Boston – Travel management professionals agree that to be effective, new airline distribution programs need to offer at least as much functionality as existing systems do. Based on expert commentary at last week’s Global Business Travel Association convention here, it would appear that a solution to be welcomed by all key parties is a ways off.
Dozens of speakers and attendees in several education sessions directly addressed changes to air travel distribution. Industry experts aren’t too worried about the ability to make a booking, although comparison shopping remains a huge question. Also concerning is what happens during the trip, and how the economics change.
Managing through disruptions is what “makes content fragmentation a challenge,” said Nick Vournakis, president of Carlson Wagonlit Travel’s U.S. Military and Government Markets. “We are in the line of fire to solve those problems. That is where investment in other technology will get better. We will not lose sight of the idea that after-sale service is paramount and needs to be seamless for the traveler.”
Travel Leaders Group SVP of airline relations Peter Vlitas and FINRA corporate travel services manager Carol McDowell seconded these concerns. World Travel Inc. president Dee Runyan mentioned questions about how to process voids and exchanges.
AA sales and distribution strategy vice president Cory Garner said that as AA rolls out NDC — buyer by buyer, and TMC by TMC— “our going-in assumption is all the capability and all the functionality that you have today and have been used to through a GDS has to be supported at a minimum. That has to be the foundation on which we build all the bells and whistles. There is an opportunity to not just preserve the post-servicing capability that exists commonly in systems today, but also take it leaps forward.”
Speakers reiterated support for AA’s approach relative to that of British Airways parent IAG and Lufthansa Group.
“Everyone needs to be in the same room; that’s how to make progress,” Garner explained. “No one is going to be able to design a generic system that applies to everybody, because everyone is not the same.”
Lufthansa senior director of U.S. sales Larry Ryan blamed the airline business but also GDS technology for the harsher stance his company took. “We are under pressure to continue to differentiate products and services,” he said. “To realize the fruits of those investments … we have to make content available to every channel. In the present display technology environment, we don’t have the transparency that we need in order to effectively market that investment.” Existing distribution channels would “ideally enable what we are looking for and everyone is happy.” As it is, he said, “we want freedom to look at other options to bring that content to the customer base.” The decision to surcharge the GDS channel, Ryan added, came from “an inability to move ahead with realizing the benefit to the customer of the investments we are making.”
He also said Lufthansa’s “vision” is to differentiate well beyond the ancillary services now in the market. For example, the airline is considering brewery tours for passengers on long layovers in Munich. “There is nothing in the display technology today that is going to enable us to market that product,” he said. “We are running into certain limitations and quite frankly we are the culprit because we are adding more services which add more complexity and challenge the display technology even more.”
Despite repetition of the narrative that GDSs are not keeping up with airline retailing ambitions, there was a strong appreciation for their role and belief that they’re integral to the evolution of distribution.
“The GDS players are the largest in the market and they are in the best position to take advantage of these changes,” said Bechtel Corp. manager of procurement Dave Weaver. “They have a huge lead on everyone else. Startups encourage competition in that space. There’s no strategy that is mutually exclusive. The GDSs are always part of the discussion. I don’t see them giving up that space.”
At Delta Air Lines, improvement in distribution “is not about direct connect or cost,” said Frank Hull, managing director of sales development. “It’s really about the revenue side. Our strategy is to lean into the GDS and have the ability to provide rich content so it flows into the GDSs as it does today. It is not about going around that or creating a disincentive.” For TMCs, Hull said, building out lots of direct connects “sounds like recreating what is there. We expect most corporations to continue down the TMC/GDS path. That’s the thing that is critical for Delta — making sure we get that part right.”
Oracle global travel director Rita Visser moderated one of the sessions. “As a corporate buyer,” she said, “I don’t look to my GDS to bring me what I need; I want it on the booking tool side.”
In response, Farelogix CEO Jim Davidson said, “If you can figure out how to decouple the corporate booking tools from the GDSs, I’d really love to have that conversation.”
Travelport global head of product and marketing Ian Heywood suggested the newest communications protocols aren’t up to the task.
“Speed of response is really important, for TMCs and arguably more so for OTAs,” Heywood said. “Where you have [Farelogix] providing that pipe as opposed to an ATPCo pipe — which we know is fast and really effective — it needs to be similar. Similar speeds, similar resistance, up time of 99.9 percent. An API has to do the same, and at the moment they don’t. It doesn’t mean they can’t in the future. [Farelogix] has to make sure the technology is as good as the technology today, and ideally even better.”
Farelogix provides direct-connect API technology to about 18 airlines, including AA.
Garner said AA last year processed 4 million tickets via NDC. To do so, it connected with 60 agencies in 30 countries. “We have grown to that size by working one agency at a time, identifying one issue at a time,” he said. “It takes a lot of help from [the Farelogix] team, from the agency’s team and, more and more these days, the GDS.”
Davidson agreed that GDSs will continue to have a role, but he said they “have to figure out how to do heavy-lifting aggregation; that’s not easy. They have pieces in place, and they will get more pieces in place. Agencies look to GDSs to deliver technology. That’s where this content will get delivered.”
Davidson said that if GDSs can replace old pipes with new ones in order to deliver “all this wonderful content and still keep [TMCs’] downline servicing in place,” everyone wins. That approach, he said, “should lessen the burden” on TMCs.
“Creating that shopping experience has to be clean,” Vournakis said. “We call it omni-channel. Our job is to make sure that content is not fragmented. We have to solve for that. Direct connect creates a bit of a challenge for us.” He also noted that branded fares are a challenge, too, because “those reservations fail in our automation processes. It is not an unsolvable problem. It is issue by issue, region by region.”
