The Travel Industry Event of the Year Braves the Long Tail
Philip Wolf's opening at The PhoCusWright Conference 2007
MICHENER’S RUSTY NAILS | He published his first book at age 40, a Pulitzer Prize! James A. Michener was born three years after American brothers Orville and Wilbur Wright made the first sustained piloted flight of an airplane in 1903. A naval officer during World War II, he flew in almost everything that had wings and walked away from three complete crashes, including a downed DC-3 in the middle of the Pacific Ocean.
MICHENER’S RUSTY NAILS
He published his first book at age 40, a Pulitzer Prize! James A. Michener was born three years after American brothers Orville and Wilbur Wright made the first sustained piloted flight of an airplane in 1903. A naval officer during World War II, he flew in almost everything that had wings and walked away from three complete crashes, including a downed DC-3 in the middle of the Pacific Ocean. Imagine what his excitement would be for the 555-passenger A380 with two decks, both the entire length of the fuselage and both longer than that famed flight at Kitty Hawk, North Carolina.
Michener grew up in a small-town in rural Pennsylvania. After dozens of famous titles, five honorary doctorates and decades of globetrotting, the author embarked on his most difficult work at age 85: The World Is My Home, an autobiography.
“When I was a country lad of five,” begins his exceptional memoir, “the farmer living at the end of our lane had an aging apple tree that had once been abundantly productive but had now lost its energy and ability to bear any fruit at all. The farmer, on an early spring day I still remember, hammered eight nails, long and rusty, into the trunk of the tree. Four were knocked in close to the ground on four different sides of the trunk, four higher up and well spaced about the circumference.”
“That autumn a miracle happened”, the plainspoken writer continues. “The tired old tree, having been goaded back to life, produced a bumper crop of juicy red apples, bigger and better than we had seen before. When I asked how this had happened, the farmer explained: ‘Hammerin’ in the rusty nails gave it a shock to remind it that its job is to produce apples.’
‘Was it important that the nails were rusty?’
‘Maybe it made the mineral in the nail easier to digest.’
‘Was eight important?’
‘If you are goin’ to send a message, be sure it’s heard.’
‘Could you do the same next year?’
‘A substantial jolt lasts about 10 years.’
‘Will you knock in more nails then?’
‘By that time we both may be finished,’ he said, but I was unable to verify this prediction for by that time our family had moved away from the lane.”
In business, like in life, we have some fairly large rusty nails hammered into our trunks. Not to be compared to the humbling rusty nails we encounter in life, the travel industry nevertheless, has its fair share of nails and apples.
I have been tracking this space for a very long time which means I have been observing, pondering and prognosticating about travel’s rusty nails and juicy red apples for a very long time. From the first GDS, to the early online forays, to e-ticketing, to the dot.com boom, to the bubble burst, to the post-911 revival, to the strip-and-flip private equity chapter, to SaaS overtaking ASP, and then some… I reflect from a rare and experienced perspective on how much has changed and how much will.
TRAVEL 1.0
Here is my first rendition of an online travel-booking schema. At first glance, it probably looks familiar; upon further inspection, you will see curiosities that date me such as common carrier, RBOC, gateway, Prodigy and Compuserve. How long ago did I state this case?
1993.
This vision became reality by the mid-to-late ‘90s. Established travel sellers rejected the online wave en mass, claiming those cold, cruel, calculating computers would never replace the old way. Lo and behold, Travel 1.0 made its grand entrance. Unlike other hot e-commerce verticals where established players dueled new entrants for the online sweepstakes, most travel retailers eschewed the frontier, opting instead for the sidelines.
I have traveled a long road since those early days, scrutinizing the travel distribution marketplace at every turn, braving many a metaphoric rotten tomato en route. Since its founding in 1994, PhoCusWright has researched, tracked, analyzed and opined on the strategic center of the world's largest industry. We observe, we forecast, we stick our necks out for a living… that’s PhoCusWright’s currency.
TRAVEL 2.0
So we know those rusty nails keep on coming.
Two years ago at The PhoCusWright Conference right here at the Omni Resort in Orlando, we noted how many entrepreneurs were replaced on stage with lawyers, bankers and executives from bigger businesses. Controversial talk was muted. Everyone witnessed Travel 1.0’s swan song.
Then, at last year’s PhoCusWright Conference, we cast a Hollywood-size spotlight on Travel 2.0, our industry’s next rusty nail so to speak. The entrepreneurs were back! The social networking floodgates opened, liberating a positive advancing force that permanently altered our landscape. Advantage customers. Travelers took control: finding and creating their perfect trips, not just their cheapest trips.
Some Travel 1.0 companies forged ahead, confronting and embracing Travel 2.0, while other Travel 1.0 pioneers resisted, ironically being reticent toward 2.0. And some laggards are now busy with expensive catch-up.
LONG TAIL ECONOMICS
For those who have been living under a rock, the next set of rusty nails and basket of juicy red apples are upon us big time: the Long Tail.
The genesis of the Long Tail is rooted in the rise of the Internet itself. Before e-commerce’s ubiquity, brick-and-mortar retailers rationalized that low volume products were not worth the shelf space, warehousing, distribution, marketing and labor cost. Selling low volume products was not economical.
