Lack of Technology Standards Presents Significant Cost Issues in Travel Industry

Posted on May 11th, 2016

Lack of Technology Standards Presents Significant Cost Issues in Travel Industry
Image: Tnooz

Have you ever purchased an airline ticket or booked hotel reservations through an online travel agency (OTA)? The speed and convenience through which a business trip or vacation can be scheduled using online services were a welcome surprise for those of us who remember the hassle of arranging such accommodations in a pre-web era. Still, the convenience offered by OTA’s does not come without a cost.  As frequent patrons of OTAs can attest, it is not uncommon to find that OTA fees and surcharges that add up to a significant sum.

As obnoxious and capricious as additional charges may be for customer, they represent only half of the story. According to tech blogger and industry player Maksim Izmaylov, founder and CEO of roomstorm.com, OTA fees are one of the most significant problems facing the travel industry today. From airlines to hotels and everything in between, OTA fees cut mercilessly into operating budgets. Whenever such systems are used, OTA fees are levied in two directions: to the end user and to the hospitality/transportation service being patronized. For European airline group Lufthansa, OTA costs have proven to be so painful that they have elected to place an additional €16 charge on every booking made through an OTA.

It may seem incredulous that alternative models to the OTA fee-driven model have not emerged, Izmaylov, asserts the reason the OTA model to go unchecked for decades is a technology-related one. The information systems used by most travel companies are largely outdated, silo-driven systems. There are extensive interoperability issues between their development environments. These issues have created the perfect environment for third party developers to set up shop and deliver data to end users that might otherwise be inaccessible or at the very least, inconvenient to obtain.  The lagging proprietary technology utilized by airlines and hospitality companies places them in an unenviable position of either rejecting the additional charges presented by OTAs and thereby cutting themselves off from the revenue such services drive, or using the OTAs to secure steady patronage, while getting hit with prohibitive fees.

The way forward, according to Izmaylov, is to promote the development of open technology standards for the world of travel. Imagine if airports, hotels, train lines, taxi services, and all other traveling accommodations committed to making their offerings available via a standardized, open API and open source code which developers could upon. In that environment, there would be no need for dozens of highly specialized mobile applications to get you from your home to the airport to the taxi to the hotel; it could all be delivered seamlessly in a single system. Because the technology would be standardized, there would be no way for market leaders (such as Expedia and Priceline) to set pricing and stifle innovation. The result: a more open and competitive playing field.

Fortunately, there are already market players who recognize this problem and are motivated to address it.  However, to make a truly open technological ecosystem function in the world of travel, Izmaylov suggested four things that would have to be present:

  1. Traveler Data Sharing Standards
  2. Realtime Hotel Availability API
  3. Flight Load API
  4. Trip ID (PNR for all parts of the trip)

The field is ripe for innovation and development and it is important that action be taken in the industry soon.  One group that is already working on open standards for the travel industry is the <LINK> OpenTravel Alliance</LINK>. While the work being done by this standards advocacy group is admirable, more action from the industry is needed. Beyond consortia / industry-driven standards, the industry and consumer advocacy groups must consider how to create open, accessible, technology standards to support global interoperability and benefits to humanity.  Truly open standards not only ensure all parties benefit, they enable competition and foster global market growth.

Do you feel passionate about open standards in technology development? Are you interested in the latest news from the various corners of the tech industry? Then why not become and OpenStand partner? You can:

Posted in News