Build #1 - Suppliers, - (airlines, hotels, train, car rental) provide the core transportation and accommodation services for the travel industry Build #2 – Pre- Web - Traditional travel agents controlled much of the reservation volume.Build #3 – These travel agents used Global Distribution Systems or GDS which aggregates travel suppliers and provides the platform for travel transactionsBuild #4 – With the introduction of the Web, consumers now can book their own travel onlineBuild #5 – With the Web a new set of intermediaries emerged – meta- search engines such as Kayak that allow comparative shopping across sites and sends the consumer to other sites for booking and ticketing and Online Travel Agents (OTAs) that provide shopping and booking of all travel elements. Build #6 – The GDS continued to power most of the online travel sites, but a new intermediary for airlines emerged called a GNE (GDS New Entrant) which provided the airlines a lower cost distribution platform Build #7 – With the mass adoption of smartphones, a new booking eco-system has emergedBuild #8 – Each of the online players (Suppliers, Meta Search & OTAs) developed their own mobile presence powered by the GDS or GNEBuild #9 – With the announcement of Apple iTravel – mobile OS providers will be implementing core travel buttons such as part of the OSBuild #10 The mobile OS providers can act as the consumer gateway to all travel transactions
The Future of Travel Distribution
The Future of Travel Distribution February 12, 2013 .
The Shifting Distribution Landscape • Multiple Distribution Paths Co-Exist • The Problem with Direct Distribution • Mobile as THE Platform for Direct Distribution • The Impact of Consumerization • The Emergence of Mobile Smart Services • Consumer Mobile Ecosystems • The Alliance/Joint Venture Ecosystem • The Threat of Mobile OS initiatives • Summary . 2
Multiple Distribution Paths Co-ExistDirect airline distribution enables greater personalization Direct Distribution Traditional Direct Connect Airline.comLeisure TMCs Meta-Search Meta & OTAs Leisure Distribution CBTs OTAs Platforms Personalized fares and ancillary bundles NDC GDS Merchandising engines Multiple distribution paths will continue to co-exist • Driving personalization based on customer value is a key airline driver • Hybrid models where ancillaries are sold direct while primary air . 3 reservations continue to be driven through the GDS may enable co-existence between models
The Biggest Challenge with Direct Distribution The Corporate Traveler Why? • Fragmented Market –Thousands of TMCs worldwide • TMC/GDS have entrenched relationships (financial & processes) • Corporate Travel Manager turnover and shift to procurement result in a lack of C-Level understanding around distribution • Lack of clear corporate benefit . But… this is all changing as…. 4
Mobile becomes THE Platform for Direct DistributionMobile is not simply a customer touchpoint but the newplatform for direct distribution Mobile Timeline1980s 1990s Early June 2000s 2007 2008-2009 2010 2011-2012 2013 + Mobile Ecosystem Within five years the concept of mobile as a separate channel will disappear as the majority of travel search and booking will be on mobile devices .
