AI and Travel Distribution

We live in a world of platforms. Facebook, Airbnb, Uber and Twitter are all platforms. In essence platforms are intermediaries. They are the modern-day …

We live in a world of platforms. Facebook, Airbnb, Uber and Twitter are all platforms. In essence platforms are intermediaries. They are the modern-day equivalent of middlemen who facilitate transactions or communication between two entities. To understand how middlemen evolved into platforms and how platforms thrive in the 21st century we must very briefly review postmodernism.

Derrida and Postmodernism

The famous post-modern philosopher Jacques Derrida (1930-2004) is known for the concept known as deconstructionism and de-centering. Whilst his ideas related to textual criticism and philosophy they can also be extended to middlemen and platforms. The idea of de-centering is that what was once the center is no longer the center and the periphery becomes the new center. This has turned out to be an accurate description of where we currently are in the West. Let me explain and I’ll use the travel industry as an example.

Deconstruction/De-centering in the Travel Industry

There was a time where, if one wanted to go on a holiday one would need to use a central service such as a travel agency to buy and book travel. Hotels were owned and controlled by large corporations and bookings needed to be done through a travel agent. In this sense the hotelier, car-rental company, airline, Global Distribution System (GDS) etc. represented the center. The traveler was the periphery. The barrier to enter the center was high, most individuals were unable to unless they got a job working for a travel agency, GDS or airline.

What we now see is the deconstruction or de-centering of the travel industry. Here are a few examples. Through Airbnb people can book rooms in private homes directly with the owners of those homes. With companies such as Turo we have peer to peer car rentals. So, hotels and car rentals are being deconstructed or de-centered by companies such as Airbnb and Turo.

This is of course a trend that is impacting not only hotels and cars but will impact the rest of travel as well (including the airlines). This is not a new phenomenon, Derrida saw this trend starting and wrote about it in the 1970s and 1980s. Every aspect of business will be impacted, Blockchain and cryptocurrencies are just one manifestation of the trend of de-centering or deconstruction.

Platforms rather than Middlemen

So how is it possible that Airbnb, Twitter and Facebook are able thrive as a center of power in a culture and society the is de-centering and deconstructing and where the periphery becomes the new center? The answer is that they act as a platform rather than as a middleman. The difference is subtle but important.

A middleman is someone who mediates a transaction. When someone works through the middleman both parties don’t want to deal directly with each other, they care about doing the deal. An old-fashioned travel agent, for example, acted as a mediator because the traveler and the airline did not care to deal directly with each other. In many ways the GDS was always the platform that facilitated between the airlines and the travel agent.

Facebook, Twitter, Google and Airbnb are really good at being platforms that facilitate. To the extent that they must mediate they make that mediation invisible. They facilitate the direct interaction between buyer and seller or between communicator and communicatee. This allows the deconstruction and de-centering of the middleman. Observe that the middleman is not obviated, rather the role the middleman plays and how they play it changes.

In summary, in a pre-modern and modern world the middleman acted as a mediator in a transaction. In a postmodern world the middleman acts as an almost invisible facilitator. This is the definition of a platform. People use a platform to interact directly with friends (Facebook), drivers (Uber), hosts (Airbnb, Turo) without having to actively go through the platform. Instead they are on the platform.

Personalization Platforms Powered by AI

But how do these companies make themselves facilitators rather the mediators? The answer is two letters: AI.

In the case of Facebook, AI is used to make sure that your newsfeed is full of personalized content that you are interested in — no two people have the exact same experience on Facebook (or Amazon). Airbnb uses AI to ensure that you are shown properties that you are most likely to be interested in booking both in terms of location and type.

In other words, AI driven personalization and recommendation allow you to easily and quickly get closer to what you are uniquely interested in. An AI powered platform allows you to effortlessly interact and transact and gives you exactly what you want the moment you want it and in best case scenarios before you know you want it. A platform deconstructs and de-centers the middleman without becoming obsolete. AI is absolutely integral and fundamental to allowing this.

This very concept of personalization and recommendation facilitated by AI is a manifestation of deconstruction and de-centering. When the corporation was the center and the client or customer the periphery there was a relationship where few products were consumed by a myriad of customers. Now that the customer is the center and the corporation is the periphery, companies that want to play, have to cater to, and have a relationship with, each customer uniquely. One, two or three sizes no longer fit all. There has to be a unique offering for each individual customer. This can only be facilitated by AI. Companies that do that well, thrive.

NDC a manifestation of Deconstruction

So how does IATA’s New Distribution Capability (NDC) where airlines host their own content and prices fit into all of this? If airlines are to continue to exist, never mind thrive, they need to develop individualized offerings and personalization. To do that, they need to own their customers and de-commoditize themselves. This is why airlines are pushing NDC and direct channels — it is an existential need for them.

So where does this leave the GDS as middleman?

In the old GDS model that travel agent dealt with the GDS, not the airline, and the GDS mediated between the airline and the travel agent. This model divorced the customer from the airline and turned the airplane seat into a commodity. Now the GDS needs to pivot to become a platform that facilitates rather than one that mediates.

What does this mean is practice? There are two side to this: 1. the end customer, 2. the suppliers. They both have needs that are entirely compatible with each other. Suppliers need to deconstruct, de-center and de-commoditize. Customers are the new center and are demanding personalization and recommendations.

But who is going to facilitate this?

GDS as AI Powered Platform

A pivoted GDS as an AI powered platform that facilitates rather than mediates is very well positioned to become this new invisible facilitator.

The GDS is well positioned for this role for many reasons. First, it is a natural evolution. The GDS was the original intelligent mediator. It used old-fashioned rules-based intelligence to create personalized offerings for customers.

Second, there are risks for individual suppliers to do this on their own. Without being on a common platform the supplier(s) most successful at personalization will end up dominating. But if they are all on a common platform they all have a chance of reaching an end customer. And in a world where customers are demanding real personalization there is room for all suppliers to have differentiated offerings that will be personalized to meet the need of a customer.

One vision therefore is for the GDS to become an Airbnb style platform where suppliers have full control of their content and pricing all tailored to different end customers and the new GDS becomes the invisible AI powered platform that facilitates the transaction with the end customer. In that brave new world the new GDS still offers pricing but instead ATPco style pricing it create dynamic prices based on the airlines revenue management needs, real-time demand and bundled merchandizing and GDS revenue is still generated based on segments.

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