believes the program serves a market need.

Pete Davies, president of TerraPass Retail, agrees.

“At the margin, customers are quite interested in their CO2 footprint, and they pay attention to companies that take leadership positions in this area.”

What’s meaningful, he says, is the impact a carbon offset can have, not the carbon tonnage of a six-hour flight in a 787.

“People know traveling is bad for the environment, but understanding the CO2 impact in relative terms rather than absolute will drive demand for this information,” like the impact of carbon offset funds directed toward a wind farm or cleaner dairy operations.

A final consideration in this discussion is the method of emissions calculation.

All three GDSs use different calculation models for their CO2 emissions.

Sabre in particular seems to have put a great deal of effort into building a complex model based on aircraft type at time of booking (for fuel burn and seating configuration), distance flown between points, and various internationally accepted protocols.

The calculation seems of limited value, given that it is currently only being applied to one customer segment – managed corporate travel.

Adding emissions data to GDS booking platforms, while not difficult, obviously won’t generate much revenue in the short term, and given the current economic climate, any feature that doesn’t generate an immediate ROI will get bumped down the list.

I have followed several conferences in the last few months on Twitter from my desk, but this week I followed my first conference on the go from Tweetdeck on my iPhone, and it was a pretty interesting experience.

The first day of PhoCusWright 2009 found me in transit from Boston to Orlando to get to the venue in time for the opening reception.

Here was my travel itinerary and corresponding Twitter usage:

• Before leaving home, set up hashtag searches on Tweetdeck.
• Drive from home to airport, one hour and ten minutes in a fair amount of stop-and-go traffic.  Read tweets (but only when stopped, of course); no tweeting.
• In security line at Terminal C at Logan 20 minutes.  Read tweets; hard to manage the phone and bag so no tweeting.
• In gate area with a cup of tea, one hour, constantly reading, tweeting and retweeting. Must’ve looked like a total dork.
• On plane before take off, more of the same.  So engrossed I had to be told by a flight attendant to shut off the phone (reluctantly followed instructions).
• In Orlando, waiting for bags 10 minutes, catching up on what I missed during my three-hour flight.
• Waiting on, then riding in, shuttle bus, 90 minutes, tweeting and anxiously watching dwindling power supply.

Am I a Twitter addict? Possibly.

Was I excited about getting to the conference so I could participate directly? You bet.

Was it a great idea for Phocuswright to manage its Twitter-stream effectively, holding my interest and keeping me abreast of speakers and topics? Absolutely.

Conferences that don’t manage Twitter are missing out on a huge opportunity to engage not only their on-site attendees and strengthen their brand, but to reinforce regret at having missed the conference, and build resolve and demand for future events.

For me, it made the long travel day pass quickly, usefully and bearably.

PhoCusWright published an article recently with the premise that travel companies in the long tail are taking traffic away from the big online travel agencies.

Certainly that feels true, given all the movement in what I call the “emerging travel segments” – emerging referring to their recent adoption of electronic distribution as a viable sales channel – including golf, tours and activities, timeshares and vacation (villa/apartment) rentals.

Let me say at the start that my definition of electronic distribution is any information provided electronically (to trading partners, distributors, brand.com) about the product (the safari, the castle in France), not just the transaction.

Distribution covers everything from a photo of the product to richer media to an availability calendar (real-time or not) to pricing and terms to the actual booking transaction.

Often segments new to distribution assume it’s all about the transaction, but in these speciality segments, that’s just not true.

Emerging segments are interested in distribution, but companies in these segments, especially those that provide travel products with a lot of moving parts (niche or specialty tours, vacation rentals), find the established OTAs, while well-suited for distributing non-experiential travel like business and non-complex leisure travel, are definitely not set up to distribute more complicated products.

These products have generally been distributed in a manual, very high-touch way, which is good for the traveler (lots of personalized service) but not so good for keeping operator costs down (lots of manual processes and human overhead), and has definitely limited research to the times of day when someone would answer the phone.

But times are changing. Costs are high and travelers of all types are now used to researching and buying online, including their business travel and uncomplicated leisure travel, and they’re used to researching whenever it suits them, not just during tour operator office hours.

It was only a matter of time until the buyers of complicated travel started asking for some information about those travel products online – at the very least, rich media like images and videos, and some idea of availability.

However, the large OTAs are built for the transaction not the research.  When planning a safari in Africa or a tour of castles in France, the process of researching is a part of the experience, and the large OTA brands don’t support that function and probably don’t want that kind of overhead.

So small tour operator technology providers that enable distribution are stepping into that gap in the States and Europe, like PEAK 15 Systems, Rezgo and TourCMS, and many specialized content aggregators are popping up as well, including well-known names like National Geographic Traveler and Travel + Leisure, but real-time availability is rare and most transactions in these segments take place off-line.

The obstacles to real-time distribution are several and familiar – outdated business processes, technology and money.

One tour operator software provider says his primary competition is Excel, not other technology companies.

In the adventure travel and vacation rental segments, standardization of the descriptors of product (define safari, define tent, define castle, define moat) is a huge business issue that these segments must address before electronic distribution can really be effective.

Other segments have done it (air, rental car, rail, hotel, even cruise) so standardization is a reachable goal with a known payoff in cost reduction, increased sales and brand reach.

The technology and distribution providers stepping into this market are generally start-ups, and the cost of entry is high.

Funding for technology start-ups is still very tight, but interest and demand for these travel products is rising, and they are higher ticket products with higher margins than business travel and uncomplicated leisure travel products.

There could be a role in these segments for the large OTAs.

Orbitz owns away.com, an aggregator of adventure travel content (but there’s no integrated search capability and no booking capability), and the large OTAs have the scalable infrastructure and technical knowledge to support the distribution of any type of inventory unit.

They would have to be willing to be more research oriented and less transaction-oriented, at least in the short term.

Orbitz’ example of away.com is a possible model for the other OTAs, provided it becomes more integrated with orbitz.com.

There’s a real financial prize to be had in these emerging segments but the winners will have to have patience to support lots of online looking without much initial online booking, and will have to drive standardization of product definition, product presentation and product distribution to realize those financial prizes.