In this episode, we chat about key takeaways from the 2019 IATA Retail Symposium, held in Bangkok, including how the industry is progressing and the path to airline retail. It’s an exciting time of transformation in the industry, and it’s clear that airline retailing and NDC distribution are no longer just a buzzword.
At the conference, Henry Harteveldt of Atmosphere Research described how consumers are expecting a more intuitive and satisfactory experience when it comes to airline retail technology. Since they are now able to bank, shop, order food, track exercise, and more on their phones, they want their airline shopping experience to be just as seamless as any other transaction. If an airline is unable to meet the consumer needs, they will go shop somewhere else.
In This Episode
[1:15]: Why is there so much pressure for airlines to change the way they retail?
[4:20]: Change is needed, but how to change is still up in the air
[6:50]: Continuous Pricing is the key and it’s no longer just talk
[8:50]: Key Takeaways from IATA Conference
Aditi Mehta: Hello and welcome to the PROS travel podcast, the view from 30,000 feet. I'm your host of Aditi Mehta and today my colleague Stanislava and I will be sharing some key takeaways from IATA's retail symposium that took place in Bangkok last week. In case you didn't get to attend, you'll get to hear some of the key takeaways about how the industry is progressing and the path to airlines retail. So before we start, Stanislava, what was your main impression from IATA's second retailing conference compared to the one you went to last year? I didn't get to go to that one, but would you have some feedback as to if things have changed in our airlines and travel companies moving in the right direction?...
Stanislava: So yeah, this year the event proved that the industry is no longer just talking about retail. There is clear evidence from IATA and all the other travel players that everyone is not rethinking the entire ecosystem but also building both the new foundations and the tools to accelerate. So the answer is yes, things are changing.
Aditi Mehta: It's really interesting. I think it's an exciting time to see how the airline industry is transforming. And what we did for this episode is really summarized some of our key takeaways and favorite moments of the conference. So first I want to start with this whole concept of retailing like you mentioned, and it's very clear that from the sessions that we attended, airline retailing is just no longer a buzzword. It's clear that the way airlines sell their products and services, it's incredibly complicated. And because of it, they've fallen behind other industries like banking and big box retailers. They're having difficulty being able to do basic things like differentiate their products according to Henry Harteveldt from Atmosphere Research who did the opening presentation.
Aditi Mehta: Consumers are now being trained to expect better. They want airline shopping to be as good as shopping for any other product or service online. And he, and this man named Jonathan Keane from Accenture, he is the president of air travel industry analyst at Accenture. They talked about this whole concept of liquid expectations that expectations from one industry bleed into another. So, for example, you may love the way you can bank on your phone now and expect all financial transactions, whether it be with an airline or a car dealership to be similar. You want that seamless experience that you're getting in one industry to be in other industries as well.
Stanislava Yordanova: Yeah. And you know, retailing isn't just something trendy. It's something airlines are going to have to do in order to meet the needs of the changing passenger or he'll just go shop elsewhere. Something Henry pointed out from his retail experience outside the airline space is the definition for effective retailing that I'd like to quote. So according to him, a good retailer carries the products that fit its brand, that customer want, makes it easy for customers to pay and a profitable products to sell. So that's really important. Airlines are entering the era of complete retail and that requires them to be nimble and agile in the way they collaborate. So in the way they use technology and even how they bring products to market. I think airlines need to make by chopping a far more intuitive and satisfactory process. And really it has to be value focused.
Stanislava Yordanova: You know there's so many nuggets of information from Henry's research that makes retailing for airlines so compelling, but at the same time also necessary. He mentioned that today only around 20% of passengers are brand loyal and at the same time I think we hear that around 70% of passengers are actually willing to share data with an airline if that means that they're going to get greater personalization of the services and products they're buying, and at the same time if that means improving safety and best tremendous. Passengers want a better experience and they're willing to provide that data and even pay for it.
Aditi Mehta:: Yeah, that was really interesting. I felt like you said all the statistics in Henry's presentation and some of the conversations that he had with Accenture on stage were just so compelling and interesting. There's definitely a wave of excitement as well as a really compelling story around retailing.
Aditi Mehta: And I think that brings us to another key point when listening to the sessions and talking with industry experts, it was clear that airlines recognize the need to change, but the approaches across airlines vary. It was clear that airlines in the room, IATA and all the IT providers all recognize that there was a fundamental shift in the industry and that we all need to strive for some really big changes. The approaches may be different depending on the airline's own business considerations. Things like NDC, continuous pricing, off routes optimization are all in play. But depending on the airline and where they are and... It's all still up in the air, depending on whether you're a leaderboard airline or a follower, you have a different strategy.
