6202009

1
E-commerce in the Travel Industry

• ENTER2000 - Barcelona 26 April 2000

Kari Aanonsen, Cand Scient Product Definition and
Research Braathens ASA
Per Myrseth, Cand Scient Researcher Electronic
markets Norwegian Computing Center
2
Kari Aanonsen, Braathens ASA

• Braathens ASA
• Handles about 5 mill passengers a year
• Mainly domestic Norway, plus Schipol and some UK
• Part of the NWA, KLM, Alitalia alliance
• E-commerce since 1997
• Booking and SET - April 1997
• Frequent flier - January 1998
• e-pass ticketless - 1999
• Movbile e-commerce, WAP - May 2000
• Background Kari Aanonsen
• Cand Scient in information technology in 89
• Research scientist at Norwegian Computing Centre
  89-97
• Product Definition and Research at Braathens
  since -97

3
Per Myrseth, Norwegian Computing Center

• Norwegian Computing Center
• Applied research and development
• Department for Electronic Marketplaces and
  Business Development
• Research programme Open Networks as the Future
  Marketplace
• Background Per Myrseth
• Worked, studied and done research in Ecommerce
  since 1992
• Contact information
• www.nr.no
• www.nr.no/home/pmyrseth
• per.myrseth_at_nr.no

4
Agenda

• 1500 - 1510 Introduction
• 1510 - 1610 Strategic and commercial
  development
• 1610 - 1630 Q A - Discussions
• 1630 - 1700 Break
• 1700 - 1730 E-commerce architecture
• 1730 - 1745 Q A - Discussions
• 1745 - 1815 Mobile e-commerce
• 1815 - 1830 Q A - Discussions

5
Strategic and commercial development

• E-commerce in the travel industry
• What is e-commerce in the travel industry
• Why e-commerce
• Main challenges and opportunities
• Integration, CRM, personalisation
• How e-commerce changes the travel industry
• Trends and case studies
• New entrants and new business concepts
• Traditional actors in the industry
• Hotels, agents, GDSes, airlines
• Corporate travel management

6
What is e-commerce? (Butler Group -99)

• E-business is what happens when you combine the
  broad reach of the Internet with the vast
  resources of traditional information technology
  systems. It is dynamic and interactive.
  (IBM)
• The application of advanced information
  technology to increase the effectiveness of the
  business relationship between trading partners.
  
• (Automotive Industry Action Group)
• The enablement of a business vision supported by
  advanced information technology to improve
  efficiency and effectiveness within the trading
  process.
• 
  (EC Innovation Centre)

7
E-business 1998 to 2000

• Few firms are rethinking their business models
• Most firms remain stuck with the first stage
• Simple electronic publishing of corporate and
  product info
• Few have actually moved to next step
• True electronic commerce - electronic ordering
  and payment
• Even fewer have moved to the third step
• Business transformation in cyberspace
• 
  (Professors Soumitra Dutta and Arie Segev,
  Berkley -98)
• Today business and industry transformation is
  starting
• No big magic changes but various steps and
  actions
• The tutorial will focus on these changes
  throughout the industry

8
Consumer use of the internet for travel is
booming (Travel Industry
Association of America)

• One in 10 US travelers book online
• 1999 1998 1997 1996
• Internet booking 16,5M 6.7M 5.4M NA
• increase in -99 - 146 206 NA
• Internet for trip planning
• 1999 1998 1997 1996
• Trip planning 52.2M 33.8M 11.7M 3.1M
• increase in -99 - 54 346 1 583
• Look-to-book ratio improved
• Nearly 1/3 of the lookers also book in 1999 up
  20 from -98
• Security is the main concern for the 2/3 who
  dont book

9
More numbers on travel e-commerce

• Online share of total travel sales - US
  (PhoCusWright 1999 yearbook)
• 3 of total travel sales in 1999 is online
• 8 of total travel sales will be online in 2001
• Airline tickets are dominating
• 583 in on-line booking in the US in January 2000
• Air Hotel Car rental
• 318 mill 164 mill 101 mill
• 20 of European business travelers have bought
  online (NOP - UK)
• 72 will consider to use the internet to arrange
  their trips

10
Key drivers for the travel industry

• More convenient for customers (faster, easier)
• Customer demand?
• New business opportunities for intermediators
• Deregulation for airlines
• Increased competition
• No-frill carriers
• Cost saving
• Technological development - new opportunities
• Technology push?

