I recently read with great interest two articles: “Airlines Could Triple Ancillary Fee Revenue by Working with Agents” and “Airlines Forfeit $67 Billion in Revenue by Ignoring Agents, Report Says.” They focused on the opportunities for airlines to sell ancillary products through travel agencies. It is great to see growing industry dialogue on this topic, and I am in full agreement that travel agencies represent a powerful channel to sell airline ancillary products and services. However, I do believe the articles, as well as the study from IdeaWorks mentioned in both, risk oversimplifying the real issue at hand as relates to what it will take for ancillary selling to really take off in the agency channel.
So let’s talk some turkey: the real challenge is not implementation of EMDs (Electronic Miscellaneous Documents). Sure, EMDs are essential and must be supported. A few airlines, along with Sabre, Amadeus, and Farelogix already support the issuance of EMDs. As you may recall American Airlines, Farelogix, and a US-based travel agency delivered the first ARC-certified EMD. But really, looking at the full picture here, getting EMDs in place is relatively “small potatoes” compared to overcoming the vast number of imposed technical and commercial barriers to ancillary product adoption in the agency channel.
I think it is important we first understand the concept of personalization and customization in retail selling—which is really the core of the issue. Airlines today—through data gathering, CRM, and loyalty programs—have capabilities to, now more than ever, better understand their customers’ travel and buying behavior. And like the principle of Moore’s Law, these capabilities are accelerating daily. Airlines are rapidly developing personalization and traveler-authenticated search and sell applications for their websites. Just take a look at the selling experience offered on some of the state of the art airline websites if you want to get an idea of the gap that exists between online selling capabilities versus the travel agency selling capabilities. And that gap, unfortunately, continues to widen, leaving the agency community, and their customers, at a significant disadvantage when it comes to airline product personalization and traveler-authenticated selling.
But even with this fast-paced development and level of investment in airline websites, our industry is woefully behind the retail industry at large when it comes to personalized selling, custom product packaging, and product testing capabilities. Personalization involves more than simply quoting a static price for a product listed in a catalogue-style display, or quoting a product/price that is customized to the traveler in the specific instance. Personalization involves knowing what choice(s) the customer makes each and every time, and, as importantly, knowing what choice(s) the customer did not make. The ability to test specific offers with other variables, so that each new offer becomes more likely to be chosen by the particular customer, is paramount to customer satisfaction, loyalty, and repeat business. Even simple A/B testing (a way to quickly test out new offerings; quite common in retail and online selling markets) is only beginning to see the light of day in our industry. It is unlikely that the airlines are going to see the high levels of sales of ancillary products projected by IdeaWorks unless the GDSs and third-party technology companies significantly update the selling platforms they currently have available for travel agencies. Let’s face it, current travel agency “green screen” selling systems can do little to personalize and differentiate airline products.
The GDSs have been very slow, or have failed to recognize, that modern buy/sell technologies have long-passed the commoditized, one size fits all, static catalogue selling and display systems. Or, they have made the decision not to invest in these newer technologies, assuming that without alternatives, airlines would, by default, flock to the GDSs’ commoditized ancillary selling options. As proof, just look at the limited progress so far: outside of a few isolated “one-off” examples where the GDSs have custom-developed or “hard-coded” solutions for charging for seats and advance boarding—and made a lot of bluster in the market—there is actually very little to show in terms of real ancillary selling through travel agencies versus the airlines’ websites. Let’s not kid ourselves into believing that this is all because of lack of EMD implementations! Rather, it is the sheer lack of travel agency display and selling systems able to support new levels of airline product choice, differentiation, and personalization.
While the GDS have clearly developed some ancillary support, there seems to be an air of secrecy around what selling capabilities actually exist. Meanwhile, at least a handful of real, production-proven solutions do exist to support modernized, traveler-authenticated selling, available from a few third-party technology companies, including Farelogix. However, adoption of these systems is quite limited for the reasons explained above. Even worse, for the few TMCs large enough to be able to afford to invest in their own selling systems, overly restrictive GDS/agency contractual prohibitions appear to limit, or downright prevent, these TMCs from moving forward with alternative third-party solutions that support modern buy/sell methodologies.
For travel agencies to have the capabilities to truly sell and service airline ancillary products and services through a traveler-authenticated method, the GDSs will either have to fundamentally retool their systems—both internal workflow and agency selling platforms—or at least allow their agency customers to readily adopt third-party applications. Otherwise, it is quite unlikely that we will see any significant agency selling of ancillary products any time soon. As one example of existing capabilities, check out our SPRK merchandising demo.
In parallel, the corporate booking tools will need a “face-lift” to manage new ancillary-selling methodologies that not only customize for the traveler, but also for the corporation. Why the owners of these corporate booking tools are not advancing this type of innovative development that would clearly create new value for their corporate customers and the airlines is beyond my understanding.
So where does this all end? I continue to believe that a more open market and competitive opportunities will eventually prevail, and innovation will rule the day. Now wouldn’t that be something to be thankful for?