The comparison of new connectivity methods for airline distribution to home entertainment has been around for some time. Airline distribution consultant Cory Garner described it in the opening minutes of this podcast published in May by Travel Weekly. After Mike Fitzgerald from United Airlines used it this month to illustrate NDC at the start of a GBTA-New Jersey webinar, speakers from Sabre and SAP Concur said it was good but imperfect. The mention also prompted the following column from Chris Kroeger, a lecturer on brand and product management in the McCombs Masters of Science in Marketing program at the University of Texas in Austin — and a former Sabre exec who keeps an eye on the industry despite leaving it in 2015.
As a recovering user of analogies and metaphors, I found the comparison between streaming services and cable in The Company Dime‘s Nov. 28 “Notebook: Catch Up On Airline Distribution” to be very interesting and thought-provoking. To complete the metaphor, I think two important elements should be added to the discussion based on my own consumer experiences.
First, I now have 10+ streaming services stitched together to replicate what I had before, and it takes my wife and me 10 minutes every night to remember where our shows are or where to search for and compare new shows. Adding other categories of content (like live TV) or services (like cross-platform search and recording) only drives additional layers of complexity and inefficiencies.
Bottom line: Disaggregation is not consumer-friendly, nor is it efficient.
Second, over the past year, each of my streaming services has raised its prices … on top of earlier price increases. Their introductory pricing to entice me to “cut the cable” was not enough to cover their costs, and they hemorrhaged money. The continued increasing costs of their own content production and insourced tech processing are only going to lead to additional price increases.
Bottom line: Introductory pricing that knowingly turns into significant price increases is not consumer-friendly, nor is it transparent.
I know there were challenges with cable, just as I know there were challenges with the traditional travel marketplace. And I also know there has been some really good value created by the streaming model, just as I know there are fundamental value elements in the current travel marketplace.
My point — and my aspiration as purely a traveler now — is that whether it is streaming entertainment or buying travel, let’s strive for three things in the future travel marketplace:
1. Strengthen aggregation efficiencies, speed and personalized comparison shopping. If remarkable retailing is truly the goal, then be like Amazon — virtually unlimited product breadth and depth, personalized, efficient and fast, all at the same time.
2. Don’t make promises that knowingly won’t be kept. Permanent lower airfares were never part of an airline’s internal NDC/go-direct business case (to the applause of airline shareholders), so find an honest carrot to motivate the ecosystem.
3. Start creating true value-add services and experiences for the traveler. Simply rebundling previously bundled-then-unbundled features is very boring retailing.
There is a wonderful line in the current movie “The Holdovers” where one character says to another, “You don’t really dream a full dream, do you?” The travel ecosystem needs to dream a full dream and meet the needs of all of its constituents — most importantly, the travelers they collectively serve.
And lastly, I highly recommend watching “The Holdovers” this holiday season. I just hope you can easily find it when it hits the streaming services.
This Op Ed was created in collaboration with The Company Dime‘s Editorial Board of travel managers.
I was talking about this exact thing just minutes ago. We all need to remember that none of this is for the benefit of the customer — whether streaming or airfare. It’s about corporate profits. I love technology. I work for a tech company. I’m not anti-change. But where is the value? I’m going to save $10 on my flight to Medford one time, then what?
I still have full cable and six streaming services. Somebody is winning here, and I don’t think it’s me.
It’s great that Chris has built on the entertainment analogy, and worth exploring further. It reminds me a little of the comparison two weeks ago at GBTA Europe to the music industry and some of my own research I’ve done on digital cinema comparatives. It’s useful to view our changes through the lens of other sectors, especially those we all consume.
So, let’s add another build. Recently Amazon has started to become a mega aggregator of TV streaming itself, offering Paramount subscription, Britbox and others … all subscribed through and paid through Amazon Prime. Isn’t that an interesting move? And let’s apply that concept to travel. What if an existing GDS or tech-oriented TMC (already in our “homes”) starts signing deals with a number of other specialist aggregators to bring us all the amazing content we need, and building price options in to their buyer servicing? #MakeItEasy — what might that look like?
