Welcome to Travel Again presents the weekly travel Roundup, covering the headwinds and tailwinds impacting the business of travel. Please welcome our hosts, Mike McCormick and Ed Silver. Hello Mike, how you doing? Good, how are you doing? I am good. Welcome to episode five, season two of the Travel Again podcast. Mike, as you know and you can see, I am back in the Asheville area. We got back on the 13th without running water here in Asheville, but then running water returned on the 18th. That is Friday the 18th. Because we record the podcast on different days, I just wanted to give you a sense of how long the area was without running water. As of today, we still have running water, but it is not potable yet. It is not drinkable yet, but it is a major step forward for the area here in Asheville.
Unfortunately, from the outside looking in, there still seems to be so much misinformation about what is really happening on the ground, which is a shame. It has unfortunately been politicized. I feel for you because we talk all the time and clearly you are there and know what is really happening on the ground. Maybe just give a couple of updates on that as well.
It is going to be a while before this area recovers. There are definitely pockets of real destruction throughout the broader Asheville area. In terms of just some of that misinformation, one thing I have noted since returning from my evacuation is that FEMA is everywhere. I went through and counted 15 FEMA stations. There are 10 FEMA units going door-to-door. There is free drinking water everywhere; it is plentiful. Everywhere you go, someone is giving out free drinking water. We are using bottled water because you have to, and we are going to be in this recovery zone for a long time. The key in terms of that misinformation is that I strongly believe the help is here. It is going to stay for a long time. If you are in this area and you need help, do not hesitate to reach out to FEMA. They have a mobile app, a website, and a phone number. There are 15 FEMA locations of massive size within a five-to-ten-mile radius of the Asheville area. Also, not for nothing, but if you are in the area and you need help with anything, just DM me directly. For those not in the western North Carolina area who want to help, please consider donating to the Red Cross. There was a hurricane that hit Florida just behind Helene, and the Red Cross is in need of lots of help. Please feel free to donate and stay Asheville strong.
All right Mike, let’s get rolling with episode five and on to the news. Article one is just a fun one. There is nothing more fun than massive companies talking about buying each other. It was reported that Uber and Expedia are looking at each other for an acquisition. They call it the dream deal. It was reported in the Financial Times that Uber is exploring buying Expedia. It does seem to be a trial balloon; no active talks are underway that anyone would report, but it makes intuitive sense given that Uber CEO Dara Khosrowshahi has past and current ties with Expedia. One other note: Uber’s market cap is 173 billion as of October 16th, and Expedia’s market cap is just under 20 billion. What do you think of this deal? True, false, what does it say to you?
It is fascinating. A little bit of the big could get bigger, but I think more so that you have these potential for some really unique combinations down the road of different companies. You have a lot of market dynamics that are changing, the ongoing changes in the travel industry specifically, but you also talk in general about bringing AI into the picture and a number of other factors that might make some of these bigger alignments—whether they are outright acquisitions or just broad partnerships—pretty interesting in terms of acquiring customers. It does speak a bit to the changing dynamics around the OTA business specifically. Expedia obviously divested of Egencia and sold that to Amex GBT. You have a number of things that are changing in and around the space. We could probably have a whole episode just dreaming up different mega-combos that would be really interesting to watch. I don’t know whether that was just real or someone’s comment was made and then an article was written, but it is fascinating nonetheless.
It made a lot of people start to ask, maybe not Expedia and Uber, but what about Amazon and Expedia? That combo definitely got the mind thinking about what is going on in the travel world there. The other underlying trend, which we talked about before, is the ongoing cost of development of what it takes to be successful in this era and the amount of capital investment required for companies to stay current or lead in a marketplace. It does lend itself to having either really large players with big capital budgets or more early-stage companies that are trying to develop a certain capability that could either grow into a big business or be acquired. Probably in between is not a great place to be necessarily because it is hard if you are not innovating in some dynamic way or if you are not big with large scale that can afford to continue to develop. It will be interesting to watch. I think they could do some cool things. I really like Dara; he has done a great job at Uber. I am rooting for something interesting to happen there.
