Notes from travel's chief innovator

By Arnie Weissmann
Arnie WeissmannTravel distribution has had its share of visionaries, but there's one person who arguably has had the greatest impact on reshaping the way travel is bought today. And at the PhoCusWright Travel Innovation Summit last month, he walked mostly unnoticed amid young entrepreneurs promoting their apps, software, features and websites.

Terry Jones, who defined the online travel agency (OTA) when he founded Travelocity as an intrapreneur at Sabre in the mid-1990s, and who brought meta-search to the industry as the founding chairman of Kayak, sent me an email a few weeks before the summit to say he had just published a book titled "On Innovation" (Essential Ideas Inc., 2012: available on Amazon.com). We sat down at the summit to catch up on that and other topics.

Jones was in an ebullient mood. Priceline had acquired Kayak just days earlier, not quite four months after Kayak's initial public offering. He wasn't authorized to make on-the-record comments about the acquisition, but he spoke eloquently about how his business philosophy was shaped by his experiences as a frontline agent at Vega Travel in Chicago, as a manager at an Intourist agency, as an executive at technology companies (including Sabre and Travelocity) and as a director and chairman of startup companies, including Kayak.

Jones has concluded that many potentially great innovations never make it to market because they get lost in management processes that stifle creative developments. In his book, Jones says the right corporate culture and the right team are crucial to nurturing ideas and enabling them to grow into products. Most companies are so risk-averse that innovative ideas die young.

In the course of our conversation, Jones reflected on why Travelocity was able to launch successfully within a very large company (Sabre) and why it might have subsequently lost its footing. Travelocity was the leading OTA while Jones was CEO; it has now fallen significantly behind industry leaders Expedia and Priceline.

"Travelocity succeeded, in part, because we knew it had to be separate from Sabre in many regards," he told me. "We had a separate building. We created a separate team. We had a very high level of funding, so no one could steal our money. Sabre provided air cover that enabled it to grow, and air cover is important."

But air cover was withdrawn at a crucial point, Jones believes. Travelocity had become a public company, owned 70% by Sabre, and Sabre decided to buy back the other 30% and take it private.

The way management contracts were written, however, in order for Travelocity's executives to get paid for their stock options, they would have to leave the company. Jones argued that Sabre should work on a way to get around that clause, but to no avail. As a result, almost the entire management team quit, and as Jones understates in his book, the company "hit a speed bump."

Having played in the traditional agency, OTA and metasearch spaces, what does he think is next for travel?

"Mobile's going to change everything," he said. "A [smartphone] interface is better than the Web, and a tablet is better than that. I don't think anyone has yet cracked the social media code in travel, but I'm too old to know. I hope someone does."

There's an anomaly in the travel industry that also spells opportunity, Jones believes.

"Every industry is multichannel except travel," he said. "Look at Amex and Carlson -- they were the big dogs, but they ceded $50 billion in gross bookings to OTAs because they didn't go online. On the other hand, there are still 14,000 agencies out there. It's a huge percentage of the business, and research indicates that as baby boomers get older, they won't want to spend their time online. But no one's really built out the online-offline store model, and that may be the next great place."

Interestingly, Jones, the godfather of online travel, is himself a multichannel purchaser. His daughter is a travel agent, and he uses her to book "complicated" travel, while buying point-to-point air online. Did he ever think of going multichannel in any of his businesses?

He did, he said, and the reason that he didn't do it demonstrates that sometimes forces working against innovation can be external rather than internal.

"We talked at Travelocity about opening stores," he said. "But we knew that if we said that to Wall Street, our stock would crash."

Email Arnie Weissmann at aweissmann@travelweekly.com and follow him on Twitter. 
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