Almost two years ago buyers and TMCs locked arms in protest when Lufthansa announced its intention to surcharge any bookings made using the GDS with a €16 Distribution Cost Charge (DCC).
On Thursday morning of last week Lufthansa announced that two large UK TMCs — Clarity Portman and Click Travel — would have live NDC-capable direct connects with the carrier from this week (1 May). That announcement prompted a scathing response from Paul Wait, CEO of the GTMC, the trade body for UK travel management companies.
Two years have passed. Are we still talking about the same problem?
Despite vociferous protests from both TMC and corporate buyer trade associations some corporates such as Siemens and Volkswagen implemented direct connects with Lufthansa. So now have two UK TMCs.
Both sides of the argument intriguingly enough centre on the customer. At the Lufthansa press conference Pat McDonagh, chief executive of Portman Clarity, said, "This is about the customer. We need to be sure we're able to personalise the offering." In a press release responding to the announcement, the GTMC's Wait said, "a direct connect between TMC and airlines does not offer a positive, efficient customer experience...The inevitable knock-on effect is the cost to the customer increasing."
How can business travel service providers differ so widely about what their customers want?
Wait quite rightly cites everyone's number one concern — cost. But there are different ways to manage pricing. TMCs' incentive payments from GDSs can subsidise client fees. Lower TMC operating costs can also reduce fees. Click's executive chairman Simon McLean explained how new technologies could increase back office automation to make TMCs more efficient because the standard process involves much more than booking the ticket and demands human intervention for everything from seat assignments to changed itineraries.
The GTMC argues that booking flights via direct connects with all the airlines will be a costlier and more time-consuming process than booking via the GDS multiple-supplier content enables comparison shopping.
This assumes that what is being purchased is an all-inclusive ticket for a traveller to fly from A to B. That is quickly becoming obsolete because tickets no longer represent the total cost of a flight and fare classes no longer represent a standard product.
Business customers' exposure to different processes in other sectors in their private lives is changing their buying expectations and behaviour.
The traditional GDS does not replicate carriers' own websites to allow merchandising and the ability to sell ancillaries or personalisation and the targeted offers, two of the factors driving IATA's NDC standard initiatives.
Andreas Koester, Lufthansa Group senior director of sales for the UK, Ireland and Iceland, contends that in the future direct connects will allow personalisation and specific corporate bundles, a corporate fare including WiFi and Fast Track access for example. They will also be able to offer specific special offers to corporate clients before release to the GDS.
TMCs may still charge buyers fees and receive incentives from GDSs and suppliers may still pay GDSs to hold their content but buyers are no longer comprehensively using corporate route deals and volume targets. They are buying more than fares and they are cost-conscious.
The GDS offers a lot of content from a lot of suppliers. Do tomorrow's customers want that or do they want something directly relevant to them?