Article two: we talk a lot about Boeing on this show for good reason. This article says Boeing’s machinists reject a contract, extending the strike. Last we talked, there were rumors that they might figure this one out, but apparently not yet. Apparently, I think I lost my bet on FanDuel about whether the strike would get ended and they would accept the contract. I really thought the contract was going to go through with the union because at this point, Boeing certainly needs the deal to happen, but so do the workers. This is a stage where they did get a number of concessions. It looked like they were meeting more than halfway. Now it is disappointing the other way because it starts to be like blood from a stone. You get to a point where you have to make the deal; you can hold out and hold out, but the company has to be able to afford it. In the meantime, the longer this goes on, it is just adding to Boeing’s issues and struggles to get quality aircraft produced and out the door. Our whole industry is dependent on it as a key driver of airlines’ ability to grow and refresh aircraft. This is not a great sign. It is unfortunately a very negative update for sure.
Best of luck to both Boeing and the union here; they have got to figure it out. This next article I pulled kind of went under the radar, and I think it is interesting to bring up regarding distribution and intermediation: Frontier Airlines was removed from the Sabre GDS. I pulled this directly from the Frontier website where they spoke about it. It was announced Frontier content is no longer available in Sabre as of October 1st. It values its partnership with travel agencies and is committed to assisting mutual customers during this transition, but clearly not enough to be in the Sabre GDS. What do you make of this?
The LCC category is certainly under a lot of financial pressure right now. You have Frontier and Spirit that are struggling financially and otherwise. Southwest is going through it a little differently but certainly going through its struggles as well. A few things come to mind. One is the ability to connect anytime, anywhere, not necessarily just through a single channel. Having the ability to have options for connectivity is so important. In the case of Frontier, they may just find themselves in a position where the cost of distribution through the GDS doesn’t work for them. It will be interesting to see how some of this plays out. For the industry and for agents trying to serve customers, they have to be able to get to the content wherever it is available. If it is not available through GDS, they must have the ability to adapt.
Agencies, OTAs, everybody has to have their distribution strategy in place because if you are relying on one GDS or one connection and you lose access to a major airline or an important LCC for your customers, it is difficult to recover. Those are the stories we prepped for, but I have one hot off the press as a surprise article for you today. Southwest Airlines ends feud with investor Elliott; the carrier agreed to add six new directors and the CEO gets to remain in his role. What do you make of this?
Clearly, Elliott was pushing hard and maybe overstating their position or the leverage they had. I think they used every bit of that leverage to try to force some change. If Southwest can do it in a way that they don’t lose their identity and soul doing it, it may end up being a positive outcome for them in terms of making some changes they needed to make to get growth going again and getting better margins to keep up with other competitors. It has been a rough ride over the last year or so to get there, but now the proof is in the execution by the current management team and their ability to adapt and pull off these changes effectively. Elliott is in a bit of a stand-down. I am sure if Southwest misses a quarter or delays an implementation, it won’t be the last we hear from Elliott, but they don’t have the majority in the boardroom. They own a substantial but certainly still minority part of the stock, so they have probably used every bit of leverage they have at this point.
It is nice to see that one at least for the moment come to a truce. That is it for the news. We will be right back with our guest. Thanks to our sponsor safe travel RX, an app that takes the worry off your itinerary, providing travel peace of mind with emergency response components, travel security, and risk management, especially for those traveling internationally. It includes 24/7 global concierge assistance. Landed in the hospital in China? Forgot your prescription? Wallet stolen? Safe travel RX is your prescription for better, safer travel. Download it today to discover the power of safe travel RX and reach out to them if you have interest in offering this tool to your travelers.
Please join me in welcoming Steve Singh. Steve is managing director at Madrona Venture Group and recently took on the role as CEO of Spotnana. Before joining Madrona in 2020, Steve had a long and storied career building and running scale businesses, including being the founder and CEO of Concur, a NASDAQ listed company, and serving on the executive board of SAP running its Cloud Business Group. At Madrona, Steve primarily focuses on next-generation B2B and enterprise-related startups. He invests across a wide variety of technology areas including machine learning, artificial intelligence, intelligent applications, and next-gen cloud infrastructure. Steve is on the board of portfolio companies Clari and Leaf Logistics. He also serves as the executive chairman of Spotnana, Troop, Stratify, Magnify, and Center. When he is not in the office, Steve loves working with others to build cool products and companies, enjoys spending time with family and good friends, skiing, exploring the world, and enjoying a great meal, good wine, and great conversation.