Enter the likes of Amazon, eBay and Netflix. A retailing explosion occurred around so-called “non-hits,” for example, out-of-print publications, one-of-a-kind things and documentary films. We have entered a period of unlimited choice online. Niche producers and sellers can afford to find an online market for their offerings while consumers are increasingly able to locate those niche offerings. Superior technology, search, and filters facilitate this transformation. There is an enormous variety of travel-related products and services that can now be efficiently distributed – provided that technical and business barriers are removed.
Customers communicating with other customers, or CtoC, has triggered a resurgence in the Long Tail economy. The alleged “leveling of the playing field” that was supposed to have occurred in the 1.0 era has finally become reality because of the Long Tail catalyst.
In today’s e-commerce economy and for travel in particular, I ask the question: Should you plan on 80% of your organization’s desired consequences stemming from 20% of your tactics?
No.
The Long Tail debunks the old 80/20 rule or Pareto principle. Defending an 80/20 strategy is getting risky. So is automatically dismissing the value of low volume products, under-the-radar channels, small customer groups and obscure key words.
In the Long Tail, embracing niches wins because the aggregation of value in the tail of the curve can be greater than the aggregation of value in the head. Big companies are successfully harvesting lots of little things while “Davids” are beating “Goliaths” with intelligent and efficient approaches. Little guys compete on the merits of their products and services; it’s the size of their reputation, not the size of their marketing budget that counts. Big guys cannot afford to ignore too many little opportunities.
LAST RUSTY NAIL
Wired magazine editor-in-chief Chris Anderson, coiner of the term "the Long Tail," reset the stage when he subtitled his book, “The Long Tail is about selling less of more.”
Current marketplace activity represents the most exciting time that I have witnessed since the first online travel wave hit. It's pregnant with potential. The primary reason for this is that travel sales, marketing and distribution – unlike travel itself, which is largely a tangible experience – travel distribution is inextricably linked with fantastic advancements in technology which evolve faster than most enterprise’s ability to deploy. If you don’t believe me, wait until a true semantic travel search platform or a prototype gPhone goes into production!
The PhoCusWright Conference is dedicated to unlocking this potential by recognizing the interplay of new forces in our marketplace such as the Long Tail. This conference forthrightly illuminates how all types of travel, tourism and hospitality companies – young and old, large and small, mainstream and niche, corporate and leisure, home and abroad – can differentiate themselves in our vast, dynamic marketplace.
It’s a fascinating thing: the continuous challenge new entrants pose to the very companies who themselves challenged the status quo a generation prior. I’ll give you an example.
Six of the top ten sites on Alexa’s October 9th Global Traffic Rankings were not there at the end of 2005:
- Number four – youtube.com
- Number five – live.com
- Number seven – facebook.com
- Number eight – orkut.com
- Number nine – wikipedia.org
- Number ten – hi5.com
Who were some of those that slipped out of the top ten? Ebay, Amazon and Microsoft.com. The mesh of technology plus communications plus media is astounding. The number of Internet users worldwide has surged from 390 million in 2000 to 1.3 billion today, 42% if them residing in Asia.
Will the Long Tail be travel’s last rusty nail? Of course not. So when those next rusty nails are hammered into our trunks, let’s stop being defensive or think we can prevent natural cannibalization. Rather, we must act “like the sensible apple tree [and] resolve to bear fruit.”
CLOSING Charles Eames, designer of the famous lounge and ottoman, said, “The details are not the details. They make the design. They make the product.” His perspective is inspiring. We are passionate about creating a unique conference in an industry mired in a "sea of same." By producing a conference that is changing conferences, we are fighting commoditization just like you.
Thank you all very much for coming.
You have chosen to join the savviest group of travel executives ever assembled. We continue our legacy of engaging, debating and defining the unfolding realities that comprise ten percent of our planet’s economy.
This year we celebrate a tipping point in convergence, not the cable-satellite-video-Internet-broadband-wireless kind – though that is finally happening – but a different variety. Long Tail economics have penetrated our marketplace, creating one global travel industry replete with millions of niche strategies positively responding to customer preferences.
The PhoCusWright Conference promises to be the ultimate convergence of the biggest ideas and visionary leaders in a turbo-charged environment. Over our 14-year history, untold thousands have witnessed that each one is a needle-moving event where the buzz is palpable.
On behalf of the entire PhoCusWright team, we cordially welcome you to an unprecedented four days where fresh ideas, incredible energy and serious business prevail. We know why you are here, over one thousand of you. Unrivaled insight, healthy debate, critical corroboration, peer talkback, audience grilling, credible forecasts, powerful thinking... and millions of dollars of deals.
So it’s the perfect time and place to “Brave The Long Tail” together.
Ladies and Gentlemen, let the show begin!
PhoCusWright provides global marketplace intelligence, offering an array of qualitative and quantitative research through subscription services, individual reports and sponsored assignments. Areas of emphasis include consumer travel planning behaviour as well as industry segmentation, sizing, forecasting, trends and analysis. Clients represent all facets of the industry value chain from around the world.
The company is headquartered in Connecticut, USA, with offices in New York, Duesseldorf and Mumbai.