It's time to decide - standardize technology in activities, or not?

Whether it’s fashion, movies or music, it seems that everything is destined to repeat.

Over a decade ago, travel experiences, tours and activities were a seemingly insignificant part of the travel industry.

Airlines and hotels referred to the sector, and still do in most cases, as ancillary. A less important and, if barely, supportive add-on to a more important segment.

Only a few software companies were serving the space. The majority of these companies were bootstrapped since investors had little to no interest in the space.

It was too small, too fragmented, and it lacked significant market interest. The technical landscape was simple, and the time to establish standards seemed perfect.

After all, there were only a handful of supply side technologies and an even fewer set of distribution platforms.

Creating a standard would mean that any new entrants, on either the supply or demand side, could save time and resources in developing their APIs by using an established and adopted messaging standard.

As a segment, tours and activities could avoid the same connectivity issues that plagued the hotel and airline segments in the preceding decades. The connectivity problem could have been solved before it even began.

But alas, the segment was not ready for a standard. Whether it was a lack of foresight, the belief that connectivity is a competitive advantage or a general distrust of standards, in the end the discussion about standards was over before it began.

Despite a concerted effort by some in the industry, the push to create a standard failed due to a lack of interest.

For a segment only just beginning to connect, there was no pain, so why worry about reducing or preventing it?

Fast-forward a decade, and the technology landscape has changed significantly, certainly more so than hotel technology in a similar time frame.

If the Connectivity Forum held recently at the Arival Event in Berlin was any indication, there are now dozens of supply side technologies and an equivalent number of demand side marketplaces servicing the tours and activities segment.

The travel industry, after years of research and innovation by tour and activity pioneers, has finally realized the latent potential of the segment, and now the big brands have jumped into the space.

• The good news - to simplify connectivity, everyone has created an API to access their platforms.
• The bad news - each one of these APIs is different, with their own capabilities, data structures and messages. Each one of these marketplaces wants to connect to each one of the supply side technologies and vice versa.

The outcome is hundreds of individual API connections, each one a unique development effort requiring time and resources that cannot be reused or repurposed.

For any technologist, this is the worst-case scenario. The pain that was predicted a decade earlier is now being felt across the segment.

The question is whether the industry is simply too far down the connectivity rabbit hole to be saved by standards or whether a focused effort by both the supply and demand side of the segment can prevent further pain.

There are several questions that affect the outcome.

Who benefits from standards?

The whole purpose of connectivity is to increase distribution. Direct online sales don’t benefit from connectivity.

Therefore, it is safe to surmise that the primary beneficiaries of connectivity are the distribution and marketplace platforms.

Based on Phocuswright research, only 4 to 5% of overall tour and activity revenue is generated by OTAs. In order to increase their share of overall revenues, OTAs need better access to supply, pure and simple.

Connectivity provides the OTAs with improved access to product, availability and booking.

This provides OTAs with the ability to drive more potential sales to operators. Whether those sales cannibalize operator direct sales is up for discussion.

As it currently stands, however, the ROI of connectivity for supply remains questionable.

Given that the OTAs benefit most from connectivity, it would seem to make sense that the OTAs should be the ones driving standardization.

Will the major stakeholders use the standard?

In the case of experiences, it doesn’t matter if every reservation system agreed to use some sort of standard for their APIs if the big brands, specifically Expedia, GetYourGuide and TripAdvisor/Viator decide they will continue to use their own APIs.

Given that the vast majority of distributed revenues are driven through these three platforms, developing and implementing a standard for the remaining distribution platforms alone is a case of diminishing returns.

It could be argued that the next Viator is waiting in the wings, and connecting with a standard could mean easier and faster access to that channel.

That may be true, but in the meantime, it would seem that the onus is on that would-be distribution player to do the work of connecting rather than expecting every reservation to take that development risk.

Without buy-in from the major players in the space, developing a standard is more of an academic exercise than a practical commercial one.

Should we let market forces play out?

To solve the connectivity problem, we are now seeing more and more channel management tools entering the market.

These tools purport to simplify the connectivity challenges faced by supply and demand platforms by providing a single API connection that then connects to a multitude of other APIs.

In essence, an intermediary technology that makes API connectivity simpler. A technology, one might argue, that would be irrelevant if there were standards.

Again, we need not look beyond the hotel industry to see why tours and activities is leaning in this direction.

As with hotels, the number of available sales channels for tours and activities is becoming unmanageable for the average operator.

Keeping track of block allocations, bookings and vouchers from a variety of different channels is problematic for the most sophisticated operators and completely untenable for the most basic.

And yet, the demand to distribute is only growing because of the brand recognition associated with the major players.

One need only look at the agenda of any industry event to see what brands dominate the stage, regardless of the fact that they currently only deliver a small minority of revenues to operators.

The path less trodden? 

It would seem we are at a fork in the road. The standards path could result in a future where, as a community, we minimize the development effort required for connectivity and spend our collective efforts on making our platforms better for operators and consumers accordingly.

This future is simpler, has fewer layers and is less costly for both the operator and the consumer resulting in greater margins for all involved.

In order for tours and activities to move down this path, however, there are two primary dependencies.

• Firstly, the community must commit to work in earnest to develop and implement the standards.
• Secondly, the big brands must commit to walk this path with the rest of the community.

Without these two dependencies, the community will continue to walk down the path it chose to take a decade a go.

This path leads to a future with an increasing number of supply and demand side systems, each with their own connectivity requirements, resulting in an ever more complex connectivity landscape.

This future will foster the creation of sophisticated tools to connect and manage this landscape, thus adding layers, complexity and costs to the supply chain.

Do or do not, there is no try.

The pessimist would likely argue that the industry has had its chance to pave this path, tried it unsuccessfully and moved on.

They might argue that despite the best intentions of the industry as a whole, the big brands are unlikely or unwilling to commit to this path and therefore, the whole exercise is academic at best, futile at worst.

The bottom line, as an industry, tours and activities will have fewer and fewer opportunities to change its path moving forward.

The further down the current path the industry travels, the less important it will become to develop standards.

The industry will find its own ways to adapt to the connectivity challenges by developing intermediary technologies to fill the void, just like hotels did.

It will have missed its chance to solve the connectivity issue by simplifying the landscape and will be destined to play an ever more complex game of catch-up, where each new API means hundreds of wasted person hours of development.

If one were an optimist, then one might say that this is the opportune time to take the path less trodden and make the short-term sacrifice in time and resources to improve the industry for the better.

By all indications, a strong majority of the players in the space are interested in seeing standards in place.

Assuming all the required stakeholders agree to participate, now is a good time to move forward and take a new path before the situation gets worse.  

Regardless of whether one is an optimist or a pessimist, the industry needs to make a decision on which path it wants to take.

It needs to decide whether to make standards happen or decide to do nothing and move on once and for all.

Giving standards “a try” and hoping for the best will likely result in a disappointing outcome and wasted effort by all those involved.

This is not to say that the industry should not make the effort, quite the opposite.

If it decides to move forward with standards, the potential improvements will reap rewards for the industry. But it will take leadership, commercial will, time and coordinated effort to make it happen.

Whatever the industry ultimately decides, it will have to live with the consequences of its decision for years to come.