The Corporate Travel Market Direct Distribution Obstacles Why the GDS will struggle to retain single-source role as the market becomes increasingly fragmented Single Source Fragmenting Forces Proponents • HBAs • OTAs • Mega TMCs • Regional/Local • LCCs TMCs • Rail • Large Multinational Buyers • Airline Merchandising GDSs continue an effort to capture fragmented inventory, but HBAs, OTAs, rail and airline merchandising continue to disrupt GDS aggregation goals. .Source: Adapted from PhoCusWrights European Corporate Travel: Fragmentation and Technology Special Project
Consumerization is Driving the Mobile TrendsThe traveler is driving the trend • With significant smartphone penetration and adoption of tablets, travelers have untethered access to travel content 24X7 Mobile Devices Apps Location-Based Services • Millennials entering the market have different travel booking habits • Visit 10.4 sources of online information before buying • 75% have a social media profile • 83% sleep with their mobile phone by the bed • 84% say user-generated content has a real impact on their travel decisions Millennials • 57% update social media every day while traveling Consumer travel habits and generational shifts are . impacting behavior and expectations for travelers Source: Tnooz and American Express Insights
Differing Reactions to the Emergence of Consumerization forManaged TravelConsumerization of Corporate Travel Capture Simplify Prevent Prohibit . Source: PhoCusWrights European Corporate Travel: Fragmentation and Technology Special Project
Door-to-Door Simplification vs. Open BookingTwo different technology approaches pushing change for corporate travelmanagement • Encompasses entire door-to-door • Allows travelers to book through booking experience dotcom sites and receive corporate • Uses expense insight to estimate discounts expenses such as transfers, meals • Collects itinerary elements for duty and multi-modal of care • Simplifies the number of clicks • Flows all information into expense needed to complete the transaction reporting process These technologies are just emerging and it is unknown if either will have a sustainable impact on managed travel . . Open Booking has the greatest potential to support airline merchandizing efforts Source: Adapted from PhoCusWrights European Corporate Travel: Fragmentation and Technology Special Project
Open BookingSupplier.com integration, TripIt itinerary aggregation andsupplier e-receipts form the foundation for a new managedtravel booking model E-receipts flow into expense report Allows traveler to book at supplier.com sites and still receive negotiated discount Feeds itinerary elements into expense reports Captures itinerary elements from multiple sources With the growth of Open Booking Airline.com sites have an excellent opportunity to capture more direct corporate business integrating merchandising strategies with corporate discounts . Source: Concur
Not all Corporations are Alike There are 100’s of 1,000s Small and Micro-Multinational Companies Worldwide that will benefit from Open Booking .
Technology Enabling Smart Corporate Travel ServicesServices that anticipate your needs are the future of mobile services Consumer Interface Smart Services • To be effective, smart services need to work with all points of traveler Proactive Disruption Services contact Smartphone • Truly smart services will focus on improving service for Driving Vendor Compliance disruptions, drive You’ll Miss Your Flight greater compliance Tablet Based on your current and adoption, and location and traffic patterns, you will miss anticipate services your flight. Shall I book a based on multiple later flight? sources of information . Pro-active Mobile Services Source: Adapted from PhoCusWrights European Corporate Travel: Fragmentation and Technology Special Project
Airlines’ Mobile Focus and Challenges Opportunities Challenges Ability to integrate with corporate Direct Distribution goals and programs Providing the right services to the Personalized Interactions right passenger at the right time Airlines can use mobile technology for more direct distribution and continuous customer engagement but offers must integrate with corporate goals, be personalized and contextually relevant .
Additional Challenges To be effective airlines must work across traditional silos to deliver a single user experience Siloed Nature of Airline Strategy and ExecutionDistribution E-commerce Airport Revenue Pricing Strategy Marketing Loyalty IT Management Management Mobile Strategy All these departments have role to play in customer centric distribution strategy Airlines can only use mobile technology for more direct distribution and continuous customer engagement if all airline departments work in concert to deliver customized, personalized services. . 14
Competing Consumer Ecosystems Proprietary ecosystems are driving unique purchasing paths Flight Search Hotel Finder iTravel ? Amazonsmartphone ? Control over mobile Local Search Customized Audiences Amazon Travel? Closed Mobile Consumer Ecosystems . • Though shopping content may be available across ecosystems – purchases are often only available within the ecosystem (e.g. iTunes, Amazon video)
Airline Distribution EcosystemAirlines can create an unique ecosystem based on alliance/ joint venturerelationships An airline mobile ecosystem may emerge providing unique content across alliance/ joint venture airlines customizing the experience across airlines VS . The challenge remains to capture a competitor’s frequent flyers 16
Potential Impact of Mobile OS on Travel DistributionConsumer Interface Intermediaries SuppliersPre-Web Global Distribution Traditional Travel Systems (GDS) Agents Web Meta-Search OTAs GDS Direct Connect Online Travel Mobile GDS • Mobile OS Meta- Search providers may act OTAs as the consumer Smartphone gateway to all . travel transactions
Summary • Multiple airline distribution paths will co-exist • Mobile is THE platform for distribution • The corporate travel industry has been the major obstacle to alternate booking paths • The trend toward Open Booking will enable corporate travel to be booked at airline.com sites • Airlines must execute a consistent customer interaction strategy across traditional organizational silos . 18