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1. PhoCusWright’s ANALYSIS February 2012 Technology Convergence and Travel Distribution Bob Offutt Bob Offutt Mr. Offutt brings over 20 years of experience in information technology, IT management and travel industry dynamics to PhoCusWright. He was most recently the chief architect and senior vice president for Sabre Holdings where he defined the strategy and plan to migrate from a monolithic Mainframe environment to Distributed Open Systems and a Service Oriented Architecture. Prior to being Sabre’s chief architect, Bob founded and led Sabre Labs, a technology incubator that made Sabre the industry leader in new online products and services. Before Sabre, he spent 26 years in the U.S. Coast Guard, where he led the agency’s information technology unit. Bob has also served on the faculty of the University of Puget Sound, George Washington University and the University of Southern California. His education includes a BS in Engineering from the U.S. Coast Guard Academy and a Masters Degree in Management Science from the U. S. Navy Postgraduate School. ©2012 PhoCusWright Inc. All Rights Reserved.
Technology Convergence and Travel Distribution February 2012 About PhoCusWright PhoCusWright is the travel industry research authority on how travelers, suppliers and intermediaries connect. Independent, rigorous and unbiased, PhoCusWright fosters smart strategic planning, tactical decision-making and organizational effectiveness. PhoCusWright delivers qualitative and quantitative research on the evolving dynamics that influence travel, tourism and hospitality distribution. Our marketplace intelligence is the industry standard for segmentation, sizing, forecasting, trends, analysis and consumer travel planning behavior. Every day around the world, senior executives, marketers, strategists and research professionals from all segments of the industry value chain use PhoCusWright research for competitive advantage. PhoCusWright enables clients to bolster productivity through superior staff training and education. Scalable products, customized programs and cost-effective delivery improve the performance of thousands of travel, tourism and hospitality employees worldwide. To complement its primary research in North and Latin America, Europe and Asia, PhoCusWright produces several high-profile conferences in the United States and Germany, and partners with conferences in Canada, China and Singapore. Industry leaders and company analysts bring this intelligence to life by debating issues, sharing ideas and defining the ever-evolving reality of travel commerce. The company is headquartered in the United States with Asia Pacific operations based in India and local analysts on five continents. PhoCusWright is a wholly owned subsidiary of Northstar Travel Media LLC. PhoCusWright Inc. 1 Route 37 East, Suite 200 • Sherman, CT 06784-1430 USA +1 860 350-4084 • +1860 354-3112 fax www.phocuswright.com This article is published by PhoCusWright. The information herein is derived from a variety of sources. While every effort has been made to verify the information, the publisher assumes neither responsibility for inconsistencies or inaccuracies in the data nor liability for any damages of any type arising from errors or omissions. All PhoCusWright Inc. publications are protected by copyright. It is illegal under U.S. federal law (17USC101 et seq.) to copy, fax or electronically distribute copyrighted material beyond the parameters of the License or outside of your organization without explicit permission. ©2012 PhoCusWright Inc. All Rights Reserved. Page 2
Technology Convergence and Travel Distribution February 2012 Technology Convergence and Travel Distribution Bob Offutt Introduction While sometimes it is difficult to see, technology convergence is happening all around us every day. Virtually every new consumer and business capability is the result of converging capabilities in core technologies such as the wireless phone, personal computer, television, online services and location determination. However, as with all technology development, we are at waypoints, not end points in the evolutionary cycle. This article explores how these core technologies have converged to provide the next generation of capabilities including smartphones, location-based services and mobile computing systems, and discusses what the next waypoint is likely to be. Discussion The convergence of core technologies such as wireless telephony, broadcast television, online computing, location-determining devices and the personal computer have led to evolved waypoints that include the 2012 smartphone, television as an integrated entertainment platform, the Internet, location-based services and mobile and desktop computing systems. There are more convergence cycles that include Radio Frequency Identification (RFID) and Near Field Communications (NFC); however, the five technologies identified above are the most relevant to travel distribution. We will look at each of the “evolved” waypoints and analyze the implications for the travel distribution value (TDVC) chain shown in Figure 1. We will also look which of these evolved waypoints is most appropriate for each phase of the TDVC. We should note that this discussion looks at the technology convergence, but not necessarily usage. In many cases, rather than seeking a converged capability, many users will continue to use the best tools for any given aspect of the TDVC (e.g., television for inspiration; desktop computing for shopping and booking; and mobile device for experiencing). While there are some interdependencies – such as the Internet needing computing devices for access and content – the more interesting aspect is that there appears to be a platform that represents the convergence of all these evolved waypoints. We will examine this new convergence technology after we review the convergence that has extended each of the five core technology technologies. Evolution 1: Wireless to Smartphone 2012 (Figure 2) The initial capability was the wireless phone: big, clunky with limited coverage and a plethora of standards (the standards problem is primarily a U.S. problem and not an issue in other parts of the world). With simple calling capability, the mobile phone had a large but limited audience. However, adding email attracted business Figure 1: The Travel Distribution Value Chain (TDVC) and Associated Business Models Desire/Be Inspired Learn Shop Book Experience Media/Advertising Media/Advertising Referral/Booking Fee Booking Fee All Source: PhoCusWright Inc. ©2012 PhoCusWright Inc. All Rights Reserved. Page 3
Technology Convergence and Travel Distribution February 2012 Figure 2: Wireless Evolution to Smartphone 2012 Source: PhoCusWright Inc. Smartphones Wireless Phones Standards Location Awareness Applications Book Market Penetration & Coverage The Social Web Touchscreen GUIs users, and the touchscreen and GUIs added application capabilities to facilitate a mobile computing platform. Add in the browser for universal Web content access, and you have a platform (with limited screen real estate) for telephony, applications, content access, e-commerce and social network interaction. With position detection, navigation and mapping, there is another dimension in capability. There is even the ability to use streaming video for access to video clips, TV, gaming and movies. The versatility of the mobile device positions it to be somewhat relevant at all points in the travel value chain, but it is most useful during the “experience” phase where mobile access is critical. Smartphones can support the inspirational phase with applicationand browser-based content. Similarly, the Smartphone 2012 can support shopping and booking, but is best as a platform for en-route services like flight delays, taxi availability and boarding passes. While it appears that the Smartphone 2012 does everything, it is limited by its size, connectivity speed and available screen real estate. Performing complex reservations and payment transactions is difficult on small touchscreens or micro pullout keyboards. Smartphones have lightweight operating systems and are extremely fast, but are limited by the available connection speeds when not using Wi- ©2012 PhoCusWright Inc. All Rights Reserved. 2012 Smartphones Fi. Current state-of-the-art 3G speed is being replaced by 4G in major cities. This new 4G capability will provide wireless devices with speeds equivalent to wired data access points. 4G-capable phones operating in 4G service areas enjoy much faster content downloads and a substantially improved Internet experience than 3G users, making the smartphone more useful in other aspects of the TDVC. Evolution 2: Broadcast TV to TV as an Integrated Entertainment Platform (Figure 3) Broadcast television was initially a very simple capability designed to transmit entertainment and other content directly to the consumer. With the advent of cable networks, which expanded the number of available channels, and set-top boxes that provide selective content, the nature of TV changed. However, it was still all about a one-way system that delivers and displays content. Attempts to provide Internet access on TVs failed due to performance and user interface issues. Televisions were not designed to be two-way devices, accepting input from wireless keyboards. However, Page 4
