We often talk about travel being a “people” business, and it is little wonder when we consider the multiple relationships, complex value chains and interdependencies at play in the travel ecosystem.
A central part of that ecosystem is the global distribution system (GDS). In our role as a data aggregator and travel technology provider, we support all players from airlines and travel agencies to corporate buyers and other intermediaries – enabling seamless retailing, distribution and fulfillment. When exploring the ecosystem further, one thing is certain. No one part of the value chain can survive on its own.
In this eBook chapter, we explore the key players in the travel ecosystem to understand their care-abouts and pain points – and, ultimately, how New Distribution Capability (NDC) standards will help them interact more effectively and drive increased value to the modern traveler.
The Players in the Travel Ecosystem
There are six key players in the air segment of the travel ecosystem that drive the market from a supply and demand perspective:
1. THE AIRLINE: Airlines supply the product and merchandise it to drive maximum revenue and brand differentiation. Airlines can distribute their product via direct or indirect channels.
2. THE GLOBAL DISTRIBUTION SYSTEM (GDS):The GDS aggregates content from airlines, applying sophisticated algorithms to compare the information and produce offers to travelers. GDS technology provides the indirect shop window for airline content to travel agencies, and it provides solutions for managing and fulfilling airline reservations using integrated workflows throughout the lifecycle of the trip.
3. THE TRAVEL MANAGEMENT COMPANY (TMC): The TMC uses GDS technology to analyze and present a comparison shopping experience to business travel clients. It provides services to corporations beyond travel-booking transactions, such as reporting, consultancy, duty-of-care provision, mobile and online apps and benchmarking. This is overlaid with corporate booking guidelines (policy) to present travel options within an agreed-upon set of rules, to achieve consistent levels of program compliance and traveler convenience.
4. THE AGENCY/ONLINE TRAVEL AGENCY (OTA): Leisure traveler-focused agencies, with a brick-and-mortar and/or online storefront, use GDS technology to collect and present comparable travel options and experiences to the end user. They provide a one-stop-shop with a variety of content for the end-to-end customer journey. At the heart of their strategy is the need to better understand and anticipate the needs of their travelers.
5. THE CORPORATE TRAVEL MANAGER: Corporate travel managers provide business travelers with access to in-policy travel options available in the GDS through a corporate booking tool (direct) or through a TMC (indirect).
6. THE INDIVIDUAL TRAVELER: In a world of increasing choice and decreasing attention spans, travelers demand personalized offers and service via their preferred channels – ranging from physical to digital storefronts and service channels that range from human contact and virtual assistance to advanced artificial intelligence such as chatbots. The biggest driver of change in the travel industry is consumer expectations set by non-travel shopping experiences, such as Uber, Amazon, Netflix and Starbucks.
Let’s examine the role of each of the players in the travel ecosystem and how NDC can help all parties collaborate better so they can collectively provide an exceptional traveler experience.
What Role Does The Airline Play In The Travel Ecosystem Value Chain?
In the travel ecosystem, the airline is the supplier of the product. Beyond the seat, many airlines have successfully unbundled an entire suite of additional products and services, such as seat allocation, meals, preferential boarding and access to online services that were once considered integral to the purchase. When retailing through their own website, airlines have full control of all aspects of how the product is presented to the consumer. However, when retailing via indirect channels, and paying a distribution fee to do so, airlines want greater control over how their products are displayed and their brand differentiated to the traveler
What Do Airlines Really Want?
The ability to transform into a true digital retailer. They want to merchandise their products and services consistently across all channels. They want to know their customers so they can make specific offers that fit with their needs and preferences. Traditionally, airline distribution standards were designed to support the sale of seats rather than modern retailing. The creation of customized retail solutions for multiple sales channels is neither financially nor technically viable for airlines.
A “one-size-fits-many” approach would provide greater efficiency for airlines while significantly reducing the time to market of further products.
How Does NDC Helps Airlines?
The NDC standard enables airlines to evolve their retailing strategy, showcase their products with rich media, differentiate their brand from the competition and upsell ancillaries across the customer journey. This approach rewards airlines for investment and innovation in the indirect channels, consistent with their direct channels, and improves speed to market of new products.
However, there is no fast-track method to achieving personalized retailing. It is best accomplished through a phased approach that begins with solution adoption and evolves into NDC-enabled offer- and order-management platforms.
