Case 1: Go-Go Travel, in Search of a New Business Modeland Survival


Case 1: Go-Go Travel, in Search of a New Business Model ”and Survival

As Chapter 1 points out, the web has made life difficult for many travel agencies. In April 2000, the investment company Bear Stearns & Co. Inc. (www.bearstearns.com) predicted :[1]

As customers turn to the Internet to make their travel plans, the role of the travel agent will diminish. According to Bear Stearns' analysis, 25% of all travel agents could eventually lose their jobs as Internet Travel expands According to industry research, in the first half of 1999 approximately 1,800 travel agencies went out of business due in part to their inability to generate revenue.According to the report, in order for traditional travel agents to survive they should fill a certain niche such as luxury travel or adventure travel, and they must focus on customer service.

With online travel sites proliferating, the future for traditional travel business seems bleak. It's increasingly difficult to argue with customers who can get a lower ticket price over the web.


For Go-Go Travel, a local travel agency, the web indeed seems threatening . Much of Go-Go Travel's business comes from corporate accounts, which hire Go-Go for bookings with airlines and hotels, and from which the agency earns commissions. In the past few years , many airlines have reduced their commissions, and others threaten to do so.With online travel sites proliferating, the future for traditional travel business seems bleak.

For these corporate accounts, travel agencies can provide a few benefits such as travel profiles, frequent flyer mileage accounting, enforcement of corporate travel policies, and payment with company credit cards. But despite those benefits, and often against stated policies, company employees search for flights with online services and sometimes find fares lower than those quoted by travel agencies. Go-Go Travel finds it increasingly difficult to argue with customers who can get a lower ticket price over the web.

Some agencies have started charging fees, such as flat service charges for bookings, but Go-Go Travel is leery of going down that road. In theory, adding fees for service should help recover the lost commissions, but it may also drive away the customers to no-fee web sites.

The company determined that leisure travel, including high-ticket items such as cruises and tour packages, could provide an opportunity to make up the volume lost from business travel.With the population aging and the Baby Boom generation reaching retirement age, the demographics look promising . And industry research indicates that cruise and tour package customers still use travel agencies for bookings.[2]

It doesn't take long, however, for Go-Go Travel to discover that many other agencies had much the same idea, and they all would soon compete for the same pool of business in the same way. Go-Go Travel needs to position itself for leisure-travel business, but in a way that differentiates Go-Go from the rest of the pack.The company needs more than a gimmick; it needs a whole new business model.

In doing this bit of strategic soul-searching, Go-Go Travel discovers the changes in business conditions brought about by the web. Customers often want to deal directly with suppliers (in this case, cruise lines or package providers), unless intermediaries such as travel agencies can provide extra benefits or lower prices. And without corporate policies requiring use of the official travel agency ”policies with decreasing effectiveness ”customers could on their own use the web to match services and find the best bargains.

Go-Go Travel makes a strategic decision to join the web rather than fight it. To distinguish itself from other travel companies, Go-Go will develop a web presence and provide a unique collection of services using the power of the web.

In its research, Go-Go Travel discovers the OpenTravel Alliance (www.opentravel.org), a travelindustry vocabulary based on XML that defines a common customer profile, a traditional part of the agency business.With these tools, Go-Go Travel can change the way it does business, provide a completely new product mix to customers, and offer its services to anyone on the web, which offers infinitely more opportunities than its static local market.[3]

The OpenTravel Alliance ( OTA ) is a consortium of most leading airlines, hotel chains, car rental companies, tour package vendors , passenger rail, technology companies serving the travel industry, and travel agents. OTA developed its common customer profile in 1999 “2000, which captures and exchanges data on a traveler 's identity, affiliations (including employer), loyalty programs, forms of payment, travel documents, and detailed travel preferences. The detailed preferences include common preferences, or those that apply across travel services. For example, a vegetarian will likely want vegetarian meals on an airplane, at restaurants , and on cruises. Travelers can also define preferences for specific travel services. If the traveler belongs to airline, hotel, and car rental loyalty programs (frequent flier, guest, or renter), account numbers could be captured as part of the air, hotel, or car rental preferences.

One way that the web has changed people's lives is its ability to create instant communities of people anywhere in the world who have web access.


One of the OTA customer profile's features allows customers to define collections of travel preferences in any way they like.This feature lets customers ”or travel agents working on their behalf ”identify preferences in terms of the customers' own plans and experiences, rather than predefined categories determined by the travel services.[4] For example, a traveler may have a certain set of preferences for business travel in general, but different preferences for business travel outside the country. The same traveler may have still another set of preferences for the annual golfing trip with pals. When visiting the in-laws every year at holiday time, yet another set of preferences applies. This ability for travelers to collect preferences on their own terms gives the OTA specification a great deal of flexibility and power.

The designers of the OTA specification noticed early on that the kinds of data being collected got quite personal. As a result, the group recommended strict privacy protections that allow sharing of data from the profiles ”even for updating files at various suppliers ”only with the explicit permission of the customer.[5] However, this ability to share preferences, with the customer's permission, offers one of the unique opportunities that Go-Go Travel seeks to exploit.

One way that the web has changed people's lives is its ability to create instant communities of people anywhere in the world who have web access. The rise of chat rooms and instant messaging, for better or worse , has made it possible for people with likeminded interests to find each other and interact. The OTA specification's ability for customers to define travel preferences in their own terms has the potential effect of allowing customers with similar interests to find each other over the web. With this ability to put together instant groups of people with common travel interests, these new-found friends could in principle bargain with travel suppliers for lower prices and added features in their tour packages.