Technology Convergence and Travel Distribution February 2012 Figure 3: Broadcast TV Evolution to TV as an Integrated Entertainment Platform Source: PhoCusWright Inc. Broadcast TV Cable TV Set-Top Boxes IPTV Entertainment on Demand Integration with the Internet TV as an integrated Entertainment Platform Apple TV Google TV Roku Box Boxee The Social Web in the migration from analog to digital, the ability of TVs to allow interactive activity improved, but was still limited to functions such as program guides and camera angle selections. The user interface and the TV remote control limited interactive capability. Using Internet Protocol TV (IPTV), content providers were able to provide TV content through the Internet, enabling video-on-demand services. One challenge was that these new video services were on the Internet, and needed to be modified and rerouted to home televisions. Meeting this challenge were Apple TV, Google TV, and the Roku box, to name a few. Attempts to use the TV as an e-commerce (t-commerce) platform continue. Comcast has deployed interactive technology in 14.5 million homes, and is experimenting with the Apple iPad and other mobile devices as user interface devices. Experiments with using Interactive TV to purchase items on the Home Shopping Network have met with success.1 Several TV manufacturers are delivering “Smart TVs” which have a computer CPU and an operating system, making the TV an applications platform. The use of external devices such as Google TV, Roku and Boxee to deliver games, content and interaction (particularly with social networks) is gaining some momentum. Despite efforts to improve interactivity and provide useful and practical user interface devices, TV is predominately an entertainment delivery platform, and as such only supports a small portion of the Travel Distribution Value Chain: “Desire/Be inspired” and “Learn.” Travel and destination videos, which present the user experience, can motivate the customer to pursue further learning and shopping, but there are no easy ways to link the learning behavior to shopping activity. Without this linkage, a referral fee business model is difficult and a booking fee model impossible. While Interactive TV may work for retail items, there are no studies that indicate it is an effective medium for shopping and purchasing travel. For travel, television will remain (at least for the next 3-5 years) an advertisingbased platform that induces potential travelers to use other means to further investigate possible destinations. Evolution 3: Online to Internet 2012 There is virtually universal agreement that the development of the Internet was a seminal event in the evolution of technology. While the realization of Moore’s law2 provides the technology foundation, it is the Internet that gives businesses and consumers opportunity to extract value from the underlying computing technology. 1. Donohue, Steve. 2010. “Comcast Accelerates ITV Development,” Light Reading Cable Analysis, November 18. www.lightreading.com/document.asp?doc_ id=200676&site=lr_cable&f_src=lightreading_gnews 2. Moore’s law describes a long-term trend in the history of computing hardware. The number of transistors that can be placed inexpensively on an integrated circuit doubles approximately every two years. This trend has continued for more than half a century and is expected to continue until at least 2015 or 2020. ©2012 PhoCusWright Inc. All Rights Reserved. Page 5
Technology Convergence and Travel Distribution February 2012 Figure 4: The Online Evolution to Internet 2012 Source: PhoCusWright Inc. Internet 2012 Semantic Web Advanced UIs XML HTML Browser HTML5 Flash Personalization Online Search Web Services Many forget that the Internet was designed as a means for academic types to share documents. Supporting this usage was the Mosaic browser and a page/textbased metaphor. From this limited foundation has evolved a global network of interconnected computers, sensors and devices that support e-commerce, social commerce, entertainment delivery and a long list of other capabilities. The original document-based browser has evolved beyond documents to support interactive applications and a variety of media including pictures, movies and music. The first language of the Internet was Hypertext Markup Language (HTML). To support business transactions, HTML was augmented by the eXtensible Markup Language (XML) and a plethora of other domain-specific markup languages. To provide a better user experience, enhanced browser capabilities such as Ajax and Cascading Style Sheets (CSSs) evolved, along with add-ons such as Flash. HTML itself has evolved into HTML 5, which supports many features that developers were using third-party browser add-ons to provide. HTML5 will enable a quality Web interaction experience. As the amount of content on the Internet has multiplied exponentially, the challenge to use it to find relevant information has grown as well. This has led to major efforts to determine which information is relevant to a ©2012 PhoCusWright Inc. All Rights Reserved. particular user (personalization) and to improve search tools. Today, Google’s search tools not only find and display search results, they break down a site into various components and display the Google-created index of the website’s content. On