“It is important for airlines to understand that they won’t become an NDC airline overnight. There is a methodical approach to building next-generation offer-and order-management systems, and there are technology and product evolution steps that are required.” – Rodrigo Celis, Vice President Product Management, Sabre
What Role Does The GDS Play In The Travel Ecosystem Value Chain?
As a central part of the travel ecosystem, the role of the GDS is multilateral.
At its core, the GDS is a travel marketplace between the airline (and other suppliers) and the agent, aggregating and making sense of the large amount of travel data available. Beyond aggregation, the GDS indexes and analyzes offers at a stable, sub-second speed to produce normalized and integrated responses so consumers understand their shopping options. The GDS’s role goes beyond retailing – it also includes highly automated quality control and fulfillment services. At Sabre, underneath a sophisticated retailing strategy sits a sophisticated data and analytics strategy. Our powerful platform has visibility around shopping behaviors and ancillary booking behaviors, which incubates our broad and deep portfolio of solutions. These data insights allow airlines to provide more sophisticated offers by better understanding travelers’ trip context.
What Does The GDS Want?
The GDS wants to differentiate through sophisticated aggregation of data and integration of rich, new content into the offer process. It wants to take what the airline is wanting to sell, in the way it wants to sell it and integrate it into a comparison shopping environment, while maintaining current agency workflows around booking management and fulfillment. At Sabre, we want to resolve growing content complexity and provide consistent value to airlines, agencies, travel buyers and travelers.
The Travel Management Company
What Role Does the TMC Play in the Travel Ecosystem Value Chain?
As part of the travel ecosystem, Travel Management Companies uses GDS and compares them to produce contextually appropriate offers to corporate travelers. In a business travel environment, the TMC overlays the fare comparison with the corporate travel policy to ensure that rules are applied at the point of sale – a crucial control point for the corporate travel buyer. TMCs provide myriad related services to support their corporate clients’ KPIs on cost, customer service and duty of care.
What Do TMCs Want?
They want to continue offering the broadest choice, most competitive fares and excellent service. They want to maintain content and price parity that their corporate clients expect. Although not immediately visible to their customers, TMCs also want to ensure that workflows are optimized and that the productivity of their agents – their most costly asset – is not affected by changes in distribution models. Process consistency across all airlines and mid- and back-office processes (e.g., refunds, changes, invoicing) is essential for productivity and, of course, profitability.
How Does NDC Help Travel Management Companies?
Along with the role of consultant and advisor, one of the key value propositions of the TMC is comparison shopping. With the growing importance of traveler experience, TMCs are looking to benefit from new retailing models that will allow them to offer richer and personalized content while at the same time maintaining efficient booking management and seamless fulfillment. It remains incumbent on the TMC to ensure that their role as policy gatekeepers can continue and that price and content parity with airline direct channels is achieved. If NDC can truly provide that parity, TMCs stand to benefit as it would remove the accusation that cheaper fares or broader options can be found via airline websites and from online travel agencies.
If future releases of NDC can solve for work processes such as interlines, schedule changes and PNR synchronization, TMCs will get a clearer idea of how NDC can be implemented with no impact to customers. Further, TMCs need strong, sophisticated and scalable technology that provides end-to-end retailing, distribution and fulfillment solutions to continue to deliver excellent service.
“Airlines are increasingly retailing their products directly to the traveler. We believe in delivering uncompromised choice to our client base, so we want to ensure our clients see the same choice across our integrated suite of technology from agent to desktop to mobile as they do on the airline website. And we want to be able to deliver the same industry-leading service on every booking as we currently can with GDS content. In time, we expect that NDC will deliver this ability.” – Fred Stratford, CEO, Reed & Mackay
The Agency/Online Travel Agency
What Roles Does the Agency/OTA Play in the Travel Ecosystem Value Chain?
The agency/OTA consumes data from suppliers and the GDS and compares them to produce timely, contextually relevant offers to primarily leisure travelers. Given the overwhelming volume of choices, these travelers rely on OTAs to display and compare options across price or qualitative decision factors (e.g., comfort, convenience). Unlike business travel, where the individual is required to take a trip, leisure travelers are often in the process of deciding whether to spend their disposable income on an experience to explore a new destination, its culture and local traditions. Agencies/OTAs can inspire people to purchase a trip that they may not yet have considered.
Agencies/OTAs are also uniquely positioned to share data insights on leisure travelers’ end-to-end travel needs, influencing how they get there, where they stay and what they do in destination.
