Having recently acquired German market leader Traffics, Christian Sabbagh founder and chairman of French developer Orchestra says further acquisitions are likely to drive consolidation but a localised approach is still required to reflect market nuances in the holiday sector
Company Profile: Orchestra primed to conduct travel technology consolidation in Europe
Last month’s capture of Traffics by Orchestra parent Travelsoft won’t be the end of consolidation in the European travel technology sector, according to the French firm.
Traffics, the leading independent Software-as-a-Service (SaaS) provider in Germany, gives France’s Travelsoft a significant foothold in the neighbouring country.
Christian Sabbagh, founder and chairman of Orchestra, said he expects to see further consolidation in Europe with acquisition being the most likely driver.
He said due to the fragmented nature of the European market there remains a need for localised technology supported by a central core offering more generic solutions.
“We believe there is a need for consolidation in Europe,” Sabbagh said. “We have a very local travel technology industry.
“The travel industry is, of course, worldwide but in the leisure sector, for operators, agencies and distributors travel technology is very local.
“There are some historical reasons for that because the way people book is different. Systems have been built locally and consolidation will not change that.”
Sabbagh said this characteristic of the European holiday market is what makes it challenging for large global OTA groups like Expedia and booking.com to dominate.
“For leisure packages I don’t think local differences are diminishing, even with modern technology like cloud.
“It is for single component flights, hotel, or car rental, but when you’re talking about packages and holidays, I don’t think so.
“Even the big players are not going into that area. They are only playing in the worldwide field of air and hotel, which is obviously huge.
“When booking.com wants to do packages they use lastmimite.com technology because it’s local and very European, plus the fact that volumes are lower.
“In smaller markets with a high level of complexity you don’t usually see the big companies.
“They prefer taking share in global single component markets and that’s a good strategy for them. But you still have this leisure holiday market that’s small for them but big for us.”
The two areas Orchestra focused development resources on during COVID - NDC connectivity and integrating tours and activities suppliers - require globalised solutions.
But Sabbagh said so much in travel technology is specific to particular markets that it is impossible grow organically in other markets with a single system.
“It will not be easy to consolidate without acquisition. If you want a proposition for a big market like the UK without an acquisition, it’s really tough.
“There’s an ecosystem, 20 years of technology, of connectivity, of specific processes between operators and agencies and relations with airlines.
“You can’t rebuild that, and you can’t rebuild the confidence in the ecosystem. If you acquire you have to stay focussed on that market, not have one global platform.”
Sabbagh said the pandemic has left most travel companies more reliant on their technology partners after they were forced to cut down the size of in-house teams.
This has seen Orchestra recover well from COVID with revenues this year expected to exceed 2019 and 10% growth forecast.
“We are stronger than two years ago because we have a lot of new features, a lot of new things to bring to the market.
“And we have a more mature market because everybody saw that the need for technology was huge. Even higher than before COVID.
“Travel is very demanding, now more than before, and you have firms with fewer people because there is a staffing crisis worldwide, in software as well as in our sector.
“The situation now is that there is a huge need for technology and yet smaller and smaller teams within tour operators to develop those systems.
“That’s why firms like us in Europe will be even stronger than before, if they managed the last two years well.”
Sabbagh added: “Doing tech in-house is becoming more and more complex. Your technology needs to perform at very high levels, if not you have problems.
“You hear people talking about having tech that’s very automated, but at the end of the day technology is human.
“If you don’t have the team, if the team is leaving, then you have a big problem. Even if you are able to pay more to bring in more resource it’s very tough.
“You need to connect to a lot of supply and that’s part of our knowhow. We have more than 300 connections, so it’s part of our core competence.
“Today, we have 20 different payment gateways, 10 years ago we’d have had just two or three, so it’s becoming increasingly complex.
“If we bring on a new client they immediately get access to those 20 payments integrations. To do that in-house is very tough.”
“The most important thing for us was to keep the people who know how to integrate those providers into Orchestra.
“Young IT people want to work for a tech company where you think about tech all day and that’s your business. In the travel industry it’s less easy to do that.”
Sabbagh predicted a revolution is on the way as Iata’s New Distribution Capability standard starts to really gain traction this year and next.
Orchestra retained all of its developer resource during the pandemic and directed it on integrating more airlines into its NDC direct connect platform.
“We have seen a huge acceleration on that,” said Sabbagh. “Today we have almost 20 airlines for which we can use Orchestra to manage direct connect bookings.
“NDC adoption is starting. Initially developments were very much adapted to the needs of OTAs, to very simple processes.
“But when you work with tour operators you have very specific issues. You have particular fares and need a way of having a lot of flights within the cache.
“You need also to have a very strong back office. If you’re an OTA you have huge volumes so ca have three people in the back office for each airline.
“But if you are a medium sized tour operator you only have once single back office. You can’t dedicate teams on specific airlines so you need one unique back office.
“That’s why the adoption has not been very quick. We are only four months into the restart and you need to see an evolution of processes internally.
“This year will be an important year to switch into this new world, which is really new for everyone.
“We are coming from the old GDS world to something which is more of a marketplace world connecting a lot of sources. This is a revolution of our industry.
“Airlines are really pushing for that because there has been a change in economics of the business and they can’t continue paying ten, eleven or twelve pounds or euros per leg.”
A second area of focus has been on activities and bringing in content from an extremely fragmented but extensive sector of the travel industry.
Orchestra has a strong presence in the ski sector through direct partnership with popular Alpine resorts and has integrated leading providers like Viator.
Sabbagh said agents and operators need the ability to add-on activities to packages to differentiate themselves but that low margins means the process must be automated.
“For activities you need connectivity and a marketplace because the margin you will get is very low compared to a full package.
“If you can do that in an automated way you can drive revenues and relationships with your customer.
“Then maybe you can think about selling activities not only related to a trip but also to the customers’ life at home, what they want to do during weekends.
“That could help agencies keep contact during the year, not only once a year or once every two years.”
Orchestra sees its role as providing a proven tech platform capable of delivering for clients based on their requirements but that can adapt to support their evolution.
Sabbagh said: “If we didn’t have the platform it would be impossible to deliver a solution, but we have to adapt.
“Our strength is the platform, and then we think about the needs of our clients and how to implement it. It’s like a service company but having software.
“More than development, its change management with our clients and understanding what we need to do to be very close to their processes because operators have specific needs.
“How we can help them to change without losing productivity, maybe gaining productivity, but the main focus is on how not to lose productivity.”