To kick off 2020, we asked thought leaders across the Farelogix organization for their views on the future of airline commerce. Last week, we heard from Farelogix CEO, Jim Davidson. Today, more Farelogix contributors share their views and predictions. Read on for more!
Retailing@Scale by Sue Carter, SVP Marketing
For many years, airline commerce teams have been looking for ways to make the process of booking flights and purchasing associated products as straight-forward as ordering from Amazon. For 2020, there are three key trends propelling airlines towards this reality and setting the foundation for “Retailing@Scale” in the coming years.
1. Intensified Offers: As Jim mentioned, controlling the offer comes with a responsibility to effectively handle spiraling and extreme search volumes. Many airlines (including Farelogix customers) are rising to this challenge by choosing new generation offer engines for the necessary horsepower. However, airlines are also seeking ways to reduce the volume of search behavior in the first place by better matching the offer to the customer need.
By better understanding what makes customers tick, airlines can not only improve uptake but can also reduce punishing search volumes. Take pricing, for example. As experts attest, a simple supply and demand view of pricing does not account for potent psychological drivers behind our purchase decisions. Identifying what a customer values and predicting what price they would be delighted to pay is groundbreaking. Why? Not only does it increase the likelihood of a quicker sale, but it results in less ‘shopping around’ (i.e., search). By integrating test-and-learn feedback loops into dynamic pricing models, airlines can push closer to willingness-to-pay thresholds, which in turn will reduce stress on airline systems.
2. NDC Retailing Platforms: NDC is not just about distributing offers through agencies and TMCs. A growing number of airlines are making NDC part of their omnichannel retail platform strategy. By selecting and integrating best-of-breed providers, airlines are learning to innovate around customer needs, harnessing and leveraging the data from across the system for smarter, science-driven retailing. The NDC pipe then enables a bonafide single source of truth that includes emerging channels such as voice and chat, moving us one step closer to retailing primetime!
3. The Order and Beyond: Airline retailing logically started years ago with a laser focus on the offer. But to scale retailing, attention is now needed on the end-to-end process. The star of the retailing show, the Offer, now has a best supporting actor – the Order. Initiatives such as IATA OneOrder and NewGen ISS, and corresponding updates to revenue accounting, are critical if we want to reach the future state of easy, Amazon-like shopping and fulfillment. Then we will know we are Retailing@Scale!
NDC-Enabled Innovation by Jason Balluck, Product Owner - NDC
This next decade has already been coined the ‘experience era.’ Travelers have had their core expectations set by some large, customer-focused tech companies, and every airline is now in a race to be the ‘experience of choice.’ Providing a seamless experience in an industry that is greatly influenced by just about everything else going on in the world is complex enough, without the added frustration of legacy systems. So, more airlines than ever before are adding an NDC API to their arsenal as a first step in their digital transformation.
NDC gives the flexibility to offer, personalize, and sell what you want to who you want – a goal for just about every airline Revenue Management and Ancillary team on the planet. Sue has commented on the selling possibilities, capabilities, and engines that can fuel an airline’s desires today. NDC is about extending the impact of these newfound capabilities (and indeed the business case to transform).
As selling partners race to connect to airlines via NDC APIs, airlines have never been more confident that they can control their destiny. With that confidence comes more introspection and insight. The airlines we speak with are beginning to look more closely at their existing processes to evaluate whether they are fit for purpose. They are asking questions such as: How will we store Orders? Does the PNR and ticket suit our needs, and more importantly, the needs of our customers? Will we perform the most daring of feats, the equivalent of heart surgery in a moving vehicle, by pursuing PSS transformationfiguration to become genuinely customer-centric, and reap the rewards?
There will no doubt be more questions around the shape of the new landscape, especially as airline alliances and joint ventures (JVs) are critical to the bottom line. Although, my bet is that no one wants to be left behind and that the ability to sell each other’s products will remain high on the agenda as we head into retailing mode. The ability to ensure the customer is looked after when things go wrong is also key, and an area in which today’s ecosystem could do much better. As for interline, we look forward to hearing and participating with the leading airlines and IATA on defining how interlining will work in a retailing world. After all, it can be a good chunk of the airline business, so it’s only natural to want to cover all channels with newly acquired capabilities.
For now, I leave you with just one last thought. NDC gives the rest of the industry something priceless, and that is openness. The ability for an airline to say, “Here are my APIs in a sandbox, have a play,” to a two-person startup trying something in their spare time, enables anyone to innovate and move the industry forward. Watch this space for a more in-depth look at new and incumbent companies innovating with (and consuming) NDC APIs.
