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1 09/28/12
Profit Stream The new distribution model
Yanik Hoyles, Head, Business Development,
IATA
New Distribution Capability
Claude Muller
IATA
Personalization
Retail
Differentiation Comparison
Merchandizing
Shopping Transparency
Value Affinity
Visibility Simplicity
Choice
What I like
What my friend like
Flexibility
Personalization
Retail
Differentiation Comparison
Merchandizing
Shopping Transparency
Value Affinity
Visibility Simplicity
Choice
What I like
What my friend like
Flexibility
Personalization
Retail
Differentiation Comparison
Merchandizing
Shopping Transparency
Value Affinity
Visibility Simplicity
Choice
What I like
What my friend like
Flexibility New Distribution Capability
Simplifying the Business 6 COPYRIGHT IATA 2012
NDC in a Nutshell NDC = New Distribution Capability = Industry standard Fill the gap – Direct vs. Indirect Revenue opportunity – Increased sales of ancillary
products and services, product differentiation, personalized offering
For passengers – more choice of products and services, more personalization, and more transparency
Balanced view, win-win-win equation
Simplifying the Business 7 COPYRIGHT IATA 2012
NDC – Collaboration across the Industry Open and transparent engagement process Everyone invited
Airlines (IATA members and non-members) System providers – GDSs and others Third parties – ATPCO, ARC, etc. Trade – TMCs and online TAs
Engagement at all levels On the CEO agenda Airline Distribution Heads SMEs – Distribution Data Exchange Group – 3 streams, ongoing activities, next
meeting 27-30 November, Montréal.
Simplifying the Business 8 COPYRIGHT IATA 2012
Risks
Learning
Reso787
Mock-up 1.0
2012 2013
2014-2016
Ref. Imp. v1.0 Ref. Imp. v2.0
Request for Pilot Participation
Pilots Review
XML Standards
Mock-up 2.0
Industry Pilots
Pilots Launch
Business adoption
Pilots Review
The NDC Roadmap
IATA World Passenger Symposium
NDC – An Independent
Perspective
16 October 2012
© Travel Technology Research Ltd 2012 All Rights Reserved
Richard Clarke Travel Technology Research Ltd.
The Opportunity and the Challenges
• The airlines must find a way to increase revenues, cost reductions alone will not deliver a sustainable industry – At least one that returns the cost of capital
– IATA is probably the only organisation that can bring the stakeholders together…
• There are some significant barriers to overcome that are not solely technology related, but relate to the supply of technology – GDS contracts
– PSS and airline systems contracts
• The new business model itself will not be straightforward – Direct competition with existing specialists
– Retailing online and offline
– Customer acquisition is costly especially online
– Further consolidation in distribution is really scary (to me)
© Travel Technology Research Ltd 2012 All Rights Reserved
Incentives - a rethink required ?
• Incentives appear to be a real challenge – GDSs provide incentives to agents to retain relevance and position
with airlines, who in turn have to pay higher fees • Potentially inhibits technology innovation, there seems to be little reward
available for those investing in new distribution technologies – But who can blame them ? They are defending their business and there are
some interesting aspects such as neutral availability that may offer the consumers the best view of the market
• A significant barrier to entry – No new entrant has ever disrupted the market share of the existing providers
– Airlines have generally reduced commissions to agents • Drives even more dependence on the GDS incentives for selling that
portion of travel related to air
• Agents need air for relevance also and are technologically dependent on the
• OTAs focus on hotels and other services where commissions are generally better
© Travel Technology Research Ltd 2012 All Rights Reserved
Incentives - a rethink required ?
• Incentives based on better outcomes for all ? – Would airlines consider paying a higher booking fee for more revenue
? • Many would argue that functionality such as married segments already
delivers this…
– Would the existing suppliers then have an incentive to deliver more capability at a speed that better suited the airlines ?
• Can new entities really emerge ?
– Would the agents be able to obtain a share of the increased revenues and would commissions and overrides increase as revenue increased ?
• This would be reversal of the trend for many markets and agency relationships
© Travel Technology Research Ltd 2012 All Rights Reserved
….unless we get the incentives right, NDC can’t achieve it’s full potential….
What’s Being Done About It?
