Google enters the travel industry

When I read “Google” and “travel industry” in the same sentence, it catches my attention!
Apparantly, Google is in talks with ITA Software and is considering buying the company for roughly $1 billion.

Now why is this so special?  Well it is interesting in 2 ways.
Firstly we can look at it as Google trying to outsmart Microsoft’s rivaling search engine “Bing”, that already has “Bing Travel“, that can look and book flights and hotels.
Secondly, we’re talking about ITA Travel.  This company, was considered along with G2 Switchworks as a GDS New Entrant, or GNE for short.  These companies, 10 years ago, were going to be the ones that would break the monopoly of the GDSs (Galileo, Amadeus, Worldspan, Sabre, …) and change the airline industry distribution model forever.  Wow, what’s that I’m talking about?  Well, ever since the creation of the Global Distribution Systems (GDS) by the airlines in order to create some centralized system to handle their distribution of airline seats to the travel agents (i.e. providing the travel agencies a means to compare offerings from all the airlines and sell them in one system instead of having to have separate terminals per airline), these systems have grown in power, creating themselves an uncomfortable position for the airlines, as all of a sudden, these systems became the only way to distribute their content to the public (remember, we’re talking the pre-internet era here).

With the rise of the internet and the distribution of technologies such as webservices, airlines started to create their own proprietary booking applications (websites etc.) to go either consumer-direct or travel agent-direct.  The problem was, that again, they were putting the agencies in a comparable situation as they were in before.  To book airline A, they’d have to go to application of website A.  The same for booking of airline B.  Since these would be independant systems, they would have to consolidate manually afterwards (not to mention the difficulty in booking A and B at the same time for a return trip).  So, the GDS was still the single point of sale if you wanted to consolidate, combine and simplify your booking.

Open the curtain for the GNEs such as ITA Software, as they would be consolidating all of this content and effectively, become a new GDS, but working on cheaper (web) technology and not charging the airlines the same amounts of money as the GDSs were doing.  All of this seemed to signal the demise of the GDS but all it really did, was provide the airlines with some leverage in their negotiations with the GDS systems.

So, in the end, the GNEs themselves had to re-align and focus more on their capabilities of being a technology enabler, at which they’ve become very successful.  So successful even, that G2 was purchased by Travelport (owning already Galileo and Worldspan) and now ITA is being eyed by Google.

Is this good or bad news for the travel industry?  All of this underpins the importance of having a strong online presence for the traditional brick and mortar agencies.  Fighting Google won’t be easy, but Google will not replace the travel agency as we know it.  The local presence, the local know-how of the market still prevails, but it will force traditional agencies to revisit their online strategy and give way to new, creative ideas.

I’m already at my desk coming up with plans.. are you?

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