Elliott Ng

I am Five of Eleven, Tertiary Adjunct of Unimatrix Tnooz

Earlier this year, I was inducted via a set of secret geek travel blogger rituals into Tnooz as a Node.  The name is reflective of Chief Editor (or shall I say, Prime Node) Kevin May’s sense of humor and futurist leanings.  Presumably, the power of Nodeship is to harness all of the wisdom of each individual writer/blogger/contributor into a greater collective understanding of travel.  Therefore, I have added my own distinctiveness to the Tnooz Collective.

photo source: aboutwomyn.com

My latest post:  interview with Eva He about upcoming China TDS 2010

I had a chance to briefly interview Eva He, the editor of TravelDaily.cn and organizer of the China Travel Distribution Summit, about trends to be discussed at China TDS.  Since she briefly brought up the issue of Google, I asked her what she felt about the sense of an unfair playing field for foreign companies. This was most recently expressed by Jeffrey Immelt, CEO of GE.  Here are his comments reported in the Wall Street Journal:

It’s getting harder for foreign companies to do business there, he told Italian business leaders. “I really worry about China,” the FT quotes him as saying. “I am not sure that in the end they want any of us to win, or any of us to be successful.”

Immelt was apparently giving vent to the growing anger among international businesses who believe that China is engaged in a systematic effort to siphon off their technology, and then turn that technology around and use it against them in China and overseas.

He should know better than anybody: GE has been handing over technology in everything from rail locomotives to antipollution equipment to gain access to the domestic Chinese market.

For international multinationals, technology transfer has long been the quid pro quo of landing deals in China.

Foreign businesses have meekly gone along with this arrangement because they assume that since the biggest markets in everything from wind turbines to mobile phones have moved to China, you have to be in the country if you want to be No. 1, No. 2 or even No. 3 in the world. Without scale, global businesses can’t be industry leaders, they can’t remain on the frontiers of technology, and they become more vulnerable to competition. But scale means that you’ve got to be in China.

That calculation gives China enormous bargaining power.

Yes it does.  Compared to aerospace and internet search engines, travel has some great characteristics that make it a better industry for foreign companies to go into:

1. Unlike aerospace and internet search, travel is not a national security or sensitive industry.  Internet search is media, and media is a national security industry.  Foreigners have a hard time understanding that.  Based on reading the works of other people, namely Richard MacGregor’s The Party (banned in China), my impression is that Xinhua is an arm of the government that performs the functions  of BOTH the Associated Press, AND the CIA (or whoever in the US government does domestic “open source” (public source) analysis).  The press serves to keep Party members informed and is an important check-and-balance against the management reporting received directly through the Party and the government.   But all the juicy stuff is not for public distribution through news outlets.  Internet search and news portals are a critical tool to shape popular opinion and I’m surprised the government doesn’t try to control it even further…since it is a national security industry.
2. Travel is also inherently cross-border. In order to help the domestic tourism industry flourish, you need to support outbound tourism as well.  Only then will providers and consumers taste international service standards and demand that of the domestic industry.  It is not possible to be too mercantistic in tourism:  try to attract inbound tourism dollars but prevent outbound tourism from happening.
3. Travel is a strategic pillar of the latest 5 year plan. I haven’t seen the actual documents that reference this, but it has been widely quoted by both Chinese officials and Western travel industry people (WTTC, Amadeus) so this implies that there is National level support for travel development.

Honestly, I sympathize with Jeffrey Immelt and he is expressing a reality that most companies discuss international but see no benefit on expressing publicly.  The even greater truth is that business is hard for ALL businesses in China, not just foreign businesses.  The only businesses that get advantages are the large state-owned or state-supported enterprises that have a plug-and-play relationship into the Party through some kind of sponsorship.

Resistance is futile.  You will be assimilated.

Now, I must go back to my regeneration chamber.

Google’s pending $700 mm acquisition of ITA Software is probably the most important deal of the year in travel distribution.

I have friends at Google and have eaten lunch at their campus.  In order to get a visitor badge, you have to sign a Non-Disclosure Agreement.  TANSTAAFL.  Since I’ve casually chatted about this topic with some of my friends at Google I need to be careful not to share insights derived from those conversations.

But I can share that I’m thinking a lot about this and if you’re involved in online travel or travel distribution, you should be too!

ITA Software’s QPX product provides flight availability and fares to virtually all the American online travel agencies (OTAs) and metasearch sites (e.g. Kayak, Bing).  Google had to be after something that it couldn’t get with just a commercial deal with ITA.  What is it?  Hmmm.

Here’s what I think:

1. Google wants to create a new travel search experience that will consume massive volume of QPX queries
2. Google wants to invest heavily in performance (speed) at scale
3. Google wants direct access to data that ITA doesn’t usually share, maybe historical
4. Google wants to tackle international and hotels faster.

Imagine a world where the marginal cost of flight queries are free, and mining historical flight data can also be free.  I think we can all imagine that some great customer experiences that can come out of this.

Flight metasearch players are at risk.  Kayak and Bing need to build a brand fast, get direct sources of traffic, and continue to innovate faster than Google.  The global GDS (Sabre, Travelport, and Amadeus) will be forced to price more aggressively.  No one will want to single source from Google/ITA, so Expedia will invest in its own Best Fares Search capability, and startups like Everbread and Vayant will get some deals done.  To compete with Google’s own offering, Kayak and Bing will need to consume more queries, and ITA will need to honor “most favored nations” status with existing customers, so price/query is likely to go down, but total cost might go up for flight metasearch players.

Some other insightful people on this topic:

• More on this subject on Tnooz (including some insightful comments from Forrester’s Henry Harteveldt and PhoCusWright’s Lorraine Sileo)
• Analysis from my fellow Tnooz nodes (Stephen Joyce, Timothy O’Neill-Dunne, Tim Hughes, Glenn Gruber, and Alex Bainbridge) and Rick Seaney of FareCompare
• Exceptional analysis by Henry Harteveldt
• A strategic travel technology perspective from Norm Rose.

I’m not a flight expert, but I hear ITA doesn’t have global coverage and there could be opportunities to tackle emerging regions well as ITA is bogged down in merger integration.

I’ve been given the honor of moderating a panel at China Travel Summit (aka China Travel Distribution Summit or China TDS) in Beijing 9/15-16.  TravelDaily.cn has convened a smart, high-level group of people in China Travel. One of them is Gregg Brockway, founder of TripIt, profiled here on CNReviews.

As a moderator and media partner of the event, I can access a 10% discount off of the current rate of RMB 3800 from the event.  Use the code “CTS555? when you register and you should get a $50 discount, or 10% off.  Use this link: http://www.traveldaily.cn/go/74.html (There are even deeper discounts available for hoteliers and airlines but you have to contact TravelDaily.cn directly.  I’d be pleased to make the intro.)

I’m never as good at keeping in touch with people directly as I’d like.  So I created a email newsletter for my friends who share some interest  for the China travel industry.  Right now, it is about 90-100 people.

If you’re interested in the topic and want to get an email about 4-6 times a year, please sign yourself up.  If I don’t know you, I’ll get in touch to introduce myself.  I reserve the right to remove people from the list!