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For former Global Business Travel Association executive director and veteran corporate travel executive Mike McCormick, there’s no fighting the changes travel management now faces and no avoiding uncertainty.
The American Airlines NDC-powered pricing mandate beginning now is signaling a major inflection point in the travel industry. It is the canary in the coal mine. However, the canary will be just fine.
Everyone across the travel industry will ultimately feel the impact in intended and unintended ways. American Airlines is taking a leadership role by placing a bet with a calculated risk to drive an outcome, but it was actually the advancements in technology and business processes combined with slow industry recovery to pre-pandemic levels of travel spend that brought on these changes.
The inevitable next stage in re-engineering the distribution landscape is now in full bloom.
Although media and social channels are overloaded with lists of every kind, I can’t resist adding a list of my own on this topic. Here are five misconceptions and three trends to watch.
Misconception 1: Business travel will never exceed pre-pandemic levels. Sorry, Bill Gates, but this is false. Leisure travel has rebounded and business travel will eventually exceed previous levels. It will still take more time (yes, four more years), and there will be headwinds and tailwinds based on many socio-economic and environmental factors, but travel will fully recover and thrive. Recent commentary by Southwest Airlines that their system capacity will return to pre-pandemic levels this year is yet another positive indicator that the recovery will continue.
Misconception 2: Technology alone is the key to success in business. It is not. Delivering differentiated service (and value) was, is, and always will be the key to success. But how service is actually delivered is undergoing another major transformational change not just in the travel industry, but in every type of business imaginable. Case in point – the use of AI-powered technology to replace more costly human interaction to deliver travel-related services. Ultimately, the customer will decide how accepting they will be about direct AI-generated responses. As traveler demographics continue to evolve, companies must test and closely monitor customer response, both short-term for problem resolution and long-term for customer retention. Those who blindly implement technology to reduce costs will lose, those who carefully integrate will win.
Misconception 3: American Airlines’ gambit will fail, reverting market conditions to their previous state. It will not fail. American Airlines’ leadership read the market signals correctly. But being first sometimes has a price. The ultimate goals are to both (1) weaken or break the current financial link between GDSs and TMCs and (2) create more direct relationships with travelers, all while charging corporate customers as much or more over time while airline system capacity continues to rebuild. This next 12 to 18 months will not be without pain, but if American Airlines is resolute and others follow, the entire industry will adapt. History in our industry has proven this time and time again. Just ask Air Canada, Lufthansa and Marriott – to name a few. They took an initially unpopular position and ultimately benefited in the long-term.
Misconception 4: Travel management companies will lose. Wrong again. TMCs are possibly the most resilient part of the travel distribution chain. Historically, they have had the most comprehensive, direct customer relationships both with the traveler and the corporation. If TMCs keep evolving and finding ways to effectively serve customers (both business travelers and the entities that ultimately pay the bill), they will continue to thrive. Some of those with new business models will prosper but many traditional players will evolve to compete. In the business travel space, the customer will always want a single marketplace to shop, book and receive service and support. Those entities that effectively provide that robust marketplace access will win.
Misconception 5: Fintech is a differentiator in travel. Alone it is not. But the applied use of fintech will be an essential part of a successful formula to support what is ahead in dynamic and continuous air and hotel pricing, combined with the plethora of payment options that customers require — and providers require for efficiency, fraud minimization and data capture.
Trend 1: Move over dynamic pricing, continuous pricing is on the way. More precision means better matching of prices to what a customer is willing to pay at a specific point in time, and a more granular supply and demand curve. Intermediaries that can provide true marketplace intelligence so suppliers can more effectively reach and convert customers will be highly valued in the future. However, corporate customers and their providers also will face a more complex environment in which to measure and track negotiated program success. Customers can ultimately benefit, but it will take retooling and retraining to adopt and fully leverage the latest technology.
Trend 2: Creative, highly personalized packaging of products, points, currency, services and benefits is the future of leisure travel. There is still plenty of room for innovation here – and we have only begun to see the impact of the bank-travel provider alliances. Given the levels of investment that have poured into this area, it is an exciting time ahead for the personal travel space. Consumers will find excellent value in areas such as international travel and cruises, as those sectors rebuild demand and capacity.
Trend 3: Corporations will take a fresh look at the whole travel buying picture, including marketplace access, data sharing, expense integration and duty of care. Traditionally, all of those companies that had enough travel spend and could dedicate experienced resources to managing their travel programs had a chance to do this. And only some of those companies were successful. The key will be for buyers and providers to focus not just on cost reduction, but leveraging the many technological advancements to better optimize growing travel budgets as business travel continues to rebound. Leading companies will invest resources to competitively manage their travel programs for both business success and employee retention – no matter the size of the travel budget.
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Broad-scale, systematic change is challenging by any standard, especially with so many interdependent links in the travel distribution chain and pressing deadlines that require change management. The future always holds uncertainty. Brace yourself. Or better yet, embrace the changes underway.
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