With 2017 behind us and the British Airways surcharged content now a couple of months old, it is worth reflecting on what this means for the future. At almost every travel conference in the last 18 months, NDC was on the agenda. What surprised me most throughout this period was the utter confusion and blurring of lines between the subject of NDC and the "surcharging of content".
These two areas are distinctly different subjects. Although it would be fair to say they have been cleverly blurred in the PR battle between the GDS providers and British Airways.
In simple terms, NDC is a new protocol for fare distribution enabling the airlines to file fares in multiple platforms consistently. At present the industry is still divided and unsure what this means for the customer but change often creates confusion in its early stages. The "surcharge" debate is something wholly different and has really only been linked to NDC for tactical reasons.
Let's deal with NDC first
At a very basic level the argument goes as follows. The airlines currently distribute their content via the GDS systems (via ATP co — no relation!) and directly through their websites. NDC is seen as the solution to single content distribution, streamlining the process and reducing the cost of loading and managing content for airlines. By achieving single content distribution, the airlines are then able to achieve another desired outcome — the ability to sell ancillaries and other services as they do through their own websites. They can also start to "dynamically" price according to the "request" being made. Think about when you make a request for one seat versus four seats into a "low-cost" carrier site. There is often no logic to the price you get back, for example.
Any change to a long established business model — the TMC, GDS and airline — was naturally going to provoke debate. The early years of this debate were heavily skewed around the industry (and we count ourselves in this early on) with many believing NDC was a route to direct relations between airlines and customers.
A number of years on, this seems somewhat ludicrous (again, I count ourselves in this). Most of the GDS providers have demonstrated they are able to work with NDC content and, somewhat ironically, are broadly ahead of the major airline's ability to deliver content that way. It will be fascinating to watch this develop. After all, the GDS systems were limited in their ability to tailor content to customers. Think of the traditional "route deal" and the percentage discount of "published fares". This seems almost archaic in an age of the personalised content we receive in our personal lives.
Early examples of the potential of NDC are interesting
For example, why not have a discounted fare that includes lounge access and perhaps catering if booked in advance? Corporate customers would then be able to be far more creative in their travel policies in an effort to reduce overall expenditure.
The flip-side (and often cited example) of airlines marketing directly to travellers is also a consideration. Does this have a potential impact on corporate compliance and therefore make the travel manager's job more difficult?
I would argue no. After all, frequent flyer programmes have been in place for many years — the corporate client is a highly valuable commodity to an airline and irritating the client too much is a short-term strategy. We come down on the side of improved content and flexibility of that content.
One major consideration going forward is whether the traditional legacy carriers change their pricing policy completely. Will over-booking become a thing of the past as traditional carriers price more like low-cost carriers?
I believe the opportunity for TMCs in this new world is to be able to offer far more strategic management. Advance booking patterns and policy can be very effective and evidenced. New types of deal and content can be created to drive and truly move market share. While there are potential concerns with these changes the overall upside when delivered appears to be positive.
So what about the surcharge debate?
Here is a simple history lesson. The airlines created and then sold off the very systems that now control the bulk of their distribution requirements. They pay significant sums (in their eyes) for this privilege and want to have more control. The process started in the late nineties when airlines were able to start marketing their products directly through their own websites. The commission cuts meant that the travel agents had to start charging fees. These fees led many small customers who effectively used a travel agency for free to go direct. All other customers that needed multiple carriers and "managed" travel started paying fees.
This latest "debate" around surcharged content is only the next stage of that process. A number of TMCs have negotiated agreements with British Airways to ensure that they are able to secure "un-surcharged" content through the GDS. It involves a change in the financial dynamics we previously operated under but still means TMCs can provide the service they need to provide.
What is interesting (but really no different to the late nineties) is how this will affect the TMCs that don't have a deal. Again a further look at history tells us that there were many family-run TMCs in the late nineties that merged, sold or went out of business when commission was first cut. It is likely that further consolidation will happen in this latest wave of change.
Is that a good thing? Perhaps we should ask the procurement professionals and consulting businesses, and ultimately customers, who will perhaps have less choice in the future. That said, one look at the business travel shows in the last few years would suggest that competition is alive and well, with many new brands of TMC emerging. So far it has been the agency community that has been most vocal while the customers we serve have not been able to be heard.
In conclusion, there is no doubt we are in a period of change. The GDS providers recognise that the world has changed and are adapting fast. TMCs have recognised that the financial model is changing much as it did in the late nineties. These changes could and should usher in a period of better customer provision. Content is critical in this consumer space and corporate suppliers need to be able to offer this in the B2B space just as other suppliers do so in the B2C. This won't be solved overnight but these latest changes start that process.