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There are two IATA initiatives known as New Distribution Capability (NDC) and One Order that are evolving. If successfully adopted by the airlines, these practical initiatives have the potential to transform the fragmented distribution process that is in place today. They offer airlines a clearly signposted path towards modern retailing by putting the customer and not the flight at the heart of their distribution strategies. There is a lot of jostling for position in the lucrative corporate passenger segment. To succeed airlines know they need to increasingly drive higher yields through higher non-seat ancillary revenue streams, which can build brand and loyalty. IATA’s vision for the indirect channel is to simplify the current airline distribution process and systems with a set of standards that will enrich the selling of the tickets at one end and streamline the customer record fulfilment and payment process at the other. 

NDC is an XML-based data transmission standard that seeks to address many of the limitations of the air travel industries current distribution channels. It’s a well-established data protocol that facilitates interchange of electronic information between airlines and travel agents. It helps airlines to deliver the same rich and dynamic content to agencies as on their own web site (including ancillaries). One Order builds on the standardized communication approach with a view to replacing the multiple and rigid booking, ticketing, delivery and accounting methods with a single and flexible order management process.

Thus closing the existing capability gap between their direct and indirect channels.

Adopting the new standards will allow airlines to sell what they want, when they want, to whom they want through all the channels. Not only will they be able to make better and more relevant offers, explain what is included in bundled pricing and what isn’t, but customers too can begin to pick and choose what they wish to pay for and what not. 

The benefits of IATA’s initiatives are very clear and powerful and a game changer for the industry. But what are these benefits and who stands to gain? Let’s take a quick look at IATA’s new distribution landscape and the stakeholders involved. We can see the key stakeholders involved in making NDC happen are the:

Airlines supplying the products and services

Intermediaries and aggregators (resellers),

Travel agents acting on behalf of Travel Management Companies (TMCs) and corporate buyers who purchase the travel trips

Travellers the ultimate customers making the trip.

So let’s take a closer look at what the potential benefits are of an NDC enabled retail environment for each of these groups:

For Airlines

NDC completely transforms their ability to merchandise their offers and take control. They can:

Distribute all their products, including ancillaries to agencies and travel management companies.

Offer value-added products and services when applicable, on the basis of personal information, should customers choose to disclose it

Display more details about their products (bundled and unbundled) including rich descriptions of differentiating facilities with media such as photographs, etc.

Increase innovation and differentiation opportunities by bringing new products faster to market, which helps differentiation

Take advantage of personalisation opportunities by delivering a shopping experience based on customer preferences

For Intermediaries / Aggregators

This represents a key step change in the way airline distribution works currently. Today the intermediary is a GDS who accesses inventory and fare databases to create the offer and then enables to book, pay, and issue a ticket. Those are complex and very diverse functions. For example, credit card payments are processed directly by the GDS, interacting with a payment service provider to authorize the payment. In an NDC environment the aggregator is solely transmitting both shopping and ordering requests to the airline host environment.

The concept of aggregation is a key component to NDC-based distribution model. The intermediary is an aggregator and its role is to transmit the information back and forth from the travel agent to the airline. Aggregators, do three things:

Determine which airlines to ask when receiving shopping requests from travel agents

Forward shopping and other requests to the relevant airlines

Consolidate the offer responses from airlines and present results to travel agents

They too benefit from NDC by having:

Access to the entirety of the airlines products and content, including ancillaries and promotional fares.

Access to dynamic pricing and product information

The ability to offer better comparison shopping for traveler based not just on price but also the perceived value of ancillaries.

The ability to provide tailored services based on a customer’s travel history and preferences, if they chose to be recognized.

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For the Travel Agent

Travel Agents are in fact the prime target audience for NDC. They represent the 50% plus portion of business that is still transacted through them. And as you know, it also represents an even higher percentage of their revenues as the type of itineraries that stick to the indirect channel tend to have higher face value (we estimate approximately 40% higher on average) as these tend to relate to corporate travel often with complex itineraries and long-haul travel.

Rich content view of travel options

Greater transparency of fares across providers

Ability to personalise offers based on context

Greater reporting capability

Simply put, for Travel Agents and TMC’s, NDC facilitates an increased transparency of travellers total spend. The premise of this is that instead of travel managers having access to the fare cost only, with the traveller then individually booking and expensing ancillary products, NDC allows all costs of a flight to be captured within the original booking.

For the Traveller

For reasons of saving time and money, travel expense management, contract negotiations and customer support corporations in particular continue to channel their staff travel needs through agents. The traveller and the company paying for his trip are prime beneficiaries of the new NDC merchandising world.

One of the biggest selling points of NDC is the facilitation of personalised fares. Giving airlines the ability to service travellers with a fully customer-centric approach, dynamically pricing and personalising their products. This means, if the traveller agrees, elements of personal information are released to airlines when the initial fare is searched. Airlines then return a fare considering these details. To an extent, this feature is already exercised when booking flight directly with an airline via their websites, where they are able to identify and engage their customers with specific offers based upon their previous journeys. For corporate travel managers this is a positive development as it encourages employees back to booking through their TMC rather than arguing that a more attractive fare is available direct.

