Two minute warning as China mulls nuclear weapons in travel tech war

Who would’ve thought the fight over travel distribution could be likened to the Cold War and India’s greatest figure from history.

nuclear bomb

In fact, the opening session of the Travel Distribution Summit in China held in Beijing this week saw comparisons being drawn between GDSs and nuclear weapons and the contrasts between the philosophy of Mahatma Gandhi and Confucius.

It all started with the opening keynote by Ram Badrinathan, general manager in Asia-Pacific for PhoCusWright, who in calling for a freeing of the travel market to allow technological innovation particularly in travel retailing, quoted Gandhi:

“I do not want my house to be walled on all sides and my windows to be stuffed, I want the cultures of all the lands to be blown about my house as freely as possible but to refuse to be blown off my feet by any.”

Badrinathan says that while travel and tourism in China had grown by leaps and bounds in all aspects, there was still one aspect where it lagged behind other markets, in particular, India – innovation in travel retailing – and he attributed this to the closed GDS market which was restricting travel agents’ ability to meet changing customer needs.

He adds that the GDS environment had evolved considerably globally to meet the changing needs of customers such as airlines and travel agents.

In a benchmarking survey conducted by PhoCusWright in China, the company found that gaps such as efficiency tools, fare transparency and integrity, reporting tools, merchandising capabilities and relationships tools and attributes existed in the current GDS environment in China.

The Chinese GDS lacked certain functionalities for example service fee management module, automated ticket refunds and reissuing, PNR quality checks and unused ticket reports.

“Fare guarantee policy is not available for international fares in China – 40% of agents said they have to check with global GDS – and in terms of integrity of fare quote engine, agents said they have to check with individual airlines,” says Badrinathan.

This, he says, created a lack of trust in agents.

Drawing comparisons between India and China, he said that while China outstripped India in terms of physical infrastructure, it lagged behind in terms of soft infrastructure.

In India, global GDSs are allowed to operate, there is private ownership of airlines, the travel retailing chain is deregulated and low cost airlines have a 50% penetration. All this encourages invesments and innovations by entrepreneurs.

In the online travel agency markets, touchless bookings dominate – close to 90% of MakeMyTrip bookings are totally automated in contrast to 80% of Ctrip’s transactions that are done offline.

While he says that not all globalization is good – for example, McDonald’s – Badrinathan says that China is sitting on the sidelines as the world of travel retailing passes by. It is time, he believes, for key stakeholders in China’s retail travel industry to take their place alongside other global players.

His remarks prompts an unscheduled response from Larry Liang, general manager for airline solutions of TravelSky.

First, he explains that there were two types of GDSs – one was run by investors and shareholders who set profitability targets and the other was run by airline shareholders whose aim was to provide services to customers. “Both are different business models and have different performance criteria and cannot be compared in the same breath.”

He then compares GDSs to nuclear weapons, saying there were some countries that chose to have GDS or nuclear weapons and those that did not.

“China is a big country; we have to choose what we want to do.” He says that while the situation was not ideal – and no one wants to sell their core technology (ie nuclear weapon) – “we are ready to learn”.

“Are we going to become competitive or go into war without nuclear weapons?”

The China travel transactions market, in any case, is huge with figures scaling from $800 million to $1.5 billion to $3.5 billion. Global transactions by GDSs worldwide only come up to $1 billion.

“Who will be capable of handling the huge travel market in China. I don’t think any system in Europe or US can handle it.”

He says a different solution was needed to solve the Chinese problem and concluded that perhaps instead of turning to a philosopher who believed in starving himself, we should look to Confucius for the answer.

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Siew Hoon Yeoh

About the Writer :: Siew Hoon Yeoh

Siew Hoon Yeoh is the editor-at-large for SHY Ventures and editor/producer of WIT-Web In Travel.

She created and manages the travel insider website The Transit Cafe and also runs WIT - Web In Travel, Asia’s leading travel distribution, marketing and technology conference, and the weekly WIT newsletter.