the content side of the Internet, efforts are underway to move from what was essentially a textbased information system (with all the complexities and ambiguities of human languages) to the semantic Web, which uses semantic constructs to disambiguate Internet documents. These efforts, once seen as the future of the Internet, have been slow to gain traction. Despite the slow growth of the sematic Web, there has recently been an upsurge in the use of semantic technologies to improve Internet capability. The Internet has the content and business capability to support all aspects of the Travel Distribution Value Chain, including activities supported by the media model as well as booking fee and referral models. Through the browser and advanced user interface tools, the Internet provides a quality user experience in all aspects of the value chain, except where a mobile device is involved. The mobile device’s limited screen size and relatively slow communication speed restricts mobile capability and the usefulness of the Internet when consumers are traveling. Page 6
Technology Convergence and Travel Distribution Evolution 4: Location to Location-Based Services Built for defense (accurate location information is key to such things as submarine missile launches and smart bombs), the Global Positioning System (GPS) developed by U.S. Department of Defense utilizes a constellation of satellites that enable accurate position determination. Early GPS devices were large and clunky but have evolved to automotive, handheld and now mobile devices. What this means is that the location of any GPS-equipped device can be determined. It should be noted that while GPS is probably the most dominant position-locating system, cell tower triangulation has its uses, particularly in areas that GPS signals cannot penetrate. Location is a useful function when shopping for air, because it sets the expected origin of a trip. However, it is most useful in the “experience” phase, because it allows the traveler to obtain information based on their location. Relevant information such as traffic, nearby merchants, places to eat, etc. can all be keyed off the traveler’s location. February 2012 Evolution 5: Personal Computer to Desktop and Portable Computing System There were many early personal computers, including the Apple II, the Commodore 64 and the TRS-80, mostly for home and hobby use. The advent of the IBM-PC, along with the PC-DOS operating system in 1982, set the trajectory for desktop computing systems. Today’s networked PCs, with high performance CPUs, obtain content from local and distributed storage, and from the Internet. These desktop units act on content stored on local drives, division or corporation-central sites and on the Internet. With a broad range of content available, search engines such as Bing, Google, and Yahoo! provide the ability to perform fast, global searches. However, these search engines do not handle the ambiguities of language, giving rise to semantic search, which has the potential to markedly improve search. The PC also provides a platform for electronic commerce (e-commerce, buying and selling). In recent years, the social Web has become very popular. Dominated by Figure 5: The Location Evolution to Location-Based Services Source: PhoCusWright Inc. Location-Based Services Handheld Devices Integration with Mobile Devices GPS Automobile Devices Location ©2012 PhoCusWright Inc. All Rights Reserved. Page 7
Technology Convergence and Travel Distribution February 2012 Figure 6: Personal Computer Evolution to Desktop and Mobile Computing Systems Source: PhoCusWright Inc. Desktop and Mobile Computing System Semantic Search E-Commerce F-Commerce Search Content Networking The Social Web Personal Computer Laptop Internet Facebook, the social Web provides virtual global human interaction. Commercial use of Facebook have evolved into the term f-commerce. The continuing relevance of Moore’s Law3 has led to the development of very capable portable or laptop computers that provide most (if not all) of the functions of desktop units. Desktop and portable computing systems support all aspects of the travel value chain well, except “experiencing,” since travelers need information when they are not at home. While portable computers can obtain access at hotels, airports and Wi-Fi points, they are difficult to set up and use on-the-fly, and they have a limited battery life. The problem of battery life may be resolved with the relatively new Ultrabooks4 , but the setup and use issues remain. Analysis As shown in Figure 7, each of the technical advances we have discussed provides capabilities to support the travel value chain, some more than others. The 2012 Smartphone is not an ideal platform to use in most stages of the TDVC, except for “experiencing” the trip, when mobility is essential. TV as an Integrated Entertainment Platform supports the early stages of the travel value chain, but doesn’t provide tools to carry through to the remaining TDVC stages. The Internet 2012 would seem to do everything in terms of acquisition and distribution of content and to support e-commerce; however, its usefulness is limited during the “experience” phase because of the size and speed of smartphones. Location-based services are also great enablers for the “experience” phase, but are marginally 3. Ibid. 4. Niccolai, James. 2011. “Intel Launches New Class of ‘Ultrabook’ Laptops”, PCWorld, May 31. www.pcworld.com/article/228991/intel_launches_new_ class_of_ultrabook_laptops.html ©2012 PhoCusWright Inc. All Rights Reserved. Page 8
