ExCeL London - 30 Sep - 01 Oct 2021
18 October 2021 - Virtual
28 October - London, UK
Travel buyers need to get to grips with a new era of airline distribution being ushered in by NDC. Martin Ferguson reports on the latest developments
The ravenous Bugblatter Beast of Traal was an alien creature in Douglas Adams’ celebrated novel, The Hitchhiker’s Guide to the Galaxy. It was known for its insatiable appetite, especially for intergalactic tourists – but its mind-boggling stupidity made it quite easy to defend oneself: it assumed it couldn’t see you if you couldn’t see it (by wrapping a handy towel around your head, for example).
Now, I’m not for one moment making a dubious comparison between travel business professionals and the brainless monster from Traal (some members of the travel management community are among the most intelligent in the country, according to government statistics), but there does seem to be an ostrich-with-its-head-in-the-sand attitude surrounding one particular industry development.
When the International Air Transport Association (IATA) revealed plans to launch its new distribution capability (NDC) standard back in 2013, few travel buyer eyebrows were raised. The premise seemed to be too far detached from the buyer reality to have any real relevance.
For those that don’t know – and this is the point to which I’m coming – IATA describes NDC as a travel industry-supported programme for the development and market adoption of a new, XML-based data transmission standard.
Yes, that’s a lot of jargon – but, put simply, IATA has created some new computer code to help airlines make more money by retailing Amazon. The goal is to make airline marketing and selling more effective in both the consumer and corporate sectors. It is, almost without question, going to have an impact on the way corporate travel is managed in the future.
THE IMPACT ON BUYERSBuying Business Travel has written extensively about the topic over the last few years. It is surprising, therefore, to learn that some buyers still don’t know what NDC is. And of those that have come across the acronym, many are still not really sure if it means anything to them. In April of this year, the Institute of Travel and Meetings (ITM) surveyed 93 of its buyer members on the topic of airline distribution and NDC. Three in ten said they had never heard of NDC, while half of the rest admitted they had no idea what it would mean in terms of budget control and compliance levels.
To avoid confusion, NDC is not a system or a platform. It is a technology standard designed to enhance communication between airlines and travel agents. It will be open to any third party, intermediary, IT provider or non-IATA member, to implement and use. It will allow airlines to offer relevant, tailored, rich-content offers to bookers in all channels. Those offers could be made through the global distributions systems (GDSs), travel management companies (TMCs) and online booking tools (OBTs), otherwise known as the pillars of the managed travel environment. They could be made via new market entrants. Or airlines could target travellers directly.
Yes, direct sell… cue policy leakage alarm bells. Ian Heywood, head of global supplier strategy for travel tech giant Travelport, has some very direct advice for buyers, and everyone in the distribution supply chain. “Understand NDC and prepare to control it before it’s too late,” he warns. “Buyers and TMCs should not view NDC as a threat; it is an opportunity to do things better. It will only be a threat if you sit back and do nothing.”
TRIAL RUNThe NDC wheels are well in motion. In recent weeks IATA revealed that eight major global carriers, including Air Canada, British Airways, United, Qatar Airways and Virgin Atlantic, conducted NDC trials last year. They tested codeshare flights, insurance upsells and mobile bookings. Business travellers buying United tickets though the Amadeus GDS can buy extra legroom seats for the first time. Meanwhile, Swiss is currently trialling the sale of packaged fares that include free checked bags, seat upgrades, and champagne onboard. Much more is expected throughout the rest of 2015.
The experiments have come a long way since late 2013 when the first live NDC booking was made in China. The ticket, for a seat on a Hainan Airlines flight, was bought through a travel agency using Chinese GDS, Travelsky. It was a landmark moment in the history of airfare distribution, though didn’t pique the interest of many travel managers. At the time, the NDC project was clouded in confusion and controversy. Travel intermediaries complained they had not been consulted on the technology and its implications. The GDSs branded NDC an assault on fare transparency, limiting comparison-shopping and compromising data privacy rights. IATA eventually conceded it had failed to communicate adequately with travel industry stakeholders.
A breakthrough was made in the US in January 2014 when the Open Allies for Airfare Transparency coalition (which includes the GDSs and a number of major travel agencies) and IATA finally agreed on conditions that the US Department of Transportation should include in its approval of IATA’s Resolution 787, the foundation document for NDC. IATA said it clarified its “commitment to the core principles of Resolution 787 regarding anonymous shopping, compatibility of existing data standards with the NDC standard and the voluntary nature of the standard”.
