City Insider - FT journalist David Stevenson on the travel industry

Is the travel industry going the way of publishing – unwillingly turned into a digital product which is under the effective control of a single dominant player, such as Amazon or Google?

Until fairly recently I’d have laughed out loud at this kind of techno babble suggestion. Travel is quite clearly different from publishing and I’d be a wealthy man, worth many millions, if I’d pocketed £1 from every person who said Google is coming after travel.

Truth be told Google hasn’t actually done very much in travel to date and to compare its baby steps with Amazon’s omnipotent control of the publishing sector has until now been frankly risible.

Yet over the last few weeks I’ve started to change my mind.

Big changes are afoot in the world of digital travel and we may eventually end up in a marketplace where Google has indeed built a dangerously powerful position.

My damascene conversion to the threat from Google has been prompted by a number of encounters and observations over the summer months.

The first epiphany came via a friend in publishing who at a senior level is trying to fight off Amazon’s predatory pricing regime.

He observed – with a deep sigh – that all business battles are in essence a fight between brands and channels, mediated by the customer’s experience of both researching and then consuming a product.

In the good old days before the internet we physically shopped for product and welcomed the choice and variety on the high street.

In the new digital age, the reality is very different. We welcome lots of brands producing varying products but we actually only want a few channels to market.

No-one really takes pleasure in shopping in the digital ‘mall’, unlike real world malls where there are coffee shops and fun places to visit and spend.

So the internet has the effect of drastically reducing the avenues of distribution. Book publishers thought the internet would be revolutionary and promising. What they’ve discovered is that everyone bar Amazon has failed to make a profit (and even Amazon struggles).

In simple language, the internet eventually consumes its channels and produces one or two omnipotent distributors.

Amazon is quite clearly that channel in books. What makes us think Google could eventually assume that role in travel?

Cue my next conversation, with a major West Coast venture capitalist who is also a good friend and, sadly for my first acquaintance, a happy investor in Amazon.

This VC’s view is simple – Google wants to rip apart the existing model of digital travel (populated by all manner of online travel agents) and create a new architecture with it and TripAdvisor at the top of the ecosystem.

Once Google realises its vision is slowly becoming a reality it will simply buy TripAdvisor – “I give it three years before it decides to spend a tonne of money on buying Trip”.

But why on earth would Google want to own the world’s dominant review site? One word should suffice: search.

This elusive term – which means so many different things to different people – is being revolutionised by mobile which is in turn opening up a land grab.

Google is determined to own this mobile opportunity lock, stock and barrel as part of a strategy to own multiple channels to personalised data.

The company’s intuition is based on something I’ve been aware of for years: for the consumer, travel is disjointed and profoundly annoying.

Every day I look at my inbox and see multiple emails from the likes of Tripit asking me to organise my trips, telling me about yet another private members only sale, Groupon shouting about some amazing local offer and TripAdvisor educating me about some of my favourite places.

It’s confusing and disjointed and for the most part these emails end up deleted.

But what if Google could control these flows of offers and personalise them to my interests, rather like Google Alerts keep journalists posted of all their news about a favourite subject?

At a minimum I’d let the message into my inbox and may even be tempted to buy off its list.

This aggregation of research and search requires three essential components from a supplier:

a) To inform me of the latest offers relevant to me;
b) To tell me about products I trust, in places I like, supplied by people I’ve used before or are recommended by friends;
c) And last, but by no means least, some of us may be interested in a social conversation about the product to help shape friends’ views (though why anyone would want to do that is beyond me). This may involve not only views but also content and video.

It’s against this backdrop that a bunch of papers by US advisory firm Evercore stand out. Penned by Ken Seda and his colleagues, these map out what Google may be up to in the world of digital travel and search – and why OTAs, in particular, have a great deal to fear.

The most recent report is from September and entitled Google’s Travel Plans in a Post-Atomic Era, but you should also make a point of reading the earlier Google’s Summer Online Travel Plans from March.

Seda and colleagues think Google has essentially decided to cross the Rubicon and take on its big customers like Priceline and Expedia.

These huge OTAs have been reliable customers for the search giant, but history teaches us that eventually Google decides it can do the job better.

Tomorrow, I’ll outline how Google intends to develop.