Moderator: ↗ Yanik Hoyles, Head, Business Development, IATA Panelists: ↗ Aleksander Von Bernstorff, Manager Distribution
Strategy and Sales Costs, Lufthansa ↗ Dr. Karl Isler, Head of Revenue Management
Strategy and OR, Swiss International Air Lines ↗ Keith Wallis, Business Development Manager,
Distribution, Air Canada
IATA World Passenger Symposium Profit Stream – The New Distribution Model
New Distribution Capabilities & Dynamic Airline Shopping Opportunities in the New Distribution Model Alexander v. Bernstorff Senior Manager Distribution Strategy, Lufthansa German Airlines
World Passenger Symposium, 16 October 2012
IATA World Passenger Symposium Profit Stream – The New Distribution Model 16 October 2012 Page 15
Imagine a new distribution world where the traveler gets the rights product; not just a ticket from A to B but a flight experience tailored to his or her needs
Dynamic response based on “who” is asking and will re-processes following modifications the customer may wish to make to the original request
Airline: The content is being fully manufactured and throughout controlled by airline Shopping: Ability to display products in all outlets, and for customer to add or remove items
throughout the process Standard: Industry “recognized way of doing things” which enables competition and thus
stimulates innovation and improves consumer benefits
Dynamic Airline Shopping to revolutionise how airlines assemble and sell their product, with more customisation and more customer choice. All distributed through an industry-wide messaging standard.
IATA World Passenger Symposium Profit Stream – The New Distribution Model 16 October 2012 Page 16
New Distribution Capabilities are going to give airlines the capability to differentiate their product and create increased consumer choice.
Booking requests will be answered directly by the airline host with a customised offer, based on the degree of customer identification.
By this, the airline controls the offer creation and channel specific content distribution, including ancillary services
The new DAS XML messaging standard enables all players in the industry to support enhanced selling of air products through one single API.
Facing new opportunities, IT suppliers can take on various roles and provide cutting edge technology to travel agents.
Dynamic Airline Shopping API Personalised Price offered with Product Attributes
Price & Product Assembly System
Fares Availability
Merchan- dising Schedule
Airline IT Provider(s)
Distributor
Travel Agent
Travel Agent
Identified Shopping (Attributes) Who is asking for my product? What is the purpose of travel? What preferences does the customer have?
Travel agents, supporting DAS, can sell a wider variety of airline products and product components and thus better serve our common customers.
Aggregator
Travel Agent
Integrator
IATA World Passenger Symposium Profit Stream – The New Distribution Model 16 October 2012 Page 17
DAS creates opportunities for all players related to airline distribution. But moreover, it enhances competition to the benefit of the consumer.
- Travellers benefit of increased transparency and choice, as well as - better customer recognition and individual preferences catered for; - Comparison across multiple dimensions, not just price, is possible
- Airlines recognise and reward customers individually - They gain the ability to differentiate their product from the competition - Selling harmonisation in all direct + indirect channels can be achieved
- IT suppliers exploit and benefit from new business opportunities - They stimulate innovation and provide cutting edge technology - They are able to distribute the same content as the airline website
- Travel agents offer an enhanced airline product to customers … - … and provide better customer service and more value … - … facing greater choice among IT providers and less dependency
IATA World Passenger Symposium Profit Stream – The New Distribution Model 16 October 2012 Page 18
Thank you very much!
Direct , Merchandised Distribution – Today
and Tomorrow
Air Canada – IATA WPS 2012
Air Canada’s ac2u API
A set of XML web services
A direct connection to all of Air Canada’s internal systems
Complete feature set: shop, book, service
Access to all products, features, and functions
A means to communicate our offers directly to preferred suppliers
Why is this important?
Data can be used by other systems
Data can be made to look like anything
Product leads Distribution Strategy
Simple, bundled, products
Transparency Choice Loyalty Trust REVENUE
Clear value proposition
Flexibility and choice
The Air Canada product was revised and merchandised in 2006
Significant increase in revenue per ticket
Little/no increase in cost per ticket
Q3 …
Q4 …
Q1 …
Q2 …
Q3 …
Q4 …
Q1 …
Q2 …
Q3 …
Q4 …
Q1 …
Q2 …
Q3 …
Q4 …
Q1 …
Q2 …
Q3 …
Q4 …
Q1 …
Q2 …
Q3 …
Q4 …
Q1 …
Q2 …
OpRASM
CASM
CASM ex Fuel
Does it work?
Travel Agency
Online Agency
Corporate SBT
GDS
RESIII
Merchandising Engine
Who is on the other end?
Availability Manager
Revenue Management
CRM
Benefits
5% of total bookings globally via ac2u
Over 30 partners, including
Corporate SBTs
Travel Agencies
OTAs
GDS
65% of tickets are not Tango
20% of tickets include an ancillary product
Rewards for Small Business
Strategy Evolution
• Content Removal
•Tango Fares
Content Rationalization
• New content direct
•Flight Pass •Travel Options
Content Creation
• Preferred features across all Products
•Better discounts •Better Terms
Content Differentiation
Agent Portal API Partners
What next?