11
E-commerce in the travel industry

• B2B e-commerce in the industry for years
• Inventory (CRS) linked though distribution (GDS)
  to retailers (agents) and financial settlement
  through ARC and BSP
• Centrally hosted and controlled around the GDSes
• Todays e-commerce on open networks including
  customers
• Distributed systems of information sharing
• Independent businesses link together - direct
  access to consumers
• Product exposure and web-prices
• GDS display of airline prices and availability
  must be given equal display due to to EC and DOT
  rules and regulation
• Main travel websites connected to GDSes
• CRS/vendor and independent sites not subject to
  the rules
• Non-air product exposure depend on GDS
  web-channels

12
E-commerce challenges and opportunities

• BAs ambitious e-business goals requires
• getting the product, the business decisions and
  the pricing policies right
• () its about execution and back to basics
  reliability. Its about scalability.() Its not
  about clever ideas .
• e-service based on monitoring passenger
  location and consumer habits
• e-working - development of new services though
  time boxing and multi functional groups
• (Pat Gaffey BA
  Head of e-commerce operations)

13
E-commerce challenges and opportunities

• Integration of old systems and new services
• For every 1 spent on e-commerce, between 5 and
  50 will have to be spent on developing the
  systems to provide the necessary glue
• Integrated e-business should be scalable and have
  as little impact as possible on existing
  applications that rely on back-of-shop supply
  chain systems
• (Gartner Group March)
• Infrastructure, procedure and a solid customer
  database
• IT issues are paramount, especially the
  integration of legacy applications into an
  e-business system
• (Computer weekly - January)

14
E-commerce challenges and opportunities

• Customer Relationship Management
• Direct link to individual customers
• There is an important need for travel companies
  to have a customer relationship strategy in a
  world of increased competition and greater buyer
  sophistication
• The need to have a customer focused strategy to
  retain loyalty and win repeat business
• 15 of Travelocity customers also visits Preview
  Travel, 23 visits expedia, 10 visits lowestfare
  
• (Nielsen/Netratings May
  99)

15
Customer Relationship Management

• A broad range of definitions
• Enhancement of services by hoteliers
• Integration of airlines databases to create a
  single customer record
• The need to have a customer focused strategy
• One-to-one marketing and the facilitation of
  multiple remote direct interactions.
• Using internet for personalised customer contact
  and supply of information to callcentres
• An operational customer database should be at the
  centre of a CRM programme
• Included active history, demographic profile,
  booking preferences, hobbies and interests.

16
How e-commerce changes the travel industry

• More direct sales
• Mainly for nofrill airlines and simple products
• GDS bypass
• More agent sale online for hotel and car
• New intermediaries
• Online travel agents - Expedia, Travelocity etc.
• E-commerce start-up companies selecting travel
• New business concepts
• Demand collection (Priceline), auctions,
  lastminute etc.

17
New entrants - Online Travel Agents

• 4 major on-line travel agents dominated in -98
• Travelocity.com, Expedia, ITN/GetThere.com,
  Preview Travel
• Sold for nearly 1 billion last year
• Travelocity.com increased sales nearly three
  times in 99
• 285 in1998 vs. 808 on 1999
• The 19th largest travel agency in 98 - no.9 with
  99 results
• Merged with Preview Travel - Combined sales of
  1.2 bill in 99
• Trading on NASDAQ - 70 Owned by Sabre, 30
  public
• GetThere.com tripled number of bookings from last
  year
• 147 000 i 3Q 1998 vs. 433 000 in 3Q 1999
• Growth in corporate travel accounts and use of
  corporate selfbooking software

18
Online travel agents - US
(PhoCusWright 1999 Yearbook)

• Online travel agents will handle 6,3 of all
  agent booking in 2001
• 1 in 1998
• 2,6 in 1999
• 4.4 in 2000
• 6,3 in 2001
• Online agents will maintain their share of online
  market
• They handle 52 of all sales vs. supplier web
  sites
• Online agents share of air ticket bookings will
  drop
• from estimated 76 in 1999 to 65 in 2001

19
New Business Concepts

• Auctions
• Demand collection
• Customer specifies price, suppliers accept or not
• Priceline (airlines), HaggleWithUs (hotels)
• Lastminute sales
• LastMinuteTravel.com - US
• Lastminute.com - UK
• Discounted fares on long-houl
• Farenet.ie - Ireland

