The seeds of air travel content fragmentation were planted with low-cost carriers: Ryanair, Spirit, Frontier, EasyJet and the undisputed low-cost leader in the U.S., Southwest. LCCs' reticence to pay for global distribution solutions led travel programs in the U.S. and their travel management companies to link out of corporate online booking tool to the Southwest corporate portal for bookings on that carrier. But that was just one airline, right? Presumably all was well.
Still, the until-then unquestioned model of distributing air content indirectly through the global distribution system had begun to unravel. Yes, that was powered by a burgeoning internet. Yes, it was major innovation. But it was a problem for travel agencies that had built their operational models on GDS technology, including agency desktops and midoffice and back-office systems that process bookings and store data.
Unbundling the Airline Ticket
European LCCs like Ryanair and EasyJet compounded the direct distribution problem by introducing the concept of merchandizing—unbundling checked bag privileges, meals and even advanced seat assignments from the price of a seat on a plane. Legacy carriers saw that customers perceived value in the stripped-down offer, and they recognized the margin potential in LCCs' a la carte strategy.
American Airlines made the first move among U.S. legacy carriers when it began charging travelers to check, not their second bag, but their first bag in 2008. All the mainline carriers fell in line, unbundling checked bag privileges from the price of a ticket. Southwest notably remains the lone holdout. Nevertheless, the concept of merchandizing had taken hold in the airline industry.
How Painful Can Booking Fragmented Content Be?
Premium economy, for instance, requires three steps in one frustrated travel buyer's program:
1. The traveler books economy on the online booking tool or by calling the travel management company.
2. The traveler purchases an upgrade on the airline's website or by calling the airline.
3. The traveler sends the revised itinerary to the OBT.
Delta Air Lines in 2012 became the first U.S. carrier to offer basic economy, a bare-bones option that included only the fare in the price. At the time, it was limited to specific routes where Delta competed with LCCs like Spirit, Frontier and Southwest. Other legacy carriers followed with versions of basic economy, and these days, airlines have generally reconfigured their product into fare families. With the premium economy concept, they've also expanded beyond the traditional coach, business and first class cabins. Marketable ticket attributes may include physical differences like legroom, seat pitch and meal service, as well as terms of the ticket like whether mileage can be accrued for loyalty programs and whether the ticket is refundable, whether it includes a seat assignment or whether it's eligible for priority boarding.
This is when the real distribution challenge began, according to industry veteran and Serko U.S. market SVP Tony D'Astolfo. "Airlines created a very different product with multiple attributes … that are not readily available in the traditional travel distribution platforms."
Problems for Travel Managers
In a world where access to all kinds of content is just a few finger taps away for consumers, accessing travel content in a managed travel program has become a huge headache for travel managers.
KBB Partners director of travel services Mira Rosen-zweig described the three-step process for booking a premium economy airline ticket in her managed program. First, the traveler or travel arranger makes a booking through OBT Concur Travel or calls the TMC. Second, the traveler calls the airline or goes to the airline's website to purchase the upgrade. Third, the traveler sends the new itinerary to Concur to ensure KBB knows both where the traveler is on the aircraft and what the full spend of the trip is. If the travelers don't take that last step, the data is lost, leaving gaps in the program.
A travel agent also could purchase the upgrade for the traveler, but Europe's General Data Protection Regulation prompts most agents to avoid that it in order not to have to collect corporate card details from the traveler, Rosenzweig said.
"And that's just for a premium economy seat, which has been around for so long," Rosenzweig said. She added that linking off to Swabiz for travelers who fly Southwest compounds the pain.
Microsoft global program sourcing manager Diane Smith said gaps in distribution not only erode the traveler booking experience that's critical in Microsoft's culture but also lead travelers to make decisions that yield poor trip experiences, such as foregoing premium economy, priority boarding or airport lounge access. "I can negotiate all sorts of things, but if I can't get that content in front of my traveler in a digestible way, then the user isn't making the kind of informed choice that I'd like them to make," she said. When travelers can't find what they want, she added, it drives them to other channels. "You start to lose argument and credibility if you're trying to force them to go through a managed process [but] there's a better experience or better value for them by going through a different channel."
Rosenzweig knows the feeling. "That's when I have to explain the value of policies, products and contracts in place for business purposes," she said.
The Fear Factor
"You don't have to be hugely insightful to read airline marketing or listen to airline earnings calls and understand how important the development of the ancillary revenue source is to airlines," said ARC president & CEO Mike Premo. Ancillaries delivered more than $82 billion to airlines worldwide in 2017 according to IdeaWorks. That's up from $2.6 billion worldwide in 2006 before merchandizing ran wildfire.
It's not entirely about margins for the airlines, though. "We want to act as modern retailers, including in our indirect channels," offering customers more choices and customization options, said United Airlines distribution director Tye Radcliffe.