Hi Mike, hey Steve, welcome to the podcast. It is nice to see you. It is good to hear that things are recovering and that you and the family are doing well. Thank you Steve, I appreciate that. It is kind of the trifecta; we had Sosanyan and Krystal and now you. We could make a whole season just out of your company leaders.
We have all known each other a long time through the industry, but I have to ask the question: what is so attractive about the magnet that draws you back into travel and doing this?
I would imagine a part of what drew me back is the same thing that draws you and Ed to the travel industry. Whether it is business or personal travel, you get an opportunity to interact with other human beings from different cultures and different parts of the world. You get to go build amazing products together, experience new locations, and just enjoy life. I would argue that travel allows you to really understand one another a lot better, and in most parts of the world today, a little bit more understanding is probably a good thing. That is fundamentally what draws me into the travel industry and keeps me hooked. That said, in the last seven years, we moved from SAS to cloud-native architectures, which is really enabling intelligent applications. Machine learning has evolved into artificial intelligence, which is literally changing the landscape of how applications are built. You are going to see literally every application category get redone and industries adopt AI in a way that transforms them. We are literally living in the golden era of innovation for the travel industry. It is hard not to be excited about it.
Frank Herbert wrote Dune in 1964, and it took until the last couple years for film-making capabilities to catch up to be able to bring his vision to the screen. I liken that to when we were all involved back in the early days, envisioning these travel agent AI-type offerings where a computer-generated activity would plan your travel for you and be your automated assistant. We are finally here.
In the next two years, you are going to be able to literally say, “book my travel for next week.” That is all you have to say. You are going to see AI agents that are focused on travel integrated into lots of different experiences like Spotnana, Troop, Center, or Direct Travel. You can literally just say that and it will understand your calendar. It will understand not only where you have to be, but it will see patterns, like that you like to show up two hours before a board dinner to interact with folks beforehand. It already knows my preferences and corporate policy. It will go make all those bookings for you, populate your calendar, and generate an itinerary. In the not-too-distant future, in 2025, you are going to see the ability to deal with travel disruptions in a completely automated model.
Is that what drove your investment in Otto recently?
Absolutely. In fact, Otto is focused in a segment of the market that in my view is completely underserved: the unmanaged travel segment. If you think about the tools in that segment, you are searching on Google and booking on Expedia or others. I would argue that everybody wants a managed travel experience; they just want a cost structure that makes sense for their particular business needs and they want it to be a consumer-like experience. That doesn’t exist today, but it will.
Let’s talk about the portfolio companies you put together. Stepping back from a Madrona perspective, which has a broader tech investment portfolio, how does that all fit together and how do you manage all that?
I have five other partners at Madrona who are incredible and they manage their portfolio of investments. I tend to invest in enterprise software; this is what I know. If you want to make money, you are far better off investing in things you actually understand. I started off investing with a couple of very focused investments in travel. One was Center, which is reinventing the expense management space, and the other was Spotnana. I invested in Spotnana because today what you can do in development, as compared to back in the software-as-a-service or even on-premise days, is develop world-class global platforms at one-tenth the cost structure of just 10 years ago. Being able to solve the infrastructure layer of travel in the hundreds of millions of dollars of investment versus billions gives you a shot at really solving that problem in a unique way that enables a much better traveler experience.
After these two investments, I realized that with the benefit of cloud-native architectures and what is happening with AI, there are other areas within travel that we can go automate and improve upon. One was group meetings and events. Except for the very high end, that is still largely paper, Excel documents, printed pages, and emails routing all over the world. We should be able to bring automation and a digital delightful experience there that is equivalent to what I hope we can get to in transient travel, which is the “perfect trip” vision.
On top of that, we also saw that if you can really build these technologies and use AI to drive the cost structure down, then there is an opportunity to reinvent what a TMC looks like. To me, the idea that the TMC goes away is silly. It will take a different shape and have a different set of value that it offers, but it is critically important to business travel and even consumer travel. I just want to interact with that TMC partially digitally and partially through a human being, but I want that human being to understand everything that is going on in my trip the moment they pick up the phone. We saw an opportunity to reinvent the TMC space and that is why we invested in Direct Travel. Otto is really the tip of the spear—how do you get to a conversational interface with travel that is leveraging Spotnana, Center, and Direct Travel? That is the buildup of the thesis.
