PhocusWright, a world leader in travel technology, did their first ever India conference last month. TourismFirst did a set of daily newspapers covering the conference, in association with them. On this occasion, we met with Tony D’Astolfo, Managing Director, PhocusWright, who believes that the ongoing price war to capture the market share is a trend which won’t be sustainable in the long run. He says that having a good service offering and creating a value based proposition is the right way to move forward.
MANAGING DIRECTOR,
PHOCUSWRIGHT
Where do you see India moving, if you look around the world, your macro perspective, which are the markets that India is best comparable with?
Comparable with, is a difficult question. Where we should be looking at, I think, are the markets where the trends that happen first, the US, Europe, particularly with the move to online. If you look at China, China is particularly aggressive on the mobile side. So these are all things that traditional travel agents…. understand. How do they transition from their historical place serving their clients to having some online presence? How do they manage the way content is changing, the way airlines are distributing their products today, the way they are differentiating between a traditional seat, standalone, and a combination of a seat and something onboard, with other things? This is all challenge and opportunity for traditional travel agents. When you look at how the US has evolved, their leisure has become a lot more heavily online, corporate has become less online, but traditional travel agents still have a strong role in the fulfilment of the reservation. It is a very interesting time.
But if you look around at whatever is happening in India, are we going more the US way?
You can see that we are moving online. There is definite impact of a lot of the dot com companies. But then you still have the traditional guys like Cox and Kings and others, who have been around for a 100 years, that are still absolutely viable. The question is, as we saw, when online began to grow, the number of traditional travel agents in the US went down by half, some were even more successful when they come out the backend, because they redefined themselves based on a different service or were a niche part of the market. There is always opportunity. But I think you will see that there will be some consolidation. A lot of the travel agents, in the US, where it is still happening, where smaller regional agencies are being bought by larger entities so that they can scale and compete on scale. The whole price game is very interesting. The way people compete on price today which, over time, I don’t think is a winning strategy. Having a good service offering and creating a value based proposition is more likely to more sustainable.
If you look at the scenario, if you see where we are in India at the moment, on a scale of 10, where do you think we are?
You are probably half way there. You got plenty of innovative and creative things going on.
Name me some?
OYO Rooms is an interesting concept. If you think about it, what he is basically doing is taking a disparate, a highly fragmented market, with lack of consistency and he is using some technology and process to create some consistent offering. When you look at a market as big and as fragmented as yours, that’s an interesting play.
You see more’ME TOOs’ coming in?
Yes, once someone does it and it’s a decent idea then it’s another opportunity. The barrier, the entry, the cost of technology is not that high, entry is not that difficult to technology. When you look at building out a call center, it is a lot more expensive than building a website. And if you can get some marketing by some search engine, you can build the business very quickly.
Tell me when you use the word technology in travel, what all does that embrace?
That’s a good question. I think historically you would have said that you would have started and ended with the GDS. Travel agencies were the integrators, they built mid office, back office and systems to accommodate the purchasing. Now when you look at the amount of fragmentation relative to the content so you know low cost carriers are increasing, some of them don’t even participate in the traditional GDS. The branded fares and the ancillary products that are not necessarily available yet in the GDS. All of this presents a challenge and an opportunity.
As a travel agent today, you have to be a lot more mindful that it is not just the GDS, I might need to go somewhere else to pull in some content. I also think the consumer because of the availability of information, they expect more. They are looking for the airfare, car and hotel and then yes something to do with the destination and help in finding the restaurant as well.
Where will all this lead to, the next step, could it be a concierge service?
Yes, there are some digital personal assistants. When you think of artificial intelligence, there is a lot of machine learning that goes on. There is a lot of opportunity to automate the processes. So yes, when you look at virtual reality – even the way people get motivated to travel today is so different.
And all the reach that online is providing…
When you think about it, it wasn’t that long ago, if you said that I am going to take a trip you go sit down with a travel counselor and see a brochure and see what you would like to do and you are getting that person’s expertise. Now you go online and see it, hear about other people’s experiences etc. All this is technology – social, mobile and more. Traditional technology has been impacted by social and mobile trends in ways that we never considered.
You said the traditional travel agents in America got shrunk to half and some rediscovered themselves as niche or with MICE etc.? But once they developed this niche, they also went online in that niche. So then online presence is simply a must.
Yes, there is no substitute. Only because the changing demographic expects it. As younger people are travelling their expectations is that everything is on their fingertips on a handheld versus going to have to sit somewhere or talk to someone. You and I will eventually become the next generation of traveller. So if you want go the long haul, you have to be able to address multiple constituencies and serve them in the manner in which they want to be served which is online, or on a mobile or a combination thereof.
