As an airline are you worried by the pace of change in travel distribution and confused about what direction to take?
On Dec 2nd I was invited with other industry execs by Tnooz to attend a discussion about the report written by the London School of Economics (and sponsored by Amadeus) about the future of the travel industry. Finnair, Odigeo, BCD, Skyscanner and Dr Graham Floater, writer of the report were represented on the panel.
The report is rich and presents a very good description of the trends in the travel industry, but I will keep two important points related to airline distribution:
- The ‘gatekeepers’ (Google, Facebook, Amazon, Apple, etc…), Mega-OTA/Metasearch and GDSs connect billions of consumers and their influence will only increase in terms of travel distribution.
- Technology will continue to transform the travel industry, more than most think it will. Those who lead on technology and do it quickly will dominate.
So what does this mean for airlines? Bryan Dove, CTO for Skyscanner, gave a clue:
“The notion of what is the direct channel also starts to evolve as technology evolves.”
And this is my personal conclusion for what is very likely to happen.
The Direct Channel is Not Really Direct Anymore
With only a fraction (22% estimated by Google) of online travelers that go straight to an airline brand on web/mobile, that makes nearly 80% going through a ‘gatekeeper’: Meta or OTA. Even if those consumers ultimately land on an airline.com, it would be more appropriate to say those customers have been ‘re-intermediated’.
Sure, airlines may classify this as ‘online customer acquisition’ and not as distribution. However: in 2015, Amadeus, Sabre and Travelport accumulated distribution revenue (i.e. excluding hosting business) was roughly $7B. Skift estimates that Google revenues from the travel sector will reach a whopping $12.2B for 2016… Add the fees from social media, Metas, etc. You get the picture.
And as those fees are only paid to drive traffic to the airline.com, then you still need to convert the traffic into customers to make the sale. Bottom line, once internal processing costs are added, the airline needs to have an excellent conversion to make an acceptable cost of sale.
Technology is the Key Success Factor for Airlines to Make Sales through ‘Gatekeepers’ and Metas
How to connect efficiently to those new intermediaries? NDC is part of the answer, but it is only an API that does not solve the processing complexity. You cannot build a chatbot on Messenger if the response time of your flight search is painfully slow or understand only some rigid search criteria. No airline can economically use metasearches if the processing cost for 5000 or more searches required for each acquired customer is higher than a GDS booking, etc…
- Acquiring from Metasearch (and NDC connected OTAs) requires the capacity to deliver massive volume of offers in a cost-effective way
- Future search applications, originated from all types of devices, bots, apps will require more intelligent ways to search flights (no more rigid ‘origin/destination/date’), more personalisation and still more demand on response time
- com and mobile require superior user-experience, upsell and merchandising to maximize conversion and revenue per customer
Because we have the future in mind and need to anticipate the demands of the new distribution we have built our Sales Offer creation platform around some keys characteristics:
- A comprehensive set of APIs (including NDC) that talk as well to a mobile device, a PSS or a tour-operators’ production engine
- Fully customizable by our customers through Business Rules to adapt to any channel, distribution partner, required performance level (quality, response time, cost)
- Large set of parameters available for the user to search upon
- Capacity to deliver massive search volumes without look-to-book restrictions
- Sub-second response time for marketing and social media applications
- And a steady rhythm of innovation to anticipate AI, personalisation and other industry trends
If Apple, Amazon or Baidu come to you with their new travel app, will you be ready?
About the AuthorMore Content by Boyan Manev