In our newest episode, we talked to Chritian Warneck – VP of Amadeus, the platform to connect the travel ecosystem about the challenges of market entry and intermediation when it comes to building a platform for the travel business.
Additionally, we learned a lot about the role of data and AI for todays and the future industry and why it is extremely important to keep innovating as a platform leader.
Amadeus is a platform acting as the heart of the travel ecosystem by connecting all players in the travel industry. This includes both travel suppliers like airlines, tour operators and hotels as well as travel sellers and buyers such as corporations and travel management companies.
As one of the top ten travel technology companies in the world Amadeus additionally offers IT solutions for airlines, an extensive hospitality portfolio aimed at the hotel industry and technology solutions for airports.
It was co-created in 1987 by four airlines companies: Air France, Lufthansa, Iberia and Scandinavian Airlines (SAS). Those four companies had a vision for an European and independent global distribution system which could counterweight the US airlines reservation system. Today, Amadeus engages around 18.000 employees from all over the world in more than 190 countries.
In the 1990s, when the internet developed massively, the travel market grew significantly. Many airlines were created and offered new routes, and technological platforms with powerful search tools became essential for finding and comparing travel offers.
Christian Warneck, VP & Head of Airlines Solutions Central & Eastern Europe at Amadeus, explains Amadeus had to face 3 main challenges to adapt to this market revolution: horizontal expansion complexity, a high barrier to entry and intermediation.
First, you need to consider the two sides of a platform business model with airlines and TAs setting very different requirements at the same time: airlines care about flight tickets sales, while travel agencies aim to offer a full journey package, including accommodation, transportation, insurance, etc. The latter has resulted in the challenge for Amadeus to expand horizontally.
Furthermore, the airline business comes from a long way: from paper tickets to a fully digitalized world with a complex setup which places the market entry barrier for new entrants very high.
And thirdly, Amadeus also needed to deal with very different levels of standardization in the travel ecosystem: this makes intermediation very complex as well.
Platforms create data
Christian mentions an interesting phenomenon: “platforms create data which wouldn’t exist if you did not have a platform.” Indeed, the data flowing through the Amadeus system enables them to create new data to improve efficiencies and create value for both sides of the market.
Continuing with the airline example, Amadeus can see where the demand is, regardless of which airlines are being searched, whereas airlines only see the demand for their own routes on their own website. However, they could benefit from the data registered by Amadeus to see, for instance, where they could open up new routes and better compete.
This is where data really brings value to both parties: the “travel researchers” and the providers.
Christian explains there are 3 layers of data, and therefore 3 layers of monetization in the Amadeus platform, which lead to different benefits for both platform stakeholders:
- Data aggregation that can be sold without disclosing competitor’s details and while totally respecting GDPR principles. For example, an airline could sell a set of data to understand where it stands in relation to the competition. All the personal data belongs to our customers, and they have the master and control of it. But the aggregation, the kind of meta layer is creating enormous value in addition, and that cannot be done by themselves. So, this is data which we monetize and share for the advantage of our customers too.
- Building features on this data that could not be built without it. Revenue management is certainly an obvious example where you see the demand and then you can adapt your pricing based on that. A good example given by Christian is the hotel revenue management: a hotel can decide to sell rooms at a cheap price to be the first one being fully booked. On the other hand, the hotel next around the corner could decide to have rooms slightly more expensive, because thanks to the data, they know that the demand for this destination and this season is high; so they will simply wait, sell later, but with better margins.
- Building a customised big data lake by combining data from the platform and the company’s own data. For example combining the data from Amadeus’ IT systems like the passenger boarding, the load factors of the plane… with data the company gets through their own direct channel like their internet website. Based on this data pool, Amadeus and the company can have events and trigger actions.
The role of AI for Amadeus in the future
When asked about future trends, Christian says “the combination of AI and data”. He illustrates his point with the topic of COVID and biometric boarding, where facial recognition would be used to give permission to board, potentially checking your vaccination certificate at the same.
To illustrate this further, Christian highlighted 3:
- Amadeus created a revenue management system with a reinforcement learning to find the right price for the highest revenue.
- The company has booking records in its systems, and those booking records might be misused: there are often cases where people are flying and once on the plane, attempt to change or cancel the booking: AI can find those extremists inside the overall bookings.
- Similarly on the payment system, which Amadeus has integrated for its customers: artificial intelligence is observing the payment flows and finding irregularities in order to signal a potential fraud.
One last leadership advice
A last piece of advice about platforms to other leaders: innovation.
“Especially when things change from the outside, like this pandemic which completely changed the travel sector, you need to innovate even more and even faster. Only by doing so you will stay ahead of the competition.”Christian Warneck, VP & Head of Airlines Solutions Central & Eastern Europe at Amadeus
Thank you Christian for the great conversation and insights.
The complete episode can be listed at your favorite podcast provider.