20
Priceline.com

• Demand Collection - Reverse auction
• Customer makes a bid for a ticket
• Priceline.com lets the airline decide if they
  accept the bid
• Launched about two years ago
• Billing 400 mill a year in airline tickets and
  100 in hotel rooms
• Brand Shield
• Airline name is revealed after booking is made
• Cheaper than airline sites and online agents
• Test April 2000 Oslo - New
  York 1 week
• Airline 1 and 2 - 9 573,- NOK and 7 250,-
  NOK
• Expedia and Travelocity - 5 418,- NOK and 5
  350,- NOK
• Priceline - 2 975,- NOK (from airline 1)

21
Lastminute.com - UK

• Handles last minute request from customers
• Guaranteed lowest prices everywhere (Travel
  Weekly Jan 24 2000)
• Launched in Oct. 98
• 600 000 user and 14.5 mill page visits a month by
  Jan 2000
• Cheap deals with carriers, hotels and tour
  operators
• Partly brand shields
• Company name revealed after booking is made
• Civil Aviation Authorities demands earlier
  revelation
• Commission
• 55 commission for hotel booking (Travel weekly
  (UK) Jan 31)
• Furious agents
• Lastminute.coms fares not available to them

22
LastMinuteTravel.com - US

• eMediary marketplace
• Pipeline for airlines and others
• Post just released inventory
• Book directly from supplier website
• Partner with yield system provider

23
Farenet.ie - Ireland

• Web site for discounted fares on long-haul
• Launched September 99
• A number of airlines has signed up
• Air France, BA, Air Canada,JAL, KLM, SAS, Iberia,
  Gulf Air,Malaysia Airline, Singapore Airline,
  United

24
Haggle With Us from ETravelNet

• For bargaining special hotel prices
• Internet and phone integration
• Customer specifies request on the net
• Hotel handles the request through buttons on the
  phone
• Accept, Stand firm or Make a counter offer
• Customer pays as soon as he/she has accepted
• Integrated in agent site or stand-alone
• Agent commission if integrated
• 12-35 transaction fee from supplier
• No brand shield
• (Travel Weekly (US) Dec 27
  -99)

25
Hotels on the net

• Increased booking of hotel rooms though Pegasus
• 2.1M bookings in 99 compared with 0,75M in 98
• Different booking pattern online and off-line
  (PhoCusWright)
• Offline 21 goes through agents and 71 directly
• Online 47 through online agents and 53
  directly
• The Hilton Hotels
• Only 2 of the bookings where made on-line
• Invested 17M on the Hilton web site
• Warnings against web discounts (Carterer and
  hotelkeeper 3.02.00)
• May damage relationships with corporate customers
• May lead hotels into a savage discount culture

26
Traditional agents

• Bricks and mortar operators get their act
  together
• Branded travel sites such as the relaunched
  Thomas Cook will become popular.
• There will be a big fallout among on-line
  companies when the bricks and mortar operators
  get their act together
• Will add online booking facilities within the
  next few months
• Start-ups such as lastminute.com, Expedia and
  e-Brookers have got a head start but Thomas
  Cooks brand
• TUI relaunches
• Will offers its entire packages holiday program
  and lastminutes as well as flights on scheduled
  and charter carriers at regular, special and
  consolidated prices. (418-7)

27
Traditional agents - cont.

• Traditional agent sold to online agent - UK
• Amersham Travel sold to Travelstore.com.
• For us to be aiming to be the survivors on the
  market in two, five or perhaps ten years time we
  would have to make a major investment in on-line
  technology
• Half of their 400 business travel accounts will
  be served online in the next few months
• Clients have told us they want access to online
  booking
• Carlson Wagonlit names digital business chief.
• The agency aims for end-to-end travel management
• Hogg Robinson set up new e-commerce unit

28
Traditional agents - cont.

• WorldTravel Partners in Atlanta
• Third largest in the US and fulfilment centre for
  Expedia.
• Expects to issue more air tickets this year for
  web sales then in our traditional agency
• Projects 7 mill ticket over internet this year
• 6 mill in traditional agency, 3 mill phone calls
  and 3 mill e-mails
• Transaction cost 5-10 on internet vs 30 - 50
  for traditional.
• Makes money but 20 of what they make on trad
  channels
• 99 from individual consumers or businesses with
  no travel management company
• Gets 0.5 phone calls pr. internet transaction vs
  3 per traditional

29
GDS - Galileo

• Launch new consumer web site (Galileo.com)
• Special web deals for consumers
• Galileo provides ticketing and handles fulfilment
• Suppliers pay lower commissions for these deals
• Facilitates suppliers relationship with
  consumers
• Acquires Trip.com
• Adds service for business travellers
• Includes FlightTracker which tracks airline
  flights in the US
• One-stop-shopping required for profitable service
• Consolidates assets into one company
• Cost savings are the key driver

