The Company Dime‘s Jay Campbell on June 28 interviewed Flight Centre Travel Group’s president of the Americas, Charlene Leiss, on a live show via LinkedIn Audio. They surfaced some potential conventional wisdom about a variety of topics. An edited transcript follows.
So, Charlene, there’s a lot going on in the industry, but as often happens, change in airline distribution is at the top of everyone’s minds. We quoted you in a May article talking about some of the challenges with the NDC implementation from American Airlines. You made the case that they were pushing the program prematurely and said adoption was low, especially in the U.S. Is that still where we’re at?
Yes, it is. It’s not really so much about NDC and the new way of distributing content and being able to sell the product and bundles, like any other retailer would. We embrace NDC. We want a better experience for customers and travelers. It’s just about the way the various programs are rolled out. There are a lot of differences in the industry from one carrier to the next as to how they’re experimenting and rolling out programs. So we’re here to ensure we deliver the right customer experience when the product is ready. At the moment, there’s still not a ton of adoption of the AA NDC front. I’m sure that will change as that carrier continues to evolve and adapt to various lessons learned, but at the moment, we’re still not seeing a whole lot of customers who want to buy that product because of the customer experience, ability to change and ability to secure seats and all those things that are part of kind of the [minimum viable product] discussion. Most customers are still going GDS-first for the most part because of that servicing aspect.
So where do you see it going — do you expect an incremental evolution or some big bangs?
We’re seeing changes coming across the NDC capability with carriers almost daily, so it’s very fast-moving. We’re in a unique position because we have our own aggregator that we purchased several years ago, a Dubai company called TPConnects, so from a technical capability perspective, we can consume that content. It’s really about the customer wanting to consume that content with the experience at hand and making sure the commercials also work for the customer.
I was planning to ask about TPConnects [in which Flight Centre has a 70 percent stake]. It’s not the only company of its kind. There are a handful of aggregators out there, and it seems like any TMCs can use one of them if they want. Is that investment a competitive advantage, and is there a downside regarding the ongoing investment required?
We absolutely see it as a competitive advantage. Based on customer feedback, this was going to be a core capability we wanted to control. We see it as an advantage because we can aggregate all content without worrying about developing our own APIs on an ad-hoc basis or using third parties. We’re still a GDS-first environment because of everything we discussed regarding servicing.
Headcount is. We went through quite an evolution. We had challenges just like every other business. We’re a bit uniquely positioned because we run a leisure operation, wholesale businesses and several niche businesses, and we have an expansive global footprint. We can bring people in from travel schools and travel agent planning programs so we can move people throughout the business.
Have your service levels normalized?
Yes. If we’re talking about our company globally, there are pockets we’re still looking to enhance, but in general and especially in the Americas, our service levels are where they need to be.
Are Service Level Agreements back to being a standard practice, and how have they changed?
One hundred percent, they’re back. We’re expected to provide a high-level service component. We’re not let off the hook, nor should we be. Those SLAs and key performance indicators associated with them are back. The measurements have changed. It’s a lot about live chat now, as well, and making sure we have KPIs associated with chat and AI and the functions that enable us to be efficient. But the component of having an SLA in major contracts is alive and well.
There’s so much talk about using AI and tech to increase agent productivity. But we’re always watching out for undue hype. What’s your view of the potential there?
The potential is vast, no doubt. AI is certainly not new. You’re familiar with Sam, our chatbot in FCM [for large clients] and Corporate Traveler [for small and midsized companies]. We have had success with that. There’s more opportunity to handle more menial tasks and have customers self-service. Simple point-to-point bookings, questions about itineraries, copies of invoices, receipts, you name it. We’ll bring that into the business more and more to allow us to scale and allow our experienced consultants to handle high-touch, complex requirements. This week we’re announcing a couple of ChatGPT or generative AI features associated with our Shep platform, which we call FCM Extension.
FCM has its booking tool, and so does Corporate Traveler. Similar to the content aggregation platform question, this is sometimes a tough one for an organization like a TMC whose core business, you could argue, is more business process or service rather than technology. Is the WhereTo booking technology proving to be a differentiator?
Yes, it has been. This journey began many years before that when we as a leadership team decided we wanted [to] design and control our own online booking platform, particularly for Corporate Traveler, which focuses on startups and the midmarket. In FCM, we do provide choice. We partner with Concur, Cytric, Serko and many other world-class online booking companies, and we provide our global customers the option to use the tool that is best for them, but the ability to offer our own proprietary platform in FCM, and to focus on that for the CT business, is key because we wanted to control the customer experience and connect with other vendors in the travel sphere to provide that end-to-end service and ancillary support. Adoption has grown considerably in both businesses.