Go-Go Travel realizes that it could offer a valuable service to leisure travelers, by serving as an aggregator of these travel preferences over the web, and as a broker of travel services to meet those preferences. Market research indicates that customers still prefer using travel agents for cruises and tour packages, so it would not need to fight a trend away from these kind of services.[6] However, Go-Go Travel needs a way of collecting the customer preferences, putting together ad hoc groups looking for similar kinds of travel, and negotiating with travel services for deals.

The concept sounds great to Go-Go Travel, but putting together a web-based service to handle the large potential scale of customers and wide variety of interests presents a number of hurdles. The model that offers the most promise is the online vertical exchange, which allows buyers and sellers to come together in a neutral arena and negotiate prices and features.[7] This travel exchange would also use reverse auctions, which work like regular auctions, except that sellers chase buyers rather than the other way around. Priceline.com has become probably the most well-known reverse auction site and is active in the travel business, but others have emerged as well.[8]

While Priceline.com focuses on price, the reverse auction process can also apply to finding the right mix of product or service features. In May 2000, the U.S. Army's Communications-Electronics Command ( Cecom ) tested a reverse auction that used software from Frictionless Commerce Inc. to purchase off-the-shelf electronics equipment. The software analyzed sellers, their performance, compliance with previous contacts, and equipment capabilities. Cecom not only found the most reliable sellers and optimal mix of features ”it also realized a 50% cost savings.[9]

Go-Go Travel planned its web service to work as follows :

  1. Customers or their travel agents post their requirements on the Go-Go Travel exchange for certain destinations and features ”for example, an expedition through the Costa Rican rain forest ”during a particular period of time. The customers or travel agents can post these requirements as well any other important preferences, such as hotel class, desired airlines, smoking or nonsmoking rooms, families included or no children, vegetarian meals, or whatever the customer deems important. The OTA customer profile specification can provide the medium for customers or travel agencies to capture these preferences and share them with the exchange.

  2. Customers or travel agents can also use automated search agents to indicate when entries with similar interests appear in the exchange, and then decide whether to join these ad hoc groups.

  3. Travel service aggregators, such as tour providers, can put together and propose packages that meet the preferences posted on the exchange, indicating travel dates, destinations, itineraries , airlines, lodging, and special features (for example, side trips), as well as prices. The providers pay Go-Go Travel a membership fee to bid in these reverse auctions.

  4. The Go-Go Travel exchange can use analytical software, like the kind used by the Army's Cecom (described earlier), to rank the order of the proposals and list costs.

  5. Customers or their travel agents can decide which of the packages to accept. If customers cannot agree on a single provider, the group can go back to a subset of the bidders and ask for best-and-final offers. If none of the bids is deemed acceptable, customers can decide to wait for more offers or disband.

    • When the customers decide to accept a bid, they can book the package with the winning provider through Go-Go Travel, which would receive a commission from the provider.

    • Go-Go Travel would also handle the financial settlements. In the travel business, financial settlement is no longer a simple matter, with the combination of credit cards, electronic funds transfers, and loyalty program points used for payment.

As Go-Go Travel prepares its new web services, it recognizes that the system must provide several critical functions and support a high volume of requests , many of them from companies with which Go-Go has not done business before. No single XML vocabulary can provide all of the necessary features. (See Chapter 4, "The Promise of XML," for an introduction to XML syntax.) The OTA customer service specification can capture and exchange travel preferences. Later OTA versions plan to include bookings as well. But Go-Go Travel also needs bid postings and acceptances or rejections of bids, as well as financial transfers and commission payments. The company will need to do business with perhaps thousands of travel agencies and hundreds of tour packages, and probably thousands if not tens of thousands of individual travelers.

Here is where ebXML can provide much of the solution.[10] Travel agencies will use the ebXML specifications to define and exchange messages containing their customers' profiles and preferences, book tour packages, send confirmations, and transfer payments. Go-Go Travel will also use ebXML methodology to exchange bookings and confirmations , as well as financial transfers with tour package providers. Go-Go Travel's site will ask individual travelers to register with the site and complete a customer profile based on the OTA specification.

Travel agencies with customers who want to register their travel preferences with Go-Go Travel can send in new or update existing customer profiles using ebXML messages. Once customers form their own virtual group for a holiday this way, Go-Go Travel can alert tour package providers with a request- for-bid message, and the tour package providers can respond with bids, using ebXML message formats in both cases.

As this process continues over time, Go-Go Travel and its associates are effectively building up a registry of reusable exchange components . The ebXML approach provides a formal registry component in which to store and exchange the vital pieces of these interchange pictures. Details of the registry interactions are covered in depth in Chapter 8, "ebXML Technical Architecture."

More messages, if needed, with further bid requests and best-and-final offers, can be exchanged using the ebXML message specifications. Bookings and confirmations with the tour package providers and travel agencies representing the travelers can also use standard messages in the ebXML format. Financial transactions, including invoices and remittances, can use the ebXML message formats as well.

Financial transaction messages illustrate the concept of core components. Messages used to exchange details on invoicing and remittances would follow good financial practices used across businesses.


The financial transaction messages illustrate another important feature of ebXML, namely the core components. The messages used to exchange details on invoicing and remittances would not likely be unique to the travel business, but follow good financial practices used across businesses. Moreover, banks and credit card processors will deal with more than just travel companies, and want messages from travel companies dealing with financial matters to be compatible with those from other customers. As a result, the ebXML-based travel-industry standard messages defined for financial transactions will use the same financial data elements as used throughout the business world. This use of common components ” core components, as they're called in ebXML ”provides for interoperability across industry groups, a critical objective of the whole ebXML exercise.



ebXML. The New Global Standard for Doing Business Over the Internet
ebXML: The New Global Standard for Doing Business on the Internet
ISBN: 0735711178
EAN: 2147483647
Year: 2000
Pages: 100

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