In addition, when it comes to “introductory pricing,” it is just that — low pricing to entice the user to test out the service/channel. It’s a widely used concept in most, if not all, sectors. And we all make our choices to continue to subscribe or cancel and decide not to access the content. In the case of travel, it looks like it’s to drive channel behavioural change so that the airlines have greater autonomy ultimately on where they get to distribute through in the future.
But the analogy falters here a little, as not to get access to “Succession” isn’t quite the same as not getting access to one of two airlines on a specific route. The implications for that are far more costly.
Thanks for bringing us this thinking Company Dime. We should continue to look outside ourselves and test the “What if…?”
I think the introductory pricing concept is a bit more nuanced that you’re letting on. In a traditional setting, it is to entice users to try a new product, knowing that it will later/normally be available at the standard price, but the customer will then know if they like the product.
But in the case of NDC, the product is the same. The discounted price is essentially an inducement to use that channel, but is not specifically an endorsement of the channel – it’s an endorsement of customers wanting savings. Perhaps you see the channel as the product. If so, do you think customers will choose it once the introductory prices are no longer available?
The point is, using pricing to win market share when the product is not differentiated is not a sustainable model UNLESS – and this is important – it can be used to eliminate the competition (traditional filed/GDS-constructed fares). And once that occurs, the motivation for the supplier to continue the lower prices is removed, prices will rise and consumers will be no better off.
I take a different viewpoint. When I think of the benefit of streaming (NDC/direct) vs. cable (GDS/TMC), I think of personalization which is time saved, and in my business, time saved is money saved! When I log onto Disney+, Paramount or MAX, I’m given suggestions based on my history. They know me and they don’t suggest things that aren’t palatable (no thank you to horror!). Do I have to make choices about what streaming I sign-up for? Yes. I don’t have Hulu or Netflix. Is that ok? Yes. I don’t need/want all the options.
To put this in travel terms, the benefit I receive by partnering with my suppliers to remove the middleman nonsense (no one in my company is flying Frontier, Spirit, etc.) we all benefit from. Do I have to make sacrifices? Yes; I don’t get the traditional comparison shopping. However, let me tell you, there’s so much choice and the airlines are all generally the same that the value-prop of comparison shopping through the traditional corporate model isn’t as strong as it once was.
However, when I comparison shop between direct and traditional, I find anywhere between a $10 and $2,000 difference. Yes, $2,000 for an international ticket. This is real money and we do our companies a disservice if we don’t find new ways (like through Traverse or Traxo) to bring these fares into our ecosystem. I don’t want to invest money in a broken, antiquated system. I want to build a new path which prioritizes the traveler, the partner and the travel manager.
A few thoughts in response to the comments above….
Nicole, you are spot on. In the end, it should be all about the consumer/traveler winning. As I reflect back on my B2B career, I think we all could have put the end-traveler more at the center of our thinking (B2B2C). I certainly emphasize that in my teaching these days – start with the end customer and work your way backwards through the various marketing channels to help brands and their channel partners exceed their joint customers’ expectations.
Paul, so good to hear from you and as always, I appreciate your thought-leadership. I understand the traditional definition of “introductory pricing” and its role in marketing (the psychology of scarcity/urgency is powerful in converting shoppers to buyers). I don’t think that’s what we are experiencing in this scenario. Some airlines (and their proxies) are saying (or certainly implying) that airfares are going to be lower with NDC/Direct forever. Not only are the current discounts well above any avoided costs, striving for permanent lower fares just doesn’t make shareholder sense. Adding value for which travelers are wiling to pay higher airfares does make sense.
And Suzanne, thanks for your comments. As I mentioned, I too believe there is real value in many aspects of the streaming model, especially in personalization and unique offerings/experiences. It’s been almost 15 years since remarkable retailing promises first started and the next value-add, personalized offer I get from my home airline will be my first. If each airline, as you say, has essentially the same value prop, then comparison shopping on price becomes even more important. Better yet, let’s be able to comparison shop on all points of differentiation, not just price. And as a side, if you can get your partner airline to guarantee that you are going to get $2,000 lower international airfares forever, sign that contract tomorrow!
Bottom line – travelers deserve the value-add services and personalized experiences that were originally promised, along with expanding the benefits that make any marketplace great (comparing options on all attributes, ease of use, and efficiency). The future travel marketplace should bring together all of those value points. Then, the traveler will win and so will the brands who serve them!