The BackEnd explores the product development process in African tech. We take you into the mind of those who conceived, designed and built the product; highlighting product uniqueness, user behaviour assumptions and challenges during the product cycle.
It’s not true that business people and tourists will stop travelling due to the pandemic. So if your big idea is to start a travel agency, go rent that mall space or whatever strategic spot works for your city.
But come prepared because it is no mean feat.
Every airline has a website where a traveller can book flights for themselves. But the airlines are more than happy to let third-party agencies legitimately sell tickets for them. It increases each airline’s visibility and ability to compete in a famously low-margins market.
They have ridden the wave of global fiestas like the 2010 World Cup in South Africa, but suffered adversities like recessions and global public health scares.
Their typical response to adversity is to scale down manual processes requiring physical visits to a store, to fully technological chains of events unmediated by humans.
As a result of COVID-19, they are redesigning for a higher premium on seamless and safe experiences. More than ever, the customer is king.
“Wherever there is friction in getting from A point to B, [customers] are looking to remove that. And they are looking for a partner to help them do that,” Bukky Akomolafe, Nigeria country manager for Travelstart, told TechCabal.
How are they able to deliver on these expectations? First, let’s take a look at how online travel companies stepped into the landscape in Africa.
Following Microsoft’s lead
In the days before online travel agencies (OTAs) or even airline websites, air travellers would rely on travel agents to manually find them flights.
The process was shrouded in mystery as agents would offer tickets that will accrue the most commissions. If you didn’t like any one agent, it was up to you to find another but there was no guarantee of a different experience.
OTAs came into the commercial air travel market with this definition of the user’s problem; transparent price comparison and convenient booking.
Expedia, one of the world’s largest OTAs, was funded by and spun off Microsoft in the mid-1990s. The acceleration of the internet and search engine capabilities saw the rise of others, including Travelstart in 1999.
In Nigeria, Wakanow’s arrival in 2008 tracked the arrival of GSM services and slow development of internet infrastructure in the early 2000s. It’s no surprise that Wakanow, the first OTA in Nigeria, was founded about the same period when AirBnB came to the fore in the United States.
Like other e-commerce segments, African OTAs have had to come after the establishment of stable payments integration into internet platforms.
So it’s understandable that many travellers today continue to rely on individuals to get them flights. Tickets are typically costly and nobody wants to make a mistake they can’t fix by themselves.
However, OTAs are making a greater case for personalised user experiences, leveraging the growing appeal of smartphones to replace the need travellers have for freelancers to book them flights.
These online agencies are able to do this because of the advent of international travel APIs and a suite of computerised network platforms.
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A GDS is simply the bridge between travel and tourism service providers – airports, hotels, tourist sites – and travel agencies. They are the interoperability enablers of the air travel industry.
Without them, each OTA would have to plug into individual airlines with different APIs to get flight inventory. Imagine a Travelstart doing that for 5,000 airlines going to 11,000 destinations.
GDS platforms like Amadeus, SABRE and Travelpro make it easy for travel agencies to book and manage trips with connecting flights for users.
Imagine that for a trip from Lagos to Abu Dhabi, there are two stops at Addis Ababa by Ethiopia Airlines and Dubai by Qatar Airways.
The GDS holds all the information on the passenger’s identity for the whole trip, but each airline will hold the portion that is relevant to it.
To get as many flights as there are available at any given time, OTAs plug into various GDS systems. And yes, they also have people at airlines to clarify uncertainties.
OTAs typically need a license from the International Air Transport Association (IATA) to work directly with airlines and plug into GDS platforms.
An IATA license authorizes members to sell tickets on behalf of airlines and gives them access to the Billing and Settlement Plan (BSP), a globally recognized channel for agents and airlines to exchange invoices.
Are online travel agencies cheaper for users?
There are two models of OTAs: actual sellers and aggregators.
For example, Jumia travel – when it existed independent of Travelstart – was an aggregator. A search on Jumia travel revealed flight deals but from other travel agencies. Clicking one of them would take the user to that agency’s website to make a transaction.
That was more a marketplace model. But if you buy from Travelstart or Wakanow, the liability lies with them.
OTAs have an obvious price comparison value to users who would rather not engage offline ticket vendors. But are these platforms cheaper for the traveller than directly booking on an airline’s website?
This Business Insider pricing experiment from September 2019 faults the majority of South Africa-based OTAs (including Travelstart) of charging up to 32% more on flights compared to what airlines charge.
Some airlines are beginning to question the justification for allowing GDS platforms to offer their flights to users. For example, Lufthansa’s group of airlines have been pulled from the SABRE GDS because the airlines decided to add a surcharge for tickets sourced from GDS systems.
If GDS platforms cease to exist, the likes of Travelstart and Wakanow will be significantly hampered. Google and Amazon are coming for the industry’s cake, building on their own tons of data services to challenge Expedia and other global incumbents.
So how will Africa’s players stay relevant?
Wakanow is experimenting with using video to sell potential experiences to customers, in addition to other value offerings like Pay Small Small, an installment payments plan.
Travelstart is eager to expand its reach and solidify its recognition with users by sharing its technology with thousands of sub-agents. Despite their technological advantage over small time agents, OTAs know travellers are still loyal to agents they are familiar with.
To cover all bases, both companies still have physical shops. They realize customers need to know there’s a place where, if they choose, they could go and get their tickets, and see the online booking process for themselves.