Regular readers of BBT will know Paul Tilstone, the former ITM chief and senior vice-president of the Global Business Travel Association (GBTA). These days, he plies his trade as an industry consultant with his company, Festive Road. For many years he has played a leading role in bringing together the supply chain with the buyer community to discuss crucial issues like distribution. It should be no surprise – there are few people better placed to advise corporates on how to plan ahead.
“Buyers must get creative,” he says. “It is too easy to work from cookie-cutter managed travel programme designs. But new entrants, changing demands and the technology revolution mean every travel management programme should be tailored to a company’s specific needs.” Tilstone says understanding your company’s culture, and commercial objectives, is key. “Find out how travel is perceived in your organisation. Then be honest about what is needed and what the best programme design would be. At one end is open booking. At the other, tightly mandated programmes. But there are many variations in between.”
UNDERSTANDING NEEDSThe next step is also rudimentary, but all-too-often overlooked: listening to travellers and airlines to understand their needs before taking any action. Many procurement relationships today are focused on cost. Therefore buyers, says Tilstone, should develop a more holistic approach to encompass price, distribution, product, loyalty and marketing. “For example, the creation of corporate specific bundles offered through chosen booking channels could mean better service for travellers, reduced overall costs and an improved buyer-airline relationship. To reach that point buyers first need to understand their traveller types and needs.”
The third step is to find value. As the supply chain becomes more transparent, traditional managed channel roles will evolve as a result of changes in the business world. There will be more focus on commercial terms. “It is a chance to develop the best supply chain model for your organisation based on the chosen travel management programme design. Ensure you understand your true needs and the cost and benefit of each supply chain participant,” he says.
Forging partnerships and choosing the right retailing mix is also high on Tilstone’s cheat sheet. He explains: “There are essentially three broad TMC/technology mix models in the managed space: there is the TMC that outsources booking technology; the TMC that has its own proprietary technology; and the technology-led TMC.”
There is also, however, an increasingly prevalent fourth option: choosing stand-alone technology. “In any case, getting the right retailing mix will determine how much control buyers have over NDC content, and the way it is managed and delivered to the travel booker within policy,” he says.
Finally, data will be the holy grail in the airline distribution chain, as it is in most contemporary retail supply chains. Retaining central control over the data provided to the airline and other suppliers will determine what offers are presented to travellers. “More data will equal better personalised offers. Managing the balance of data provision with policy compliant offers and data protection is going to be important,” says Tilstone.
There were initial fears in some quarters that with NDC airlines were setting out to bypass GDSs and TMCs. Though the technology would enable disintermediation, that is not the desired outcome. Carriers simply want to market and sell their wares like any modern retailer.
And there is real emphasis being placed on building corporate models with NDC standards. An investment fund, Travel Capitalist Ventures, has been established to support companies in this field. The fund manager, Abrar Ahmad, told BBT his priority this year is to unearth developers to target and improve managed travel processes.
The Ravenous Bugblatter wasn’t the sharpest tool in the shed, but perhaps it is the beast’s rapacious hunger that should inspire travel buyers. Technology is driving change at an unprecedented rate; the corporate travel community must, therefore, have the appetite for knowledge, data and insight.
Abrar Ahmad is a partner at travel investment firm Travel Capitalist Ventures, which is partnering with IATA to provide a £5 million fund for managed travel innovations based on the NDC platform
I’ve been a corporate travel agent and seen the opportunities and challenges first hand – this isn’t a theoretical exercise for me. The business travel market is yearning for solutions to address managed-versus-unmanaged travel, the changing role of TMCs, and the increasing demands of business travellers and corporates. I believe the NDC standard enables greater engagement between business travellers, TMCs and travel-tech providers.
For example, flight search results contain personalised flight options, amenities, upgrades, pricing and change/cancellation details tailored to my frequent flyer status, company or the event I’m attending.
If I have the highest frequent-flyer status on a Oneworld carrier and receive specific flight results and amenities – for example, a premium economy upgrade – unique to that carrier and my status, would that increase engagement? Yes. Do business travellers want to see these options? Of course. These examples just scratch the surface of what the NDC standard enables for business travel.
As an investor, I see it like this: give business travellers a highly intuitive NDC-enabled, corporate-approved booking channel on a mobile app, with personalised flights, hotels and transfer options tailored to their frequent flyer status and purchasing history, and I know you’ll see higher engagement and conversion rates. Make that same business traveller jump through complicated hoops to get something they could do with one or two clicks on a – unmanaged – consumer app and you won’t.
The NDC standard is not some magic solution for all corporate travel problems, but I do believe in its positive impact – and a strong return on investment.