Losing the race for technology?
September 15th, 2011
Technology in travel is racing ahead in leaps and bounds, but companies in the Middle East are lagging behind. ATN spoke to top travel technology experts to find out why
The dire warning from a travel tech expert that half the agencies in the region face annihilation by online travel agencies in just three years is bound to send shivers down the spine of the industry.
Faisal Memon, CEO, Illusions Online predicted that those without a proper online presence will be wiped out as a growing number of online players enter the market. But which travel companies are leading the way and who will be left standing in the technology race?
It might be hard to believe but according to Memon there are still no travel companies in the region which offer a bookable website — meaning customers can go online, search for a holiday, whip out a credit card and book without the need for human interaction.
“If we talk about the ‘bricks and mortar’ companies I can’t think of any who are completely online,” said Memon.
“Look at the biggest operators —Emirates Holidays and Etihad Holidays — I can’t get a price online, I can’t book online, I can’t do anything online. You have to pick up the phone, fill out a very old static form and wait for them to get back to you. For me that is a clear indication of the fact that the level of technology they have in the business internally is very poor or completely missing.”
Travel agencies are “completely struggling” said Memon, when it comes to establishing an online presence. “There is a lot of talk. We have been hearing it for years now but how much is converted into real action?”
Back office lags behind
And it’s not just in the online sphere that travel companies are lagging behind said the experts, but off-line too.
Bicky Carla, president of travel consultancy firm TraVision said: “Adoption of technology for point of sale, mid and back-office has been weak too.” Carla puts this down to a “lack of understanding of enhancing operational efficiency, which has led to a lack of investment and low adoption.”
Kabir Ali Baig, managing director of Dubai-based travel technology firm Global Innovations International agrees that agencies here face huge hurdles due to their antiquated back-office systems.
“The tourism industry works in a very ad-hoc way and manual way,” said Baig. He estimated that less than 25% of travel firms in the Gulf have automated their back-office functions; while the overwhelming majority still rely on outdated processes such as Excel spreadsheets and even fax machines.
A major downside, explained Baig, is that without an automated system companies do not have the business intelligence at their fingertips to properly manage their business.
“Companies here do not have automation at all. You can make a booking, print a voucher, but the moment you ask the system to tell you the particular production of a hotel; or how many room nights you have done with an operator in Europe, it fails. So that in-depth knowledge, is completely lacking in this business.
“Business intelligence is key for growth of an organisation,” he continued. “You look at your past you predict your future and you plan. But if you ask a company head here what his finances look like, he looks at his accountant. That’s sad unfortunately.”
Baig added that by not being automated travel companies have failed to keep up with one of the key innovations in travel — XML technology — which means different systems can talk to each other, removing the need for any human interaction in booking process whatsoever.
“XML services is the buzz word in the travel industry today,” said Baig. “One system sends a request and the other system sends the response — the language used is XML language. But this is only possible when you have a proper software solution in place at your end.”
Cutting HR costs
So why have travel agencies in the region been so reticent about investing in the latest technologies?
The experts agree that generally companies prefer to invest in human resources rather than make major upfront capital investments in technology.
“People don’t mind spending on HR but they never have an IT budget,” explained Baig.
“When you talk about an IT strategy you are talking about a capital investment, which looks big in a size — a proper software solution could cost US$100,000.
“But they prefer to hire more people, which over a period of time will cost far more than that.”
In fact, accoording to Baig travel firms could slash HR costs by up to 50% just by investing in the right technology.
Memon believes that this attitude is slowly changing in the region however as recruitment costs become ever more expensive.
“People always say it’s cheaper and easier to hire more people to get the job done. I remember conversations with some of the biggest agency owners in this part of the world and we would say it’s going to cost US$100,000 - $200,000 [for a software solution]. The retort would always be — do you know how many people I can hire for that money?
“But now businessmen are feeling the pinch of the whole HR process and that is changing. It’s just a question of time before you can’t have that approach anymore.”
Christian Belzner, from Dubai-based ISO Travel Solutions added that while the “desire” for IT is very high, “there is still a gap between desire and capability for investment.”
