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The Institute of Travel Management did not shy away from perhaps
the most divisive corporate travel issue of the moment at its autumn conference in
London last week, where it brought three travel managers and three
airline representatives together on stage in a lively session which inevitably focused
on New Distribution Capability (NDC) and distribution strategies.
Twelve months since American Airlines’ announcement concerning
its new distribution strategy – which included removing up to 40 per cent of
its fares from traditional EDIFACT channels – one travel manager was
sympathetic to carriers’ commercial strategies but was unequivocal on the
disruption it had caused her travel programme.
While NDC was designed to help airlines better control,
differentiate and retail their product, as well as offering a route to distribution
savings, the upshot for many corporates has been difficulties accessing content
through their preferred channels and subsequent programme leakage.
“We understand the economic realities of the situation we’re
in. As buyers we’re not opposed to NDC or new distribution strategies –
everyone has to make money,” said Sue Jones, global meetings and travel
manager, Ingka Group.
Asked whether airlines and customers were aligned, however,
Jones said she was “diametrically opposed”. She continued: “What the airlines
are doing with this modern retailing strategy is treating individual travellers
as the customers. That is absolutely fine on the leisure side of the house, but
on the corporate side of the house it’s us, the organisation, that is the
customer.”
NDC is keeping us awake at night. We can’t find a way through this right now and I genuinely don’t know what to do
She continued: “Where you [American Airlines] are removing
content from the channels we use – we don’t really have alternatives right now
– then every day my inbox is blown up by ‘I can find this cheaper if I go
direct’, ‘I can do this better myself’, ‘Why do we have an agency?’, ‘Why do we
have a booking tool?’, ‘Why do we have you?’ It keeps me and my team awake at
night.”
Jones questioned whether the airline “needs us quite as much
as it used to” but warned that leisure travel will plateau. “We can’t find a
way through this right now. I genuinely don’t know what to do.”
Focus falls on travellers, not corporates
American Airlines’ director of global sales, Kyle Cumbie,
said its long-term strategy was “oriented around the traveller” and making sure
they have access to digital self-servicing and their loyalty recognition benefits.
Since April, 50 per cent of the carrier’s indirect volume has come through NDC channels, he said,
a figure that will “only increase” through the end of the year and into 2024.
Cumbie added: “The thing that has driven this strategy is
the reality of where people are travelling and what we’re seeing in the data.
Our revenue is 35 per cent leisure, 35 per cent blended, 30 per cent business
travel. Corporate travel is still very, very important to us but what’s
interesting about that 30 per cent is that the managed corporate volume is much
less than it was and SMEs are growing significantly more to levels we’ve never
seen before. That’s what’s driving the strategy – it’s making sure long-term
that we’re building out ecosystems, whether direct or indirect, that provide
the traveller with the best experience.”
He added that its GDS agreements – announced in October last year – were the
foundation of its NDC strategy. “We heard for ten years this won’t work until you
integrate with the GDS and that’s exactly what we did.”
David Oppenheim, director of global sales at British Airways,
noted the carrier had “made a different set of content decisions” to its partner American, but said
the industry needs to “get off the 50-year-old technology and I think the GDSs
are there now”.
British Airways is live with its NDC content in two out of
the three major GDSs (Amadeus and Travelport), said Oppenheim, while American
is live in all three. “It’s not about the tech providers now because they’re
doing it, it’s really about the TMCs. They’ve built a lot of custom work on the
back of old technology and for them to improve… we have some that are doing it
and some that aren’t.”
He continued: “The reality is that we have corporate
customers and agency partners that are moving to this [NDC], and so it is
possible. It doesn’t mean it’s easy. It’s not easy for us, it’s not easy for
the GDS, and it’s not easy for anyone involved in this because it’s a massive
change.”
The third airline representative on stage, Matt Raos, senior
vice president of global sales at Qatar Airways, said: “I’d caution buyers that
if you don’t get onboard [with NDC] there’s going to be some content – and good
content – quite soon that you’ll miss out on. We don’t want to do anything
that’s disruptive to the distribution chain but we don’t want that distribution
chain to miss out on what’s coming.”
Diminishing corporate deals
Jan Jacobsen, travel and mobility
procurement director at Accenture, agreed with Jones in that the focus of airlines with NDC is “too much on the end customer and not on who’s paying”.
He continued: “I’m not saying at
all that the traveller shouldn’t be looked after but we have policies in place
for a reason. I’m all for NDC but let’s get at the table and make it happen
together.”
If you’re going to become our least profitable business we can’t invest in all of the things we do for corporates. They have been difficult conversations
Jacobsen also argued that when
considering corporate deals, airlines should take into account the overall
value of an organisation’s workforce – not only of its business travel activity,
but also those employees’ leisure spend too.
“It could be any supplier, not just airlines, but they have
to look at this holistically – the value proposition of what we bring to the
table and that’s 740,000 employees worldwide. They also travel for leisure,” said
Jacobsen.
“We do [airline] status matches for a reason. They ask us to
push those promotions because they want our travellers and their residual
income. We do inhouse marketing for our [travel] partners and we don’t charge
for that. I’m giving you access to a tribe of 740,000
people. That becomes your tribe too. Why doesn’t that have value? That should
come into the equation too.”
Like American, British Airways’ leisure business has “grown
tremendously” since the pandemic while business traffic is “meaningfully below
what it was”, said Oppenheim. And although business travellers are still “incredibly
important to us”, he pointed to a significant change in yields affecting the
availability and extent of corporate deals.
“If you look at the average price a corporate traveller was
paying [pre-Covid] – because they tend to book late and other things – and the average
price that a leisure traveller was booking, there was a very large gap. The
problem is it’s got much closer,” said Oppenheim.
“We’re now in a period when the planes are full
again, we’re coming to these negotiations and we’re saying that your business
is really important to me, we really want it, we’re willing to invest in you,”
he said, “but the reality is that if I take that closer yield gap and I
give you what you’re used to [the level of discount], now you become my worst
business. And that’s not where I want to be. If you’re going to become our
least profitable business we can’t invest in all of the things we do [with corporates].
They have been difficult conversations.”
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