Right now the pieces are being integrated together but also serving other customers independently. Do you see that structure changing or coming together at some point?
One of the things that is different about cloud-native architectures is that if you really take the philosophical approach that you want an open platform that anybody can extend and add value to, then the reality is you can integrate across different companies in a way that is just as delightful and seamless as if it was being done by the same engineers in the same company. Troop is integrated into Spotnana in a way that you can use Troop to manage your group travel program, but when you actually book travel, it is calling Spotnana behind the scenes. You just don’t know it. When you are issuing a virtual card, it is actually Center’s virtual card. Following the expense report, it is Center behind the scenes. When it is being serviced, it is Direct Travel behind the scenes. The beauty of these open architectures is you can leverage innovation from anywhere; it doesn’t have to happen in the same company.
If each of these investments is running independently and you are not CEO of all of them, how are you ensuring that that infrastructure work is actually going in a single unified direction?
There are two tools that I use to help drive that. The most important tool is that you have to have a common view of what you are trying to solve. For us, our companies are united by this idea of the “perfect trip.” That vision is broad enough that anybody can contribute to it, and every one of the companies I am in benefits by making that vision possible. Number two is that good human beings talk to one another and collaborate. Sometimes we disagree, and my feeling is that is okay. If one of the companies has a slightly different vision, my feeling is to go for it and make that a reality because ultimately the customer gets to decide. If the customer loves it, everybody else will start to move in that direction. If the customer rejects it, you adjust your trajectory. Allow people to experiment and innovate within a common vision.
Historical problems for the industry involved larger customers who always wanted a degree of customization. Because a lot of development was in a closed environment, it made it really challenging for companies to scale. Is that better now? Do you find that to still be a big challenge?
We are in the early stages of this, so I don’t want to pretend like we solved this problem. But I do think the foundation to allow customers to configure to their heart’s content is there. Next-generation TMCs are going to bring value in configuring platforms to meet the specific needs of a customer in a specific industry or geography. The ability to build value on top of these open platforms has expanded. Back when I started in software, there might have been two or three million professional developers in the world. Today there are maybe 20 or 25 million hardcore developers. But if you look at the ability to build on top of these open platforms, using that term a little bit more broadly, you are talking about 125 million plus developers. That is only getting larger. In fact, AI is being used perhaps in the most broad-based model today in development—the ability to write specific code.
Do you really think that approach to software development will reduce the likelihood that the platform will be bastardized by some single giant customer’s individual needs versus the platform needs?
This is to me the only way it can be done: a completely open platform. Take the case of Spotnana; our mission is to build a platform that powers the perfect trip, whether it is a business trip or a consumer trip. We are going to add a lot of functionality specifically designed to make it easier to run your TMC. Our goal is you should be able to run your TMC at 50 cents on the dollar in cost structure using modern technologies. We think we can meet most of your needs, but we probably can’t meet all of them because some TMC in a specific geography will have specific needs. As long as you are integrating and adding value through our APIs, innovate to your heart’s content. You can even take that innovation and make it available to others to use.
The industry overall has been ripe for this. Our advice to customers is always that you need options and the ability to adapt to whatever the market is doing. If you need certain content and there is only one way to get it, you need to be able to facilitate that. You can’t rely on the same old tools necessarily. The GDS is still a workhorse and elements of the industry can be efficiently accomplished there, but you need the ability to connect and adapt no matter what the situation.
GDS is still very important to the overall industry. That said, I think NDC has reached the point, especially in the Spotnana platform, where it really can start to add real value for us as consumers. Over the last 20 years, NDC was effectively a pipe that allows you to connect content from the supplier to the end consumer. The problem is there was no capability to provide servicing on top of that because no technology was really built around NDC to provide that servicing. Spotnana has spent a lot of money really building servicing into that NDC pipe and into our platform. If you are a TMC, you can use our NDC pipe, you can use Sabre’s, you can use anybody’s, but the value of our NDC pipe is we will build a servicing architecture around it that allows you to treat that piece of content the same as a piece of content via GDS. You also have to look at this and say: how do you understand the data around the traveler and the supplier? How do you build a traveler graph and a supplier graph and then provide tools to make it really easy for the traveler to understand what is available from the supplier? That takes real development effort and real investment in innovation, and it has to be open. If you make it open, anybody can add value and build upon it.