That strategy has helped keep base fares low. And while that sounds like a good thing, it could cause problems for travel managers like Rosenzweig who need to understand the full cost of the trip—for budgeting purposes but also because they want to get credit with their suppliers for all their contracted spend. A world where merchandizing is kept out of managed channels undermines that ability.
On the other hand, corporate travel buyers need to be cautious about how much retailing occurs and how many options airlines offer to travelers. The ability to merchandize through managed channels and to target offers as if on a consumer site may look like an invitation for travelers to increase spend unnecessarily.
According to Premo, though, improved distribution means better content control for the travel manager. "Travel managers should be approaching this from the position of, ‘I know this is a growing spend area, and it's clearly strategic to these suppliers. How do I get better line of sight into that spend, better data on where it's going, and how can I leverage it to improve my program?' [That includes] the quality of life of my travelers, better discounts, what have you. It's better for the buyer to have clear transparency, better that they are able to bring those attributes into negotiations and really tailor what they are going to be buying to whatever their policies are. Some companies are going to optimize the program for comfort because they're all about keeping their talent happy. Others are going to say, ‘We're a bare-bones operation—we're manufacturing, we're a government contractor. We're not going to reimburse for that stuff.' Some may opt not to show certain content to travelers. Solving the gaps in distribution will give travel managers the control they don't have right now."
Industry Alternatives
The International Air Transport Association's New Distribution Capability XML standard has gained momentum from airlines, GDSs and some TMCs that are committed to more robust retailing. IATA aims to have its 21 Leaderboard airlines pushing 20 percent of their indirect transaction volume through NDC-enabled application programming interface connections by the year 2020. While it's a laudable goal and the industry seems to be falling in line behind the standard, that represents just a fraction of the airline volume and content out there.
In the meantime, alternatives have emerged in the margins. "We're not waiting. We've built a platform that enables us to consume content via an API and via other methods out there," said Serko's D'Astolfo. He was referring to Zeno, the revamped online booking platform that the New Zealand-based company launched regionally at the end of 2017 and this year in the U.S. To get as much content as possible, D'Astolfo said Zeno integrates with Amadeus, Apollo, Galileo, Sabre and Travelport. It gets content directly from Australian carrier Qantas and uses airline aggregator companies AgentWare and Travelfusion to pipe in additional airline content. Zeno was also the first corporate booking tool to integrate rich content from Routehappy so travelers can understand seat attributes like legroom, pitch, electrical outlet capability, Wi-Fi and entertainment before booking. D'Astolfo said the company is working on more direct connections with airlines.
Startup TripActions has a similar strategy. It's a mobile travel concierge tool that blurs the line between technology provider and TMC. Its artificial intelligence-enabled recommendation platform pipes in content from GDSs, direct connect APIs and aggregators. The difference is that, unlike mobile travel startups like WhereTo and 30Seconds-ToFly, TripActions can issue a ticket. It is a true TMC, with ARC credentials and midoffice and back-office technology connected to some traditional rails, at least for now. The company is rebuilding that infrastructure, which could free it from the constraints of traditional TMCs that rely on legacy GDS providers not only for content but also for much of their technology stacks. While TripActions is richly funded by investors and claims to be taking business away from mega TMCs, the industry considers it still to be in its infancy and perhaps not yet able to handle complex global programs.
SAP Concur continues to expand its supplier network for TripLink, which acts as a travel manager workaround for travelers who won't book in indirect channels. TripLink allows them to book their corporate negotiated rates from supplier websites and then prepopulates the data into SAP Concur's TripIt itinerary app and SAP Concur Expense. Travel managers capture the bookings in real time without travelers forwarding their itineraries to SAP Concur. TripLink has a growing number of supplier partners live, but only three are airlines, thereby limiting the solution. More airlines, however, are expected to go live, including Lufthansa in the "relatively near future," according to SAP Concur supplier and TMC services EVP Mike Koetting.
Traxo is another provider that gathers data on supplier-direct bookings. It securely integrates with corporate email
servers and filters messages sent from suppliers' domains. It then parses itinerary data and pushes it into corporate systems, including travel dashboards and data tools. Startup Shep's lightweight browser extension technology chases a similar objective of capturing direct booking data. It caters, however, to the small market.
Managing the Chaos
With the industry in distribution transition, travel managers are guiding travelers as best they can; they're also putting pressure on suppliers to devise better solutions.
For KBB's Rosenzweig, Trip-Link no longer is an option. While her travelers get access to TripLink through SAP Concur's TripIt Pro, most KBB member firms have asked to switch it off because travelers weren't properly trained and personal trips were flowing into SAP Concur Expense. She also said it encourages people to book outside their designated channels. "As soon as you open the floodgates and tell people they can book direct, that's it. They expect to be able to book directly everywhere," Rosenzweig said. "We're looking at technologies all the time that address these issues."
