Google – the Ultimate Direct Connect Platform?

Let’s connect some dots.

Dot 1: Google is in a quandary. It needs to enter big markets with high growth opportunities.
Dot 2: Google likes the travel industry. I’ve heard estimates that about 10% of its revenues are attributable to travel.
Dot 3: There’s a big travel-related search market that Google hasn’t cracked. It sits behind the walls of the GDSs.
Dot 4: ITA Software has deep expertise in airline pricing, shopping and availability searches. ITA powers several of the big-name travel sites, including Orbitz.
Dot 5: An ITA-powered Google travel search engine could (would?) gut the need for GDS-based distribution of simple price and shop queries.

Seems like a pretty straight line through these dots.  Not that it ends with Google doing simple searches.  Think about Google’s ability to be the ultimate direct connect platform.  Suppliers place their ads and inventory with Google, travelers search and find deals they like, and Google lets them make just one more click – and ta-da – the booking is completed with the supplier.

Of course it’s more complex than that, but not so complex that the Google Travel team is throwing up their hands and saying “Too hard, too hard!” On the contrary, I’d bet that those bright boys and girls are drooling at the prospect of eating the GDS industry’s lunch.

Going after the search and booking business from the GDSs seems like a natural move for Google.  Are there other reasons for it to acquire ITA?  Sure, especially if you think about the growth in travel searches done on mobile platforms.

If Google succeeds in winning a big chunk of GDS bookings, then there are some interesting issues for corporate travel.  What happens to the GDSs’ ability to fund travel agencies with financial incentives?  Lower bookings probably mean lower incentives, which likely means higher booking fees from the TMCs to corporate accounts.

What about the ability to implement travel policies at the point of sale?  Could Google come up with a travel search tool tailored for the corporate market?  Why not? After all, those tools all provide shopping, pricing and availability functions.

Yes, there is a fulfillment service feature packaged with each of the online booking tools and every travel agency.  But couldn’t Google take a page from Amazon’s playbook, and be the front-end shopping/booking tool, and route the fulfillment component to a designated TMC? Can you imagine seeing TMCs and OTAs appearing in a booking path, each with their transaction price and customer ratings in plain view?

Looks like just a couple more dots to connect – definitely not too hard.

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9 Responses to Google – the Ultimate Direct Connect Platform?

  1. Rob Wald says:

    Hi Scott, yes Google clearly sees an oppty but it’s also somewhat defensive. Seeing what Bing has, Google has to continue to stay cutting edge as Bing has done a nice job pulling together travel pieces. They’ve got to defend the 10% of their revenue. On another note, my sense is price is an issue with an ITA transaction…

  2. Joyce Greenberg says:

    Why do I have a sense of déjà’ vu? Is it the year 1999 when we were on the cusp of the OTA’s? It was the dawn of vertical agencies? By pass the GDS? Connect and book direct? Wasn’t this the path we traveled before? Déjà’ ……..

  3. Scott Gillespie says:

    @Rob, Bing-o, for a bad pun! I’m sure Google is trying to counter Bing’s success, and ITA would be one good-sized arrow in the quiver.
    @Joyce, you’re right about the feeling of deja vu…but given that we’re a decade farther down the road, doesn’t it seem ever so much more feasible?

    I’m thinking mainly about the advances in technology and the proven commercial viability of online searches and bookings – and the intellectual and marketing horsepower that a Google could bring to bear. If Google buys ITA, I’d advise selling GDS stock…just look at what Google (and Craigslist) has done to the newspaper industry.

  4. Michelle says:

    Very well-written. Google always plans big sweeps and it’s evident with the ITA plan as well. Google could actually become the “ultimate direct connect platform” if they get this right – and still be called just a search engine. I’d guess they go the TripAdvisor route in their direct model (TA charges a Business Listing fee for direct connect to hotels, while they still remain the good-ol’ ‘review site’). GDS and OTAs are surely in trouble soon.

    Their’s huge opportunity for business travel technology specialists like HotelHub.com & others, b’cos business travel would be the next big thing to go the Google way if they get right things like travel policy compliance, combining GDS+non-GDS channels in single booking interface, and extranet. The game is getting interesting.

  5. Darrell Ross says:

    Its been several years since I’ve seen the ITA pitch. The big take-away I do recall is “GDS processing can be replicated cheaply using UNIX and other open-source technology.” Currently ticketing, baggage handling and other core GDS functionality is handled on mainframe based systems that require high-license fees to IBM and operating fees to EDS (who hosts most of the airline big iron and have the majority of TPF-trained developers). Breaking this near monopoly should drive down the per-tix cost, as well as overcome some of the technical deficiencies (e.g., Sabre’s need to reuse PNR #s because of field length limitations in their database).

    As we know, Google is one of the more efficient operators of data centers. Combining this knowledge with ITA’s domain understanding makes for a powerful combination.

    Interesting notion indeed Scott!

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  7. tony kim says:

    well its official. GOOG buys ITA. now what? will the GDS’s be doomed? i listened to the conf call tonite. No mention at all of GDS.

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