Vournakis said client needs — rich content, optimized travel costs, policy compliance, real-time info and upholding safety and security standards — “cannot be compromised. All those pieces are integral. There is no panacea solution that solves for all those today but they are all solvable and we are working to get there.”
That’s what Davidson wants to see happen. Addressing Visser (who identified CWT as Oracle’s TMC), he said, “If you said to Nick, ‘I want to get AA content through [the GDS]. You have six months, go figure it out,’ what are we gonna say? ‘No’? If you want just another IATA or GBTA working group, I am not going to come. But if you say this is what you need and if I don’t do it there will be consequences, I’ll show up.”
Runyan isn’t holding her breath. “It takes a lot of time to program to get all of this,” she said. “There have been dribs and drabs. If [NDC] truly was a standard and a GDS or other technology company could flip a switch, we’d already be there. While there is a lot of talk of NDC being a standard communication protocol, everyone is applying it a little differently so it’s a lot slower to market than any of us would have liked.”
Sabre vice president of North America sales Shelly Terry agreed: “We’re not seeing consistent utilization of the standards that are there. We do have some attribute-based shopping capabilities today. That will continue to improve and we’ll continue to enhance our APIs. So I think in the next 12 to 24 months you may see a marked improvement, but it’s likely to take longer than that before you see mass adoption and proliferation.”
“This concept is in its infancy,” said Vlitas. “Let it shake out. Wait a year.”
Delta’s Hull said the key for travel managers isn’t how content is delivered, but what is delivered, if it’s transparent and consistent, and if it creates a good traveler experience. He said fancy new ideas like proactive booking systems which scan calendars and suggest travel options are interesting, but some ways off. “The next year will be more about the basics,” Hull said. “Can we display Comfort Plus versus Premium Select?”
Lufthansa’s Ryan said that “the vast majority of corporations are sitting back and waiting for the whole thing to unfold. Initial cases for customers who do choose that [are] great for us; we wouldn’t be able to handle the masses anyway.”
Follow The Money
Meanwhile, speakers didn’t shy away from the often uncomfortable topic of distribution economics.
From the audience in one session, Kiewit Corporation director of global travel Cindy Novak said, “I see a lot of mouths to feed. Is this making our technology more affordable, our agencies more efficient, our travelers happier? How is that changing? So, I love the concept, but I don’t want to pay for it.”
Visser posed this question: “If we follow the money, what does it mean in the end, from the airline perspective? If you are getting information to people differently using Jim’s systems and Ian’s, does that drive down your prices and therefore prices you show to me?”
In response, Garner said AA’s NDC strategy essentially started 10 years ago as, “in part, a cost savings strategy. The cost savings we set out to achieve have largely been achieved so going forward, as we establish new relationships in the corporate community, we are taking the pool of money we have been paying GDSs this whole time and we’ll pay travel agencies.” Referring to the $2 per booking incentive AA is offering TMCs and tech providers that adopt its version of NDC, Garner said it adds up to $200 million a year.
“The agency will decide if the GDS is the best way to run the business or some other platform,” Garner continued. “We are injecting the same amount of money into the system as we did before. To the extent that the cost of technology comes down over time, I think it should be a net financial benefit to everyone in the chain.”
Davidson agreed, saying technology costs for memory, servers and such will go down. “That should find its way into the ecosystem once you have a competitive financial model,” he said. “We still don’t, in our view. The benefit should be there and I think will be there.”
Unpacking the idea of a competitive financial model means considering the wholesale model, wherein airlines pay TMCs, which in turn pay GDSs. (The predominant model today has airlines paying GDSs, which in turn pay TMCs). Asked about that, Davidson said, “I do think we’ll see more of it. I’m seeing more interest among some of the TMCs that have invested in technology.”
“The relationships that airlines have with all the [industry parties] create a lot of power and tension,” said GoldSpring Consulting partner Will Tate. “The airlines have certain preferred relationships with TMCs. So a TMC may have a preferred airline they would like to do more business with because it’s more lucrative, there’s more marketing money.” It’s no different, Tate said, from preferred relationships companies have with suppliers for laptops, office equipment and so on.
“In that model you have a TMC [incentivized] to go in that direction with that carrier,” he continued. “That’s terrific if that matches your goals, but if it doesn’t you have a little tension there. I’m not saying the TMC is violating your agreement, but there is tension there because they make more money here than over there. So that creates a bias that buyers have to work with.
“That’s just airlines and TMCs,” said Tate. “With GDS incentives, you add more complexity. Online bookings are [mostly] robotic. Why does it matter which GDS it goes through? So now you have a fulfillment tension that is saying, ‘Okay, TMC and GDS, let’s fulfill these electronic ones over here because I have a greater incentive.’ Terrific, but does the mid-office and back-office processing for your policy, your fare shopping all work the same in that channel as another? Maybe. It does create a lot of attention where buyers normally say, ‘You guys handle it. I’m focused over here on strategy.’ ”
Additional info: One session made public the complete list of travel managers serving on IATA’s NDC travel manager advisory groups. The North America group includes Claire Blades (Veritas), Anne Dery (Viacom), Rosanna Fiorin (Government Services Canada), Diane Lundeen-Smith (Microsoft), Shari Quackenbush (IBM), Rita Visser (Oracle) and Dave Weaver (Bechtel). The Europe, Middle East and Africa group includes Greg Acha (Stanley B&D), Claudia Adams (Allianz), Mark Cuschieri (UBS), Eija Kurtilla (Telia), Jens Liltorp (LEO Pharma), Claire Marsden (Atkins), Darragh Ormsby (Google), Irma Rinkel (Bluewater), Vera Strezyk (Chanel), Susan Savy (HPE), Pascal Struyve (Trane), Herman Vermeiran (Johnson and Johnson) and Mark Zuber (Nestlé).