30
GDS - Amadeus and Worldspan

• Amadeus
• Positioned as technology provider, as well as
  travel information service
• Amadeus technology used in 3000 travel agent
  sites and by 55 airlines
• Worldspan
• Worldspan buys 25 of XTRA Online
• managed corporate travel is an important
  segment
• Xtra Online is on 250 000 corporate desktops
• Merge with Worldspan Trip Manager (which has 850
  customers)
• Launched e-ticket in Europe
• Available for Worldspan agents in UK
• For e-tickets from BA, United and TWA

31
Airlines and E-ticketing

• e-tickets important element of airline e-commerce
• Braathens doubled internet sales twice in the 6
  months after e-ticket introduction
• US
• Issue of e-tickets outstripped paper tickets in
  Aug 99
• 48 of all agents transaction through was
  e-ticket ultimo 99
• 33 ultimo 98
• Europe - UK survey
• 12 increase in number of e-ticket users compared
  to 99
• 87 said they would consider using e-ticket in
  the future
• Not general interlining yet
• Alliance interlining introduced first

32
Airlines

• BA - High expectations and ambitious plans
• Wants 50 of airline revenue to come from
  internet in 2003
• e-services and e-working important element in the
  strategy
• New services
• Database for London hotels, extranet for agents
• Lufthansa - extends type of services
• Plans online travel agency - hopes to begin
  offering package holidays online later this year
• Plans to double direct sales to 14
• Aims to double its internet sales
• Sets up a separate web-site for online bookings
  by business travelers

33
Airlines - cont.

• Delta - focus on business travelers
• Enables business travelers to book corporate
  fares
• Offers special web fares which will count toward
  both revenue and market share goals
• Enable online tracking of both shares and revenue
• 4 of revenue from Deltas web today, planned 18
  by 2004
• Move from 70 agent sales today
• An airlines exclusive web booking environment
  restricts the view of fares available
• AA - service for group and meeting
• Post a calculator of its zone fares for group and
  meeting travel on Event.Source.com

34
Airlines - cont.

• Braathens - Significant growth with e-ticket
  introduction
• 5.5 mill NOK in 1Q 1999
• 8.8 mill NOK in 2Q
• 15.6 mill NOK in 3Q - e-ticket marketing campaign
• 34.0 mill NOK in 4Q
• SAS - Major investment in relaunched service
• Invested 30-40 mill NOK in new web-service
• Relaunched web in October 1999
• Plans to main Scandinavian travel portal
• Presents products from other carriers as well
• Sold tickets for 50 mill NOK after 3Q 99
• Wap service with SMART and Ericsson

35
Airlines - cont.

• Alitalia extends booking capabilities to US
  travelers
• Chose GetThere.com for corporate customers in US
• Northwest Airlines offers web check-in
• Seat confirmation, print out of boarding pass and
  upgrades from laptop
• Give customers added incentive to use NWA web
  site instead of agent
• Ryan Air expands to one-stop
• Expands to one-stop web site with insurance,
  hotel accommodation and car rental
• 60/40 phone/internet - goal is to increase
  internet sales
• Easyjet with 63 internet booking ultimo January

36
Airlines - cont.

• Business traveler book no-frill on the net
• 38 booked on internet vs. 33 on the phone i
  1999
• British Telecom to offer internet with e-mail on
  inflight
• 66 of business traveller carries laptops
• Ready for test ion early 2001
• IATA top 10 wish list had e-mail as no 5 and web
  as no 7
• Airline portals in the US and Europe
• Just over half the buyers purchase directly from
  airline
• Portals (major online agents) account for 39 of
  buyers
• 10 European in Online Travel Portal
• 4 American in T2 (Delta,United,MWA and
  Continental)
• Planned launch in summer 2000

37
Corporate Travel Management

• Target for suppliers, agents and system providers
  
• More price conscious - 44 chose flight based on
  cost
• No killer application, a number of services
  offered
• Delta
• Corporate fares, special web fares count towards
  revenue and market share goals, travel manager
  info
• XML standard format for profile info from OTA
• Transfer of records when corporate change agent
  or GDS
• Compile corporate databases from diverse systems
• Build direct links to preferred suppliers