Are we really there yet with NDC? Has any traveler really experienced the benefit of that development yet?
Not at scale. That said, it is working; we have customers who are using it today. But the scale that I am looking for is how do we put this in the hands of tens of thousands of corporate customers and make sure that millions of travelers have access to it. That just takes time. But if the functionality is fantastic and delivers a better experience at a lower cost structure, people are going to use it.
You think about how fundamentally different our industry will be when people get over this desire to have everything in a closed proprietary environment and really embrace the open nature of it. It has been a trickle at this point.
Somebody has to go lead that charge. In all fairness, as much as COVID was certainly very bad for humanity, it enabled new innovations to take root much faster. It certainly helped us at Spotnana in giving us time to build an incredible platform. I give you a lot of credit for putting the “perfect trip” out there as a mission statement because so often in travel we are very insular and people lose sight of a bigger vision.
Any vision that has an opportunity to become reality to really help improve the experience can’t be about you or how you benefit. It has to be about how we as travelers and the companies that we work for benefit, or how the suppliers benefit. If we can help bring about that vision through technology, that is a worthy objective to go chase.
What is your guilty pleasure when you are out there traveling?
It is going to be boring. I really value my time with my friends, I value great conversation, and I love wine. So great friends, great wine, and great conversation—that is a perfect evening for me. That is my guilty pleasure.
Not a bad one. Back to face-to-face and travel and why we all do it—it gives us the opportunity to be out there and do that. Thank you again for joining us today, Steve. We look forward to seeing you face-to-face soon.
Travel Again Advisory works to really help companies bring clarity to complex issues and elevate those companies to a new level of competitiveness. In our last project, we worked with a very large travel entity and helped them bring their supplier strategy into the current day and beyond, navigating around changes specifically in airline distribution and NDC. It is not just about helping them figure out how to survive in that environment but leveraging it to find a way to take advantage of it. In this environment, you need a new strategy for this day; if you are using yesterday’s strategy, you likely will not be successful. If you get about 30 minutes of your time, we can certainly help you take a look and maybe consider refreshing your strategy or game plan.
I identify what we think is adding value to travel or taking it away. Mike, you are up first with headwinds. This one was an interesting article about airlines cracking down on boarding behavior at the gate. There was an article written in Australia focusing on major airlines, and they talked about how frustrated airline employees get because people tend to crowd the gate and board out of order. They actually said employees called it “gate lice.”
The reason why people crowd the gate is not because they want to crowd the gate; it is because they are concerned about maybe being on a budget and not wanting to pay $200 to have five bags checked, or maybe they are on a really tight trip with tight connections and can’t afford to worry about whether their bag is going to be there. People have anxiety about travel. To treat it like somehow these passengers are being annoying to them about their flawed boarding process—stop. I get status people board earlier, but you have to give people a break here. I am respectful; if I checked my bags, I let everybody else get on first. But don’t forget who is paying the bills here and don’t disrespect the fact that people do have a lot of anxiety when they travel. That “gate lice” term really pissed me off.
I’ve got a tailwind for us. United Airlines announced its largest ever international route expansion for the summer of 2025. I love to see airlines expanding to new and unusual places. They are going to increase flights to favorites like Spain, Italy, and France, but also brand new routes to lesser-visited destinations like Mongolia, Greenland, and Senegal. United said they are trying to fly to places that speak to all travelers from honeymooners to adventure travelers and beyond. I really love to see the expansion.
It is great. Having been through everything the industry has gone through with COVID and the recovery, we are at that inflection point where the foundation is solid. For airlines to be more speculative about routes—even summer seasonal ones—is really healthy and it is a great sign for how bullish clearly United and others are about 2025. It should really be a very exciting year for travel.
That is our show today. Thanks again to our sponsors. We will be back again next week.