While Microsoft doesn't encourage direct booking on supplier sites, Smith said she's looking into a solution like TripLink or Traxo. "We have to. If we can't effectively get content through our channel, we have to provide an avenue for our travelers to be able to book it and report their information back to us for duty of care," she said, adding that she needs that data for Microsoft's traveler personalization efforts and for supplier negotiations, among other purposes.
To keep Microsoft travelers up on what's available through the company's travel program, including air travel benefits Smith has negotiated, she communicates via a company intranet email and Tripism, a dedicated mobile app powered by Roadmap, the social site Yammer, a Q&A travel bot that went live in June and access to UserVoice, a website that allows travelers to vote for program improvements. In July, Smith uploaded to Tripism, the Microsoft traveler community platform, information on negotiated air travel benefits. "We're trying to create different areas for our travelers to educate themselves on what's available. When they go to book, at least they have a better idea of where to steer that booking," even if the content is not available in the booking tool. Smith admits it's "clunky," and she'd much rather have a seamless experience within corporate booking channels.
Rosenzweig wants to cut to the chase and move toward content feeding directly from her preferred airlines and hotels into a single platform. "If we have partnerships in place with the vendors we need, why isn't that directly coming into some sort of technology solution?" she asked.
Overcoming Entrenched Industry Models
There are advantages to getting content from the clearinghouses that are GDSs, but at the BTN Group's recent The Beat Live conference, FINRA corporate travel services manager Carol McDowell embodied the frustration of of travel managers about GDSs' inability to deliver nuanced content when she said, "Just freaking build it, OK?"
Koetting understands the sentiment: "It's such a reasonable question: ‘Why is this so hard?' Why is it so difficult to provide that diversity of experience in packaging and pricing in a corporate environment? Those travel managers are right."
United's Radcliffe said that was the concept behind creating the GDS in the first place and that it would be too much work for an airline to do a direct API connection with every TMC or OBT and then configure per client, especially if every other airline does the same thing. It would be too much work. "That's why the industry got together and worked on NDC, and that's what we've tried to put forward," he said.
But NDC doesn't solve the real issue, according to Koetting. He said, "NDC is about the ability to sell a richer variety of priced and packaged airline seats. It doesn't address the fundamental dependence of [TMCs] on legacy GDS infrastructure, and it will not be widely adopted by [these] intermediaries until it is consumable in a GDS" passenger name record.
That is to say: Direct connects into booking tools or new platforms do not hold a lot of promise until TMCs shrug off the influence of GDSs. GDSs provide TMCs with agency desktops, profile management systems and backoffice technologies, all of which accept information as structured on the PNR. GDSs therefore limit TMCs' ability to service trip segments not booked within the GDS. Driving that influence home are the incentives that GDSs pay to TMCs for booking volume thresholds within the channel.
"If the primary objective is to enable access to content for a traveler and that traveler can execute the transaction on his or her own behalf and is comfortable and confident supporting themselves in the event of a disruption, etc., the bar becomes much lower for enabling that content," Koetting said. "To the degree that travel managers expect the same level of service that is delivered [by the TMC via legacy] infrastructure that relies on that PNR, enabling different distribution channels may be extremely problematic."
Koetting's point speaks to the variety of ways airlines may decide to distribute via NDC—for example, via direct connects rather than through the GDS. As Southwest established so many years ago, direct connects stand to save airlines money, and NDC-enabled GDS solutions presumably will cost more than traditional service—a cost some airlines already complain about. Which airlines will go all-in with GDS providers? No one yet knows, but it should be noted that even Southwest now distributes a portion of its content through Amadeus' GDS.
But servicing and supporting travelers is the raison d'etre for managed travel, so airlines that want to play in the managed space will need to consider the consequences of eliminating GDS pipes in favor of alternatives.
On the other hand, certain TMCs are making a straight-up play for direct connect business. The concept is that reduced distribution fees will lower costs for travel programs, win business and allow them to focus on servicing clients no matter where those clients' travelers want to book their travel. That seems to be the roadmap for TripActions and WTMC, both of which claim never to have taken a GDS incentive payment and are trying to build profitable travel businesses on a different economic model.
Smith is confident change is coming to the managed travel industry. "I've never felt this sense that we're at a point where things are going to be changing, and changing quite significantly, as I do now. We're at a tipping point. The models as they exist today have to evolve and have to improve."
D'Astolfo's advice for travel managers who want to see change: "Get a seat at the table to have conversations with suppliers, TMCs, booking tools and GDSs."
Premo agreed, but also encouraged buyers to become more conversant in distribution if they expect to have influence. "Buyers need to know how that data flows, know who touches it and be savvier. They need to understand when something gets displayed on a screen or a self-booking tool where it came from and what it means and what its reliability factor is. I get that it's not easy and it's certainly not intuitive, but it's important."
—Additional reporting by JoAnn DeLuna