38
Corporate Travel Management Systems

• More functionality than consumer booking systems
• Booking of both air, hotel, car etc
• Travel policy - preferred supplier, price/service
  range
• Access to corporate agreed fares, add to
  corporate volumes
• Accounting, reporting, settlement services
• Travel manager functions
• Large potentials for corporations
• Enforce travel policy (main goal in Europe)
• Save time on booking process
• Reduced agent/service cost (main goal in US)
• Employees may book from home

39
Corporate Travel Management Systems

• Systems mainly available on the US market
• AXI (Amex and Microsoft) and Sabre BTI dominates
• E-Travel, Via World Network and Xtra Online
  (XOL), GetThere
• GDS products (Trip Manager, Amadeus Corporate
  Traveler etc.)
• Hard to implement in the market
• Changes in ownership and business policy
• Amex markets GetThere.com instead of AXI for SMEs
• GDSes buys other systems Worldspan - XOL,
  Galileo -Trip.Com
• Via from travel service provider to system
  provider
• Corporate services strengthened in other systems
• GetThere, Delta with corporate rates

40
Via World Network

• Spinoff from Andersen Consulting in 96
• Handles 40 of all Anderson tickets (70 by
  year-end)
• Advanced e-commerce functionality
• Direct link to suppliers (6 US airlines)
• Full sentence speech recognition
• Pay-at-use
• Changes in policy
• Offering services directly to corporations
• Pull via airlines and agents (oct98)
• Intel inside approach Technology to travel
  distributors and travel management companies

41
Mobile e-commerce

• Finnair
• Timetable,Arrival/departure own flights, FF-info
  with login, special offers, services (Finnair
  offices, destinations, loungeinfo), MultiFLYe
• Swissair
• Check-in via Wap terminal - confirmed
  flightnumber, exact departure time, gate and seat
  number
• Updated info on departure changes
• Pilot test from from 16 des. 99 with 600 FF
  customers
• Delta
• Own itineray, departure/arrival, gate and
  timetable
• Booking and change in phase 2
• Project with IBM for Palm VII

42
Mobile e-commerce cont.

• SAS - Only for corporate (pilot?) customers
• SAS' timetable, Departure and arrival for
  SAS-flights, Status på EuroBonus
• Plans confirmation on waiting list (SMS-message)
• SMARTs WTM - Wireless Travel Management
• Travel Service - Booking, re-booking and
  message service
• Travel Management - Corporate Flight Reservation
• Mobile Office - e-mail, calender, Internet and
  company intranet
• SMARTs Travellink
• Internasjonal Timetable
• Widerø
• Arrival and departure for Widerøe flights
• Cooperate with Amadeus on booking based on 1A Res

43
Widerø - Departure and Arrival
------Widerø -------- Select airport Aberdeen Alt
a Andenes Båtsfjord Bergen Berlevåg Select
Back
------Widerø -------- Alta DEPARTURE ARRIVAL Last
changed 23.02.00 1501 Select Back
------Widerø -------- Alta Arrival 1440
WF932 Tromsø-Hammerfest-M ehamn-Berlevåg-Vadsø New
time 1445 1450 WF943 Kirkenes-Båtsfjord 224
0 WF936 Tromsø-Hammerfest Select
Back
44
TravelLink - Timetable
----Requirements------ From (City or
code) ... To (City or code) ... Date
(YYMMDD) 000224 Time (HHMM) 1300 Search
based on Departure Means of transport All
means Search timetable Valg
departure, arrival
----Timetable Result---- Oslo - Bergen Friday
february 25th 2000 -------------------------------
A, 1300-1355, 0 A, 1345-1435, 0 A, 1400-1455,
0 A, 1400-1510, 0 Hjelp Valg
Tilbake
----Details ------ Oslo Airport
- Flesland/Bergen 1400-1455, SK319 SAS - Boeing
737 Seats Available ------------------------------
Total trip duration 0055 Valg
Tilbake
45
Finnair
- F I N N A I R WAP -- 1. Flight
Schedules 2.Arrival/Departure 3.Finnair
Plus 4.Offers 5.Services 6.MultiFLYe Valg
Tilbake
---- F I N N A I R ------ Sceduled
Flights From (e.g HEL) HEL To (e.g.
HEL) HEL Day (e.g. 07) 25 Month (e.g.
07) 02 1.Contimue 2.Help 3.Back Valg
Tilbake
---- F I N N A I R -- ROUTE HEL-STO DATE
25.02 OK Valg Tilbake
------------Flights--------- DATE 25
FEB ------------------------------- AY631 HELARN
0650 0645 ---------------------------- AY933 HELAR
N 0745 0740 -------------------------- AY643 HELAR
N 0800 0755 -------------------------- Valg