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One area not discussed in the NDC effort is the significance of mobile as a booking channel for managed travelers and how mobile airline apps could play a role in 1:1 marketing to the business traveler.  Over the last few years I have spoken to hundreds of travel managers at companies across the globe for various research projects.  Many travel managers still have trouble answering the basic question of how much leakage is going through supplier and OTA mobile apps.  Often I find travel managers stuck in their 1990s/early 2000’s measurements of online booking adoption, and are not adequately tracking mobile bookings through supplier apps and OTAs which could significantly impact their traditional high adoption measurements.

There is no question that the three GDS are now committed to embracing NDC, but how long will it take to bring this rich content to the booking platform?  While the sector is struggling with this refresh technology, airline applications are already providing a platform for more custom deals. Will the airlines wait until NDC provides the personalization channel with rich content? The answer to this question depends on the Airline.  The FSCs in Europe – Lufthansa Group, IAG and AF/KLM are clearly leading the financial restructuring either though NDC direct connectivity or “private channels” that eliminate or greatly reduce “financial assistance”.  American has offered TMCs an incentive to use NDC direct connect. The slow roll out of Concur’s TripLink is clearly one important solution to bring airline.com and direct app bookings to the travel and expense management system, but adoption from corporate side has been slow.   The problem with both these solutions is that in an era of personalized NDC offers, understanding the Lowest Logical Airfare (LLA), a foundation comparison benchmark for effective travel management compliance and analysis, could be significantly disrupted. In fact it is likely some airlines will use their mobile app to offer unique ancillaries and possibly price to the business traveler whether they are part of a managed program or not.  Every corporation needs to have a handle on their mobile leakage and create negotiation strategies with their preferred carriers to prevent unique offers through the airline’s mobile app. Adding an air booking capability to a TMC app to solve this problem misses the very point of the airline controlling the quote, the essence of NDC. Corporations need to keep in mind that airline retailing is designed to increase the profitability of the carriers and thus may directly conflict with travel management objectives.

The topic of customization has never been warmer for the worldwide travel industry. The amount of papers, conference topics and pitches for startups highlighting personalization has reached the cycle’s extreme hype stage. In reality, the theme of personalization has been around for decades. For the travel industry, personalization has its own set of barriers especially for the infrequent leisure traveler. Let’s take a deeper dive into the subject and separate the hype from the reality.

When I recommended Broadvision back in the early 1990s, I first became engaged in the attempts to personalize the travel industry. Before the burst of the DOTCOM bubble, Broadvision was the leading personalization platform. By 2000, Broadvision had contracts with major airlines (AA, TAM, Air Canada), Amadeus, EurailPass Forte Hotels, and IntraWest. Unfortunately, the Company’s fortunes were impacted hard by the DOTCOM bubble burst as their stock lost approximately 98% of its value by 2002. This did not mean the concept of personalization was dead, but instead indicated that the complex platform offered by Broadvision back in the 1990s was not able to meet the market’s needs.

Traditionally, personalization uses two basic techniques: explicit and implicit preferencing. Explicit preferencing asks the visitor to specify their preferences by selecting from a list of attributes such as “beach vacations”, while implicit personalization gleans a traveler’s preferences by their online behavior and past purchases.

So why is there so much hype about personalization today? Three driving forces (1) the customer experience with other e-commerce sites like Amazon and Netflix, (2) the maturation of AI technologies (3) the growth of social media. Foremost on the AI front is the ability to analyze and understand vast amounts of unstructured data, including social media behavior. Incorporating unstructured data helps extend the knowledge of the customer, as well as providing better interpretation of supplier content (e.g. understanding the themes of customer reviews).  This may include using a Google-like search bar to ask a more detailed vacation request (e.g. New York Hotel with lap pool and close to Grand Central Station). Behind the scenes Natural Language Processing (NLP) is used to understand text, traveler intent and match the request with hotels that not only have a pool, but ones where lap swimming is possible.

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With the limited frequency of most leisure travelers, rather than offering true 1:1 personalization, many companies try to micro-target specific types of travelers within a group/segment (e.g. family, business, adventure travel, etc..).  In general, the business travel segment is more attractive for personalization due to higher travel frequency and thus more data on the traveler’s preferences. In a corporate travel managed context, the challenge of personalization is that it may put the traveler’s preferences against corporate policy.  Dependent on what level of detail of customer behavior is captured, the trade off between personalization versus “the creepiness factor” is still a struggle as well. In addition, the fact that travelers may project different personas for a given trip or within the same trip, further complicates the effort toward 1:1 personalization.

I would propose that a more important use of customer data is to provide support and services based on the traveler’s context.  Simply put, context is the immediate need of the traveler (e.g. what are they doing right now and what they will do next). Getting context right is extremely difficult.  In order to provide the right context, the travel supplier or intermediary needs to track the trip closely and provide services on a real time basis. For example, something as simple as a text message identifying local coffee shops received when the traveler awakes is an example of a contextually relevant message.

So don’t get caught up in the hype around personalization and instead focus on a traveler’s immediate needs based on intimate customer knowledge. The more a supplier or intermediary can proactively communicate with a traveler throughout the travel cycle, the more effective the contextually relevant personalized communication can be and the more it provides a positive view of the supplier or intermediary.

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