Technology Convergence and Travel Distribution February 2012 Figure 7: Converging Technologies and Relationship to the TDVC Desire/ Be Inspired Learn Shop Book Experience 2012 Smartphone TV as an Integrated Entertainment Platform Internet 2012 Location-Based Services Desktop and Portable Computing System Fully Supports Partially Supports Source: PhoCusWright Inc. relevant for the other TDVC phases. It would appear that the desktop and portable computing system capabilities could support all aspects of the TDVC, but the need for easy portability during the “experience” phase limits its effectiveness. We are close to having an effective solution to all aspects of the TDVC: mobile devices and smartphones use the Internet and location-based services to support the entire TDVC, albeit at different levels of capability. All of these devices and technologies support activity on the TDVC, but fall short in the “experiencing” phase, where device interaction and portability are prerequisites. In addition, technology used during the “experiencing” phase must be able to access content that was created (or previously researched) at other points in the value chain. The good news that there is an emerging technology that provides mobility, access to centrally stored information and easy interaction, overcoming the deficiencies ©2012 PhoCusWright Inc. All Rights Reserved. identified above. This technology is the tablet computer (see Figure 8), which combines the best capabilities of all of the technologies discussed above. The tablet supports full Internet and application-based content access from network devices, TV and video displays, location-based services and, with 4G connectivity (coming soon), high-speed communications. All of this with an effective display size, and either an integrated or onscreen touch keyboard. The tablet computer is truly the convergence point for travelers who wish to use one device to plan a trip from the “desire/be inspired” stage through the “experience” phase (see Figure 9) At the 2012 Consumer Electronics Show, AINOVO announced an US$89 tablet. This places the tablet at an affordable price point for nearly everyone. Page 9
Technology Convergence and Travel Distribution February 2012 Figure 8: Convergence to a Tablet Computer Source: PhoCusWright Inc. Broadcast TV Smartphones Cable TV Wireless Phones Set-Top Boxes Standards IPTV Location Awareness Entertainment on Demand Integration with the Internet Applications Book Market Penetration & Coverage TV as an integrated Entertainment Platform Apple TV Google TV Roku Box Boxee The Social Web Touchscreen 2012 Smartphones GUIs Desktop and Mobile Computing System Semantic Search The Social Web Semantic Web Internet 2012 TABLET Advanced UIs XML HTML Browser HTML5 Flash Personalization Location-Based Services E-Commerce Online Search F-Commerce Search Web Services Content Networking The Social Web Personal Computer Handheld Devices Integration with Mobile Devices GPS Laptop Automobile Devices Internet Location Figure 9: The Tablet can do it all Desire/ Be Inspired Learn Shop Book Experience Tablet computers Fully Supports Partially Supports Source: PhoCusWright Inc. ©2012 PhoCusWright Inc. All Rights Reserved. Page 10
Technology Convergence and Travel Distribution February 2012 Figure 10: AINOVO $89 Tablet Source: ainovo.com Conclusion Technology refresh continues, with the introduction of new platforms and capabilities that quickly make their legacy forebearers obsolete. Many of these new platforms and capabilities support the convergence of features and functionality so that, ideally, users would need fewer devices to navigate the Travel Distribution Value Chain (TDVC). However, much of this new capability is ©2012 PhoCusWright Inc. All Rights Reserved. limited in that it only addresses one or two aspects of the TDVC. The only converged capability that spans all aspects of the TDVT is the tablet computer, with has become increasingly affordable at the entry level. Will these factors drive travelers to converge their TDVC activities around a single device? Not likely, since it remains easier to change technology than to change personal usage and preferences. Page 11
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