Ever since online travel became a thing when the internet took off in the late 1990s, the industry has been evolving in line with changes elsewhere - traveler trends, global events, enterprise and consumer technology progress and more.
Today, the evolutionary path has arrived at the cloud which, we believe, will support the next phase in the industry’s evolution - cloud-enabled and subscription-based "software-as-a-service" (SaaS).
Context
One-off shocks to the system such as 9/11, Lehman Brothers or the ash cloud shook things up for a while, but travelers regrouped and the industry adapted, evolving into whatever the next phase was.
COVID is different – changes to traveler sentiment, government regulations, business models, macro-economics, investor demands are deep-seated. The resulting paradigm shifts are starting to happen.
At WBE.travel, we have experienced the evolution of the travel industry through the lens of a technology provider. We have been a standalone business since 2009 (with six years' experience prior).
Our products, services and business models have evolved over this period and today we are helping SMEs, in particular, to compete by offering them cost-efficient access to inventory and software that allows them to grow their business in a sustainable way.
We started out as developers, but we anticipated the changes to come and now see ourselves as SaaS specialists. Subscription-based SaaS is where enterprise technology is heading and will be the next big change in travel tech.
When we talk to existing clients and potential prospects today, its costs and budgets dominate. The travel standstill remains. The situation is improving but for some sectors, long-haul and corporate travel, volumes are low.
Margins are tight in travel – this was true even when things were going well - so the decision on how, or even if, to fund tech becomes even more business-critical. Some bigger firms with a tech budget have diverted that cash for general use, to keep the business afloat.
Most SMEs will have a specific set of operational requirements from their tech, but all of them will be hyper-vigilant on the immediate, recurring and long-term costs.
Even the conversation around costs is evolving. The focus is now on cost efficiencies across the business as much as cost reductions in specific departments.
Development > product > service
The future is in the cloud. The cloud means subscription-based SaaS can be the best option for tech suppliers and travel companies. The pros and cons of the cloud are well known to Phocuswire's readers.
Early bigger-picture concerns such as the perceived loss of control of mission-critical tech, the security of internal and customer data and the complexity of managing a migration – dominated early conversations between cloud-based tech providers and travel firms.
As more major players continue to sign up with cloud providers, with Travelport and ATPCO recent converts. We think this vote of confidence from the big players will encourage SMEs to have a look at what the cloud can do for them.
There has also been an evolution in how the cloud industry operates, even since WBE.travel first got involved with the cloud in 2013, and these developments mean that SaaS is now mainstream and even more accessible for travel companies.
WBE.travel started out as a developer doing one-off bespoke projects with clients, but when APIs came in things started to change. Everyone saw APIs as a way to be ahead, with quicker time to market, outsourcing some of the former development spend and shifting it to integration.
But soon it was clear that travel companies needed a way to differentiate when everyone had access to the same inventory and pricing through the APIs.
The move from development to product was under way – tech companies started to build products that brought lots of APIs together, all accessed from the same place.
However, these products also needed to be built so that layers could be added on top, and these layers – improving the booking journey, adding rich content, upgrading the user experience, and working on the look and feel – gave travel companies have the chance to differentiate.
An evolution in travel tech company's business models emerged in response, made possible by the cloud, completing the transition from products to subscription-based SaaS. Moving away from one-off products reduced development spend, including those costs that are often overlooked - project management, process change, and training.
When products were the route to market for most travel companies, it was with a license and everything was hosted on its own servers.
This approach is still used by some companies, but often it is a legacy mindset rather than a deliberate strategy that is keeping the idea of major product development and/or software licensing and/or on-premise hosting afloat. However, the nervousness around letting go of some areas of the business to a third party is starting to ease as the cloud becomes mainstream for all e-commerce and technology businesses.
In contrast, early-adopter travel companies are starting to see the benefits of using the cloud to subscribe to the services provided by the tech companies.
Licenses tend to be static, whereas a subscription is more dynamic – if you bought a license for version 2 of a product, that license will not necessarily include upgrades to vs2.1 or even vs3 whereas a subscription makes it easier for the user – in this case the travel company - to keep up-to-date.
Costs, budgets, return on investment
Most travel companies had no choice other than to knuckle down on survival during the pandemic, and the tech providers were in a similar position.
At WBE.travel our SaaS model was already getting noticed and we were determined to keep improving the core content and functionality of the products we were putting in the cloud so that when travel volumes pick up, we have what our clients will need.
So, as well as increasing the inventory by integrating more APIs to increase coverage (and doing all the necessary work around de-duplicating and hotel confirmation numbers) we adopted some additional services that the cloud put at our disposal, and which improved the core of what we offered to subscribers. However, these new options increased our cloud costs, which is somewhat normal for us. What was not normal is that our costs were increasing when our revenues were flat.
This situation led to us pivoting our business model, again, and introducing to clients the idea of "pay as you grow". We wanted to make sure that the costs of doing business were in synch with the volumes of business, so we devised a payment schedule to reflect this.
More bookings, we get a larger fee – less bookings, the client pays less. Our terms and conditions reflect this and will also evolve over time.
This structure allows us to invest in the services we offer because we know that, when volumes return, we will start to get our investment back. Travel companies need to know that when the standstill is over their tech partners are ready to go at once, which is why we have been investing in our core product.
Travel companies will not be able to cope with 2022 if the tech they are using, and how they pay for it, has not been updated since 2019.
We believe that this pay as you grow approach, which has emerged from a subscription-based SaaS mindset, works best for us and for the travel companies we work with.
Conclusion
The travel industry seems to be slower than other industries when it comes to the cloud and the benefits that software-as-a-service can bring to the suppliers and distributors.
The reason is, I think, is the idea that still exists that somehow the downsides – such as loss of control over the product and commoditization – outweigh the advantages.
Travel companies want to be different from each other. They are nervous about putting their business in the hands of third-party product owners who will have a strong say in the future of their business. We accept that these are legitimate concerns and there are lots of companies thinking like this.
We are 100% committed to software-as-a-service and will fly the flag for this model. However, we are not talking about "right" or "wrong" decisions – it's about looking at, or being alerted to by your travel technology partner, the options which best suit the vision for your business and the business model you operate.
There are many options out there – not all SaaS providers are created equal - and it is a question of travel companies doing their homework, with help from consultants if needed, and making sure that whatever they sign up for is right for them.