“Some companies have realised that they have to invest in proven and innovative technology, but others have paid a high price to realise this,” said Belzner.
“What’s most underestimated here is the fact that it is necessary to have a team in place to feed, manage and work a new IT solution,” he added. “In Europe this has been realised quite a while ago and guarantees successful implementation. In the UAE the desire is that everything goes automatically without any manual work. Projects are started over and over again without any final goal.”
Doing it on the cheap
Another issue is that the quality of IT solutions supplied in the region is often under par, and the travel sector has often had a tendency to go for the cheapest option.
Belzner said companies were “very price sensitive, which is a real problem because they tend to be sold IT solutions that do everything for a very low price. These projects are not going to work and are stopped after a short while. Money is dumped without any success.”
According to Memon, the trend was for companies to outsource technology requirements to cut-price programmers in India who were not experts in the travel field.
“India is the technology power house of the world and while there might be very good developers and software companies there, they don’t all have a product or a system for the travel industry.
“The travel industry is not as simple as other industries. There are standards and processes, it’s so complicated and there are many involved in the supply chain from airlines, cruise companies, hotels, inbound tour operators to outbound tour operators, and the list goes on.
Going for the cheaper option can have dire consequences in the long run he said. “Some of the biggest organisations in this part of the world have spent years and millions of Dirhams and they had to write off everything.”
Other tech firms report similar experiences. “Our challenge comes from companies in the East who undercut us. The money has gone but they are not able to deliver the product,” said Baig.
He stressed that travel firms must ensure IT systems will be properly implemented and the correct training given before making any investment in technology: “The management may save money on a product but if it’s not implemented properly this is money down the drain. Once a company signs up for our system we have 15 days training for each department. Almost 50% of our cost goes into training the staff.”
Technology is not free!
Often it’s not even just a case of going for the cut-price option, but — rather astonishingly — many travel agencies expect technology to be free.
“Travel agents in this part of the world are very spoilt,” stated Memon, which he says is down to the way GDS systems traditionally pitch for agency business, offering up everything on a plate.
“They don’t pay anything [for the GDS] They get the shops painted! New signs and windows, they give them free computers, and vouchers every time they making bookings over a certain volume. But unfortunately GDS are a very small part of the travel business.
“What about your CRS process? Managing your customer profile, and the packaging side of things? Then you have your bookings, your documentation, your accounting, your reporting, your MIS, your B2B website, your B2C website — GDSs don’t do any of that because that’s not their business.
“Ask any travel agency in this part of the world what they want and they typically say — we want to be like Expedia. But my answer is, do you have any clue how many millions Expedia spends on technology?
“They want to be the best but they don’t want to spend on it and that is the sad story of technology in this part of the world. We all like to be high-flyers but you have to work hard for it and invest and that is, and will remain the biggest challenge.”
Time to take the leap
So what is the future for the industry if travel companies continue to remain stagnant in terms of technological innovation?
Carla predicted the region will soon witness a rash of new OTAs enter the sector. “Whilst we may be amongst the last few regions to adapt to a trend, we are known for the speed with which we adapt — and we will soon see several independent OTAs operating as well as full-service portals as corporate white labels operating in this region.”
Baig warned that travel firms relying on outdated, manual processes will lose the edge in grabbing business. “The West talks of automation. Europe and America and even Russia for that matter, will deal with you if you have an automated solution. They don’t want to deal with you if you are manual.”
Established players will need to play catch up to ensure they are not left behind. “The new players coming into the market are coming with a vision. They will take over this market. The old players will see marginal growth, but companies who are innovative will be seeing the major growth.”
Memon said travel agencies were already losing out to OTAs, and this process would only speed up.
“It’s already happening. Travel agents are already complaining that customers who used to go to them are now going to booking.com, expedia.com etc and booking directly on those websites. And these websites are not even based in the Middle East — these are companies based out of Europe, Asia, and the US.
“In my view, adoption of technology for travel agents is not a question of ‘if I should’ it’s a question of ‘how quickly can I?” he added.
“I’ve said this for years to travel agents here — innovate or die — adapt to technology or you will be extinct.”