Stanislava Yordanova: Yeah, and it's actually really interesting to hear the viewpoints of different carriers. I remember for example, Patricia Hwang, who is the general manager of sales and distribution of Cathay Pacific, she told about how their airline is looking up concepts like product differentiation and customer experience. So for Cathay, their strategy is really to improve how they display their product to passengers. So there is transparency and customers know what they're buying and can actually make an informed choice when shopping. They said that for them, the key is really the customer. Just making sure that product differentiation and distribution strategies align all to serve the customer better.
Stanislava Yordanova: And it's also interesting that the protest personalization across the industry also vary. So for data customer who leads RM in distribution at Etihad Airways. He mentioned that personalization really depends on things like the business model of the airline for example and who is asking for an offer. So not all requests coming from the market need a personalized offer. Historic data actually can enable going deeper and personalization and segmenting better groups of passengers. So airlines can categorize them based on the purpose of the trip. And I just think overall it was great to see the progress that different airlines are making around concepts related to retailing in NDC. Whether it's creating the perfect offer or dramatically improving distribution models.
Aditi Mehta: Yeah, great. It was really fascinating to see all of these real stories from airlines that are actually implementing some of these concepts that we were only talking about a few years ago at these types of conferences. So this brings another interesting topic of discussion, which is continuous pricing. And we heard a lot about it at this conference and it's something really near and dear to the hearts of people across.
Aditi Mehta: So continuous pricing is the key step in airline retailing. Its significant part of the discussion was dedicated to dynamic pricing and dynamic offers. It's clear that an airline needs to work towards dynamic pricing and dynamic offer creation to be true retailers. You may ask, what's the connection between dynamic pricing and retailing? And I think there was some interesting conversation around that. Airlines had to have relevant offers that encompass the seats and ancillaries and it has to be offered to the customer the right way. The only way to do that is to break away from rigid pricing and be more flexible. And I thought Patricia Hwang, who we mentioned earlier, gave a good explanation of why continuous pricing is so important. She mentioned a dynamic offer would really remove the customer pain points and enable airlines engage better if they were just making relevant and make more sense to customers.
Aditi Mehta: And we saw past customers like Lufthansa describe the work that they're doing to adopt continuous pricing and adapt RM and distribution. For example, Christian Popp, the head of distribution and revenue management talked about what a perfect price looks like and that once it's created, there's still some ways to go. He mentioned that RM, NLS often need to... Often already know the perfect price, the challenges, how do you distribute it by going back to the 26 restricted booking classes and attaching it to the price? So that's a huge hurdle oftentimes for airlines. And it's clear that airlines like Lufthansa are looking to NDC to help solve those problems.
Stanislava Yordanova: Yeah, and this brings us back to the main topic of the conference, the new distribution capability from IATA. I think that a key takeaway from me around that was that retailing is really about three key things. The offer, the order and the digital experience. So more or less from the discussions, I think the go of NDC's really the freedom of distributions for airlines and transparency and choice for travelers. But I don't think NDC will deliver this on its own. Airlines really need to rethink their strategy and start doing things differently. Differentiation can be achieved only if airlines figure out the business and market strategy behind the new distribution standards. New offers need to be created and distributed via NDC. They really need to be different. The way airlines displayed them need to be different.
Stanislava Yordanova: Traditionally these three elements, the offer, the order, the experience, they all have been fragmented in the airline space, but the rising digital technology today, I think it will bridge the gaps and make this end to end experience possible and just for the passenger it will look and feel as part of one flow. I think we heard how Hopper invest time and resources into asking their mobile only customers what they want so they can deliver it. We even saw Keck explain how they're testing different UI versions for usability and conversion. Airline retailing shouldn't be static. It is the dynamic state of testing and improving how you interact with travelers and we are all travelers.
Aditi Mehta: Yeah, that's very true. And I personally feel really optimistic after leaving the conference. There are so many organizations, whether be airlines and IT providers all working towards these common goals and like you mentioned there were many real life examples of how travel retailing is changing and how NDC is a key part of it.
Stanislava Yordanova: Yeah, there's so many players that need to come together to bring this to life. Revenue management needs to work with distribution which needs to work better with finance and marketing and eCommerce. Usually just a few of the nuggets we could summarize from this episode but I think there is a lot more we can discuss in the future.
Aditi Mehta: Which reminds me, this is the last episode for this season and I really hope all of our listeners enjoyed the view from 30,000 feet. We had some great interviews and discussions across the industry and we'll continue to do so next season. So stay tuned for more episodes beginning again in February, 2020. If you have any suggestions for topics or interviews, please reach out to me at firstname.lastname@example.org. So that's A-M-E-H-T-A @pros.com. Stanislava thank you so much for joining me today. It's a great discussion. A special thanks to our listeners and guests. This episode was produced and edited by Genevieve Todd. Till next time.