Is there any strategy for integrating with expense or having your own expense services?
We have those conversations a lot. We talk to clients, and partners like Concur, about opportunities to integrate and offer more — whether it’s white-label servicing or other types of programs that would benefit our customers. So it’s something we have looked at and will continue to look at. And we do have some other preferred supplier partnerships in payment and expense. That’s a growing part of the industry and one that will continue to evolve within Flight Centre.
A big piece of the value proposition for TMCs is data and supporting clients for several purposes, including duty of care. But we hear from customers a lot that they’re not satisfied with data, whether it’s the timeliness, accuracy, or cleanliness of it. What do you think is going on there?
This topic has been around this business for quite some time. Data is so critical and important to everything we do. It’s an industry issue and comes down to the global nature of servicing our customers. When globalization first came about, data was one of the major drawbacks. We want to document in an accurate and timely basis all the detail, not only where customers are if something happens, but also being able to negotiate, detail from a policy perspective and control that third-largest expense for any major company. So data has been a challenge for a long time. We have tried to improve the data experience. We’re offering our multinational customers a series of programs we launched over the past few years about delivering accurate, on-time data regardless of the point of sale. So we have made significant investments and seen major improvements in both pre-ticketing data, which is more risk management-related, and post-ticket auditing. It’s about being able to standardize that offering, and the struggle comes in because you want to offer that local service [accounting for] the nuances that the markets you’re operating in [have], and have experts on the ground and use local tools, but still get live, accurate data that is consolidated. So we have made many advancements in that, and a lot has to do with standardizing how we take that data in, but there’s still more work to be done for us and the industry.
The corporate travel agency commonly acts like the travel manager on the small or midmarket end. What do you see there, maybe in the midmarket: do more or fewer of them have an internal travel resource?
That goes to the persona question. We have so many customers in our client set, whether it’s the travel manager who runs the program, the finance or procurement team managing the spend, or the end user, the traveler. Travel arrangers, by the way, have come back in full force in the USA because of the time and resources it takes to manage your travel requirements. We have seen a lot more travel arrangers in the U.S. come back, whereas globally, that’s always been the case. From a travel manager perspective, we’re seeing a lot more outsourcing, even on the large client side. They’re starting to outsource to consultancies or the TMC. It’s not just about the program’s size. It’s also the complexity of the program and the core focus. There’s a lot of ebb and flow to the approach to travel management.
I was talking with someone from a tech provider responsible for relationships with so-called mega agencies and asked if Flight Centre was in that group. He said yes. FCM says it has a bit of a different philosophy on service configurations than others in that category. Could you tell us about that?
We’ve got some amazing competition out there. Hats off to them. Our approach has always been a bit different. Even though we’re a global entity, we really like to customize our program and don’t approach our customers with a res center mentality. It’s still a small team, in-market approach by and large. Our online adoption is massive, but for those offline bookings, the custom small-team approach has worked for us. This is just our lane at FCM.
That’s not cheap, right?
No question. We don’t claim to be the least expensive; we’re not looking to be the least expensive. We provide a custom, boutique set up for clients, and it’s not for everybody.
How TMCs make money is always interesting, and the basis for client fees was sort of a hot topic going back a couple of years. Was there any long-lasting change on that for you?
It’s about providing options. Our pricing models have changed a bit. We used to do management fee and P&L pricing for larger customers 15, 20 years ago. And we’re starting to see a bit more of that; we’re starting to see subscription fee services and software-as-a-service types of fee structures. We embrace all that because we embrace choice. But the transparency around our models — how we make money — has not changed — that’s important to customers of all sizes. So being really clear about how we make money from suppliers and customers is key to any program and relationship.
Supplier revenue is often under a microscope, but maybe even more recently. What’s the trend there?
The trend is all around that distribution conversation. Preferred supplier relationships continue to exist in a very strong way. Our model will always be to support those suppliers that support us where we have a mutually beneficial relationship for taking care of our customers. The customer experience is there, [including] the ability to get ahold of someone when you need to do that. So having that ability to count on service is key, but the preferred supplier relationships that provide a mutually beneficial commercial outcome to the supplier, the TMC and the end user are alive and well, and I don’t think that will change. Capacity constraints and coming out of Covid and understanding the unit economics in the market right now based on supply and demand are part of it, but that will evolve, as well, as we move out of that recovery period. The business is back, the way we see it.