When was the last time you had a Google-free day? The search company, or perhaps more accurately the company that started as a search engine, is increasingly all-pervasive in our lives. It is tempting to say that it has been on a buying spree recently, but there is every chance that this is not a spree, it is the new normal.
It is certainly true that the CEO of Ryanair, Michael O’Leary is not having Google-free days. In an interview with the Irish Independent newspaper he has let it be known that Ryanair was working with Google. It was a deliberate ploy, designed to scare the competition. From now on, all airlines, and travel agents, will need to know a lot more about what Google is doing in air transport.
They should be scared. Very scared.Google is starting a new generation reservation system called flightsearch. It will ‘change the way people buy tickets forever’, said Mr O’Leary. You are entitled to have a respectful scepticism for any Ryanair announcement.It is the largest airline in Europe, but it is known for using the press for its own publicity purposes, rather than as a means of communicating important information, but this is an interesting admission.
As you have your interactions with Google, ask yourself, when was the last time you paid for any Google product or service? The concept of paying for services they can get for free is not in the Ryanair DNA – why do you think they do not use the GDS for distribution – so this deserves a deeper look. Google is offering to distribute airline schedules and availabilities to its customers – everyone with a computer – and package that information in ways Google does so well, addressing the customers’ complete set of requirements as determined by the Google algorithm.
Several legacy carriers have been supplying data to Google for a few years. You may recall that Google bought the start-up reservation system ITA in 2012. Understanding the significance, Microsoft and a number of other erstwhile competitors were vociferous in their opposition to the move at the time. They back www.fairsearch.org, a well organised opposition lobby to the purchase.
Google’s flightsearch product now displays the schedules and more importantly, the prices and availability of airlines that work with it. The ITA contribution to that is its ability to price complex journeys and put that together with availability. Given that some legacy carriers, including importantly, Emirates, already supply this data to Google flight search, the genie is out of the bottle.
However, Ryanair’s involvement is another step towards a consumer distribution channel that is truly open, unbiased,and free to the travel and tourism industry. Suppliers provide their content to flightsearch. It then filters, collates and presents it to you, or indeed your agent, in a way that reflects all the other things Google knows about your preferences. Before you unleash your inner Edward Snowden, remember that this is no more than the systems we used to call Computer Reservation Systems (CRSs) and then we called Global Distribution Systems(GDSs) have been challenged to do for decades, and have failed to do. The consumer will be presented with the available product options, ranked by some user-selected criteria, to allow study and purchase.
IATA understands this issue. It also understands that the GDSs are very powerful, charging theairlines high fees, whilst continuing to retain the power in the relationship. That is why IATA launched its New Distribution Capability (NDC) initiative. It is an attempt to circumvent the GDS by putting reservation data and booking processes on XML, the internet protocol, and effectively starting again.
Clearly, Google now intends using content from the low cost segment as well. That will provide a base of product that will be competitive with the legacy carriers’ distribution strategy and at a fraction of the cost. The content suppliers, including legacy airlines, will have to be involved or face being excluded from this distribution channel. We are talking Google after all, not some small, regional entity that can be ignored.
If this can be delivered it is hard to see why it will not revolutionise the way travel products are distributed. There is no downside for the service provider if the traditional Google business model is maintained, as much of the revenues are generated by advertising and other value-added activities that do not impact directly on consumer or service provider. If a passenger ‘clicks through’ it is to purchase a ticket directly on the airline’s website. Just a few months ago that would have been a Good Thing.
The traditional players in the airline and travel and tourism industry understand the need for a neutral, low cost and global distribution system. That is the reason why IATA has gone to such efforts with its New Distribution Capability initiative – in the face of fierce, albeit passive-aggressive, resistance from the GDS. So you would think that a new distribution channel that reinforces the need for the NDC initiative would be good news.
Instead, the broadening of the Google-based competition opens a new flank in the traditional cosy relationships in the legacy industry. Ask yourself, was the sudden announcement of an alliance between the warring parties – the travel agents and IATA – to agree to support the bogged-down regulatory approval process for the NDC a week after this news came outit a mere coincidence?
For the past two decades airlines have let their control of the systems and services that allowed them to manage and distribute its product migrate to entities outside of their control. This was done with the aim of divesting so-called ‘non-core activities’ such as ground handling, catering, data processing,as well as the distribution and sale of their product. This divesting let airlines generate short-term shareholder value, but at the expense of control over the core infrastructure that supports the business.
Ryanair has not invested in distribution. It does not pay agents a commission – something that easyJet has just started to do – and it does not have a dog in the NDC fight. It owns its website, and the passenger data. It is able to see that it has the potential to distribute its products in new and interesting ways.
Today airlines simply fly aeroplanes. They pay extortionate amounts for the products and services that support this activity. They suffer from a ‘locked-in syndrome’ that restricts the ability to think outside the GDS paradigm and the traditional airline distribution process, notwithstanding the rise of web sales and mobile services. It is hard to believe that there is no further benefit to accrue to the airlines from technology and commercial innovation than is being achieved today.
Google will overcome the resistance of other content providers by simplifying the data collection and aggregation process, and then process it using their very big computer. It will create a global catalogue of services, pricing and inventories much more comprehensive and transparent than found in any new distribution capability or process dreamt ofin the airline establishment’s philosophy. And then it will tailor the data to the user’s preferences, right there on their screen. The ability to access billions of consumers will be unmatched by any of the pretenders in the market today. There are few that can match its processing power either.
The airlines’ view is that transferring control of their product distribution from rapacious GDSs to a rapacious Google is no big improvement. They should have thought of that when they chose to throw distribution to the wolves in the first place. The airlines do not own the agents anymore and they do not own the passengers or the passengers’ data.
The NDC is about to come up against a Google-ised travel and tourism industry product that is able to break down the traditional barriers to business processes. It is going to be a barn-burner.