You touched upon the price game, I am concerned at another level. Not sustainability of the online player but I am more concerned about the sustainability of the market. You can be some player in aviation, for example, a new airline or a new LCC which is looking at capturing its marketshare and is selling at less than 50% and is therefore disrupting the market and then goes bust itself. Should there be some law on this?
I believe in free market.
But free market to achieve what?
That’s a great question. I started with United Airlines in 1979 right when the US market was de-regularized. So at that point everyone would file a fare and everyone would match. Now there is no filing a fare. Now it is just constant change. But if looked at it, the amount of people that travel today has just compounded and the opportunity to travel and the world has opened up.
But how to garner market share, you are selling 50% below cost, getting funding, subsidising what you are selling and then disrupting the real brink and mortar retail and the customer is having a laugh. I don’t see the logic of it eventually.
I think there will be some that will disappear and some will thrive.
But you cannot go on selling below cost for ever, some time and somewhere you will need to balance out cost?
The theory is that once you grab an audience, once you scale a business and have the economies of scale, your cost will go down and then over time, the price might go up.
Right, might go up. And by then, there could be a new disruptor in the market?
Absolutely. That’s what makes it all good. Amazon was losing millions and millions of dollars over a period of time. Now they are successful and they hurt a lot of companies on the way. Again if the market responds to that, then they are going to thrive.
What would be the differentiator, in the coming years, everyone is going to do virtually the same stuff….
If you look at the US, some very interesting things are going on. What we called the LCC now we have the Ultra-Low Cost Carrier. So this has made the seat pitch the central issue. The seats don’t even recline. You have to pay for everything. You pay separate for each facility. However, there is a market for this. They have been very successful. What you are finding is that the size of the audience expanding and then you find each segment of the audience will go after a certain segment. American Airlines spoke about how 75% of their travellers, travel with them once a year and they are price sensitive. There is another segment to their market, about 20% of it, which travels with them much more frequently, is higher yielding , overall, you have to be able to serve all markets.
To reach out to achieve this segmentation must you have new carriers? Can we not achieve many of these objectives through a single service?
I think new carriers will always appear and the older carriers will evolve.
Originally, where I am coming from, once you had the revenue management systems in place, the job of the revenue management programme on any online system was to manage revenue, sell at different price points to different markets and achieve a certain holistic balance. Similarly, in the hotel segment, at times I find the kind of segmentation that they are creating at times…..
There is also the impact of technology there. The average room night in downtown SF was 350-400 dollars, I deliberately didn’t book in advance. I used my mobile app to book and I ended up with something that was lesser than 250. This is counter intuitive to the way people think historically. I mean if you were booking a flight, God forbid you would land and not have booked and undecided on where to stay. Today that is no longer a challenge. Today you will take that shot and quite honestly you will manage to get a better rate. Sometimes it may not work out, but it’s a risk you will take.
About this conference, how has it panned out, to what extent does it meet your expectations?
We are very excited to be here. This is a market where we have had a presence for many years, we have staff here, we hope this is the first of what will be an annual appearance. There are three components to our conference – we do the Travel Innovation Summit which is literally a pitch event, we have 10 innovators that will be pitching on Thursday from start-up and traditional companies; we do our Sponsored Workshops – about taking it from theory to practice and how to implement and finally Centre Stage – which is our thought leadership platform and brings thought leaders from the entire region and then we do a live research presentation right on stage. We have a lot of content over a day and a half.
Considering it is your launch event – how much of that would you have achieved here?
For regional events, here we had targeted 300 and we will exceed that. For this market, within 3 years, we want to do 500 and then beyond that we will see. I am not sure I want to grow bigger than that. I want to maintain getting influential and senior level people only. We want the decision makers.
Tony D’Astolfo: Profile
Tony assumed leadership of Phocuswright in July 2013. A travel industry veteran, he is an accomplished executive with rich expertise in travel and technology and a passion for moving the industry forward. As managing director, he builds on the strength of Phocuswright’s premier research and events to foster growth and expand the company’s global reach. Prior to joining Phocuswright, D’Astolfo served as chief sales officer for next-generation car service GroundLink. Previously, he fueled substantial growth as senior vice president, travel services at Rearden Commerce, where he assembled and led a team that built a distribution network of over 50 travel management companies and added 7,000 customers. His record of success in the corporate travel technology space began with B2B e-commerce leader GetThere, where he led the pre-IPO startup as vice president, sales during an explosive growth period that saw a tenfold increase in revenues and an increase in customer base from five to over 2200. Prior to GetThere, he spent more than 19 years in leadership roles at United Airlines, including his last assignment as national sales manager for the U.K. and Ireland. Tony is a frequent speaker at travel industry conferences around the world and is also an author of the popular travel industry blog IN: business travel. As Phocuswright enters its third decade, Tony’s leadership is instrumental in driving the company’s continued evolution and growth.