In 2008, WIT was awarded the Most Innovative Marketing Initiative by the Singapore Tourism Board. Siew Hoon is also an established speaker and facilitator at travel industry conferences and workshops.

She is also is a published author, having written titles including “Truth, Lies & Other Stuff” and “Around Asia in 1 Hr: Tales of Condoms, Chillies & Curries”.

 

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  1. Tour Info

    wow great and well post. I am also looking such as blog . I like that post

     
  2. After nuclear-led Cold War comes travel distribution detente | Tnooz

    […] The unscheduled “nuclear” remarks made by Larry Liang, general manager, airline solutions of TravelSky, prompted by the opening comments of PhoCuswright’s Ram Badrinathan, whose presentation was by the way immediately followed by that of David Jones, CEO of Amadeus, was a case in point. […]

     
  3. China travel symposium Oct. 14 at Hilton | world travel tours

    […] Two minute warning as China mulls nuclear weapons in travel tech … […]

     
  4. Douglas Quinby

    Global and regional GDS transaction and retail travel value data (not including TravelSky) are available in this free study from PhoCusWright here http://www.phocuswright.com/library/getfile/1133

     
  5. Daniele Beccari

    In 2008, global GDS processed 1.1 billion bookings and generated US$ 9.6 B in revenues.
    Can’t remember where this comes from, I think it’s IATA data.

     
  6. L.T.

    Andrew…

    You have made it quite clear that there is such a GDS in China genertating its revenue from both ends from the airline suppliers on the segment booking fees (though cheaper than rest of its competitors) and inevitably local agencies on the mentioned terminal accessibility fees…

    Does it really mean they are THAT serious in aiming to provide services to customers ONLY?

     
    • Andrew Shepp

      I couldn’t answer that question because GDSs cannot say who their “customer” is.

       
      • L.T.

        TravelSky is a public company, instead of a non-profit organization, with the responsibility to generate revenue and reward its shareholders with the dividend, which is all the way coming from the profit it is expected to make through its business operation with the service it offers to all its customers.

        The comments made by Larry Liang does not make sense at all.

         
        • reborn

          I could not agree with your understanding to Travelsky. It would be helpful if you could firstly study the SOE system in China under SASAC. To understand that SOEs are not profit driven companies as westerns’. This is how things work in China. Quite different from Western.

          Thanks

           
          • L.T.

            Reborn,

            Are you sure you know SOE and SASAC well?

            As a native Chinese born in China and growing up in China and having 20+ years of working experience under such a so-called SOE system, I don’t think I am in a position with less knowledge and understanding on what Mr.Liang is saying on Travel Summit in September than you do.

            Not sure whether you know it or not on what President Hu JinTao recently stressed on “Inclusive Growth”.

            To make it simple, what TravelSky has been doing over last 20-30 years and may want to continue to do in China Travel Distribution sector is PURELY to protect its business and benefit not to be disrupted and impacted by trying its best to monopolize everything of sector against anyone with an attempt to play a fair game if there is such an one in the market place.

            By the way, let’s assume…A quick question to you…If any SOE under the leadership and supervision of SASAC may have unfortunately suffered a biz loss and a poorer biz performance, what may happen with its company management?

            I hope to see what you may want to advise in a more honest way.

             
  7. Timothy O'Neil-Dunne

    I think I need to correct the numbers here.

    Worldwide based on our research T2Impact believes there are approx 2.2 billion GDS segments. This includes China today. According to IATA the Western GDSs charge $4 on average per segment and Travelsky’s average segment price is $1.20. (less for domestic).

    T2Impact estimates that the actual average price for a segment issued through one of the big 3 GDS companies when total costs are included now exceed $6 per segment. There are some discounts offered however and indeed some surcharges imposed as the traditional GDSs unbundle their pricing. Thus the value of GDS market worldwide is much larger that perhaps Mr Liang is estimating.

    Thanks

    Timothy

     
    • Andrew Shepp

      And a fee from the airline per segment booked is only one of (at least) three revenue sources for GDSs. I’m often astonished to find agencies paying access or bandwidth fees to GDS too. /Andrew

       
 
 

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