Expansion and enhancement of Rewards for Business
True dynamic pricing
CRM database
RM systems
Managing the offer (fare, terms and conditions, ancillaries) based on who, when, what and how they are asking
Build a unique, one-time offer at time of shopping based on known customer attributes
Generate new customer touch points
28 8 4 09/28/12
New Distribution Capability Eric Leopold, Director Passenger, IATA
Personalization
Retail
Differentiation Comparison
Merchandising
Shopping Transparency
Value Affinity
Visibility Simplicity
Choice
What I like
What my friend like
Flexibility New Distribution Capability Just an idea…
A GDS and Trade Partners Point of View
Keynote Speakers: ↗Cyril Tetaz, Head of Marketing, Airline
Distribution, Amadeus ↗Tony Berry, Director, Hogg Robinson
Group ↗Jan Rolf Moer Forsdahl, Travel Trade
Director, ECTAA
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Travel Inspiration and Personalisation
Cyril Tetaz, Head of Marketing,
Airline Distribution, Amadeus IT Group IATA World Passenger Symposium 2012
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Travel search is BIG…
175,000 products in the biggest
store
~26,000,000 songs
> 1,000,000,000,000 options
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61 70
83
28 30 32 30 33
…and people search more and more
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58
2011
38.2 Bn
45
2010
16.4 Bn
20 2012E
56.6 Bn
FQ trx / bkg Fare Quote transactions
Amadeus pricing transactions Absolute volume and transactions per booking
Shopping trx per booking OTA vs airline.com
+24%
2010 2009 2008 2007 2011
+5%
110
OTA Airline.com
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35%
15%
37%
40
Channel hopping
airline.com
Airline Ticket Office
Offline TA
Online TA
Point-of-sale
13%
Source: PhocusWright; Amadeus estimates
Primary referrer to airline.com
30%
24%
6%
20%
15%
5%
Direct navigation
Organic search
Paid search
Other travel sites (OTAs, reviews etc)
Other non-travel sites
Metasearch and Lead Generation
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Source: PhoCusWright Inc. Base: Discretionary travelers (Weighted n – U.S. 872; U.K 831.; Germany 913; India 797; Russia 768; Brazil 831)
Travellers expect more flexibility on search In the earliest stage of thinking about your last discretionary trip, how flexible were you in the following aspects of travel?
% responses “somewhat” and “very” flexible
58%
58%
55%
44%
41%
44%
40%
Distance Travelling time
Budget Travel dates
Mode of transportation Activities Climate
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How does Amadeus power search & shopping today
Tech enablers
Cache Polling
Fare Quote
Massive Computation
Platform Open
systems
Extreme Search
Travel Seeker
Pricing feeds
Affinity shopping
Products
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Personalisation in the Amadeus CRS
Carriers which can adjust availability through polling: 110 Carriers using Frequent Flyer feed from Amadeus: 10
Scalability issues? Readiness?
Willingness to use?
Carriers can adjust price of ancillary based on Frequent Flyer 50+ carriers on IT 24 on Distribution (9 Implemented)
Technical or commercial limitation?
Deployment?
“Pull” for Availability (polling)
Ancillary Services
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Travel inspiration will rely on more complex, broader and faster search.
Key points on NDC
There are solutions today already enabling personalization and differentiation.
How can NDC deal with the search and shopping complexity? How can we balance caching and polling
to build a more inspiring travel experience?
What are the enablers – beyond standards – to facilitate adoption across the value chain?
The Distribution Landscape Tony Berry – Industry & Airfare Distribution Director
Hogg Robinson Group plc (HRG) is the award-winning international corporate services company.
HRG specialises in travel, expense and data management underpinned by proprietary technology.
Today’s Technology
How it is changing
Agent Point of Sale
Self Service App
Self Service Browser
Microsoft Outlook
Data & Reporting
ACC
ESS
SER
VIC
ES
CO
NTE
NT
INTE
GR
ATE
Administration
EXPENSES
APPROVAL
PAYMENT
COMMUNICATE
SECURITY
PLAN SHOP BOOK REVIEW CONTROL ANALYSE
HRG UNIVERSAL SUPER PLATFORM
52 09/28/12
Networking Break
The Value Chain in the Spotlight Moderator: ↗ Marc Rosenberg, President, Marsalyn Creative Panelists: ↗ Tony Berry, Director, HRG ↗ Richard Clarke, Founder, Travel Technology
Research (T2RL) ↗ Jan Rolf Moer Forsdahl, Travel Trade Director,
ECTAA ↗ Cyril Tetaz, Head of Marketing, Airline Distribution,
Amadeus ↗ Paul Tilstone, European Managing Director, GBTA
Welcome Reception Sponsor