What Does An Agency/OTA Want?
Agencies and OTAs want to acquire, convert and retain more travelers. To achieve that goal, they want access to all available content through airlines, GDSs or other intermediaries in one single place, for easy shopping comparison and fulfilment. While finding the lowest fare is an important purchase-decision metric, travelers also weigh qualitative factors such as the brand perception of the service provider and overall traveler experience. Many agencies/OTAs invest in marketing channels such as TV and social media for customer acquisition and to increase their brand equity.
How Does NDC Help an Agency/OTA?
Online and offline travel agencies are looking to benefit from new retailing models that will allow them to offer richer content with personalized shopping and seamless, omni-channel fulfillment. If NDC can facilitate more advanced and normalized air content, it will free up the agency/OTA’s time and resources needed to source and analyze myriad flight options. Instead, they can focus attention on other value-driving content such as lodging, cruise and ground-transportation services or in-trip experiences such as tours and activities.
The Corporate Travel Manager
What Role Does The Corporate Travel Manager Play In The Travel Ecosystem Value Chain?
Another key player in the travel ecosystem is the Corporate Travel Manager. Corporate travel managers are responsible for managing the balance between cost control, duty of care and user experience for their company. Their stakeholders include travelers, travel bookers and budget holders, and their role includes communicating travel policy, monitoring compliance and ensuring that all players in the supply chain meet agreed-upon service levels and commitments. Corporate travelers expect a booking experience that offers all the options, flexibility and add-ons that they see in their leisure bookings, combined with a guarantee that they will get the support they need if things don’t go as planned.
What Are The Key Concerns Of A Corporate Travel Manager?
Most of their concerns fall into one of three buckets: cost, customer service and duty of care. Deciding which to prioritize is a delicate balance and will vary from one corporation to the next. While cost remains a key priority for most corporations, the user experience is becoming increasingly important, and many larger firms (particularly in professional services) are focusing heavily on the employee experience.
How Does NDC Help the Corporate Travel Manager?
The way corporate travel managers negotiate with airlines has gone unchallenged for many years. Based either on volume or market share, corporate travel managers make commitments to the airline and, in return, get preferential rates that should beat the market. Yet, these rates are generally static and don’t always include ancillary services that are of value to the traveler. The addition of ancillaries can make a material impact to the overall cost; currently however, this is highly fragmented from the corporate travel manager’s point of view, and therein lies the positive opportunity from new airline-retailing solutions.
According to Kathy Morgan, Vice President of NDC for Sabre Travel Solutions, “custom negotiated bundles for corporations where you get a broader range of products” will become commonplace. She warns, however, that “while such things will become very valuable, you’ll need to ensure your policy is ready for them.”
The Traveler – A Key Role in the Travel Ecosystem
How Does NDC Benefit The Traveler?
Imagine in the future, rather than negotiating on specific fare classes with specific discounts, consumers can expect to be offered a bundle of products and ancillaries. And, crucially, policy can be overlaid at the point of sale.
This feels like a “win-win-win” for all key players involved in the travel ecosystem. Airlines can maximize revenue and differentiate their brand and product offerings. Agencies, OTAs and TMCs get to provide comparison shopping with more contextually relevant offers. Corporate travel managers get greater visibility into the true cost of travel, as they eliminate the purchase of additional ancillaries. And travelers receive more personalized offers based on loyalty, purchase history and trip context. However, airlines are moving at different speeds and travel buyers should expect that in the foreseeable future, the level of retailing maturity across their
supply chain may vary. All players in the travel ecosystem stand to benefit from advanced retailing methods, including NDC. We are at a critical point in the evolution of airline retailing, yet NDC remains a new standard. There are many proof points that need to be tested and delivered; however, we believe it’s the way of the future.
In the next NDC eBook chapter, we explore how Sabre is investing beyond the NDC standard to build an end-to-end retailing, distribution and fulfillment ecosystem.
“The reality is that corporations are going to have to evolve their corporate travel policies. The notion that everything is based on the lowest logical fare isn’t relevant anymore. Quite often, the lowest logical fare isn’t the fare you want the traveler to book. By the end of the journey, they have spent more on ancillaries or their in-trip experience. Evolution from lowest fare to best fare is key and best becomes the definition of your travel program.” – Kathy Morgan, Vice President of NDC for Sabre Travel Solutions.