Data-Science Driven Retailing by Diana Porro, Data Scientist
Data science is the ‘fourth industrial revolution,’ and it’s making an impact across the airline business, from operations to customer service. In 2020, we will see a significant leap in airline commerce activity that leverages the output of this discipline. “Getting the right product in the right place, at the right price, at the right time,” has become an emblematic slogan in the new era of retail. Putting this into practice will be a prime objective of data science in the airline business.
With the help of artificial intelligence, airlines are putting together and analyzing data from different sources such as booking data, social media posts, weather data, streaming data from travel APIs, etc. The endgame of learning customer preferences and factors that may affect/promote certain spending behaviors is to predict future buying behavior while optimizing both uptake and price.
Whereas work on optimizing fare pricing is already out of the starting blocks in the industry, in 2020 expect to see data science play a role in creating personalized ancillary recommendations, beginning with dynamic seats and bundles.
Travelers nowadays have plenty of choices, and with so many options available, it’s more important than ever to deliver an outstanding customer experience. So, why treat all customers identically and stick with the top-10 sold ancillaries for an airline, or a season, or a specific market? The most popular ancillary, like the most popular movie, doesn’t have to be the one that every customer wants/needs. This approach fails to unlock value from the long tail. Data science can take airline commerce to a Netflix or Amazon level, where ancillary products are recommended, or bundles put together based on what ‘customers like me’ have bought before.
With machine learning algorithms and supporting technology now readily accessible to gather and process all available data, creating, implementing, and learning from data is more real than ever. For us, the opportunity is ‘low hanging fruit,’ held back only by hesitation for diving in.
The data science team at Farelogix is actively working on bringing the benefits of machine learning and Artificial Intelligence to its customers and the industry. We look forward to showcasing some of our work at FLX-Disrupt 2020 and hope to see you there!
The Death of the Static Corporate Travel Policy by Nancy Delgado, Director of Product Marketing Management
With the dramatic distribution changes that we see in the corporate travel sector, is a static policy to manage corporate travel still valid? While at the IATA Air Retailing Symposium 2019, I heard Cory Gartner from American Airlines ask a thought-provoking question. “Why do we have to report on the Lowest Logical Airfare if we are moving to a retail-led world, where we compare our travel purchase on value and not price?” This question got me thinking about the effectiveness of the corporate travel program and something we may soon see – dynamic travel policies.
After spending many years working in corporate travel, there wasn’t a single reservation where we didn’t capture the lowest logical airfare (LLA) along with a reason code, should the traveler not accept this fare. LLA reporting is how a TMC demonstrated its value. But, how are agents supposed to do that in a world where airlines are negotiating and offering corporates bundles of fares and ancillaries?
Does the corporate buyer need to negotiate the same kind of bundle with every one of their preferred airlines? That seems unlikely. Will the corporate buyer have provisions in their travel policy that allow travelers only to purchase the negotiated bundle? Perhaps. Or does the ATPCO Next Generation Storefront (NGS) initiative solve this problem altogether? I don’t think that it does. While NGS is a great way to establish a transparent shopping experience, we still need a mechanism to aggregate data and report on various trends, patterns, and cost savings.
The easiest thing to do is to compare the bundled fare to the LLA plus the cost of the related ancillary product.
Bundled Fare including Bags & Wi-Fi - $320
Lowest Fare - $300
Checked Bag - $25
Wi-Fi - $15
Total - $340
= Corporate savings of $20
The problem here is that many factors can affect the calculation. For example, how do you know that the traveler intended to check bags in the first place? What if they are a frequent flyer and don’t pay for bags? Does the price of the bag go up if you purchase it at the airport? Not to mention that filed fares and RBDs will someday be a thing of the past, so will LLAs be relevant any longer? I suspect that corporate travel purchasing won’t move instantaneously away from managing cost to value. Still, the challenge of managing the effectiveness of the corporate travel program just got a lot more complicated.
Enter the Dynamic Travel Policy. Essentially this is the ability to adjust the travel policy based on specific criteria such as the duration of the trip, cabin, tier level, form of payment, etc. Hotels are already using this approach. For example, a travel policy may state that the maximum room rate in Miami is $250 per night. But, if there are no rooms left at that price, then the maximum room rate allowed in the travel policy is adjusted accordingly. If airlines can determine how to best price a seat, why can’t we apply the same type of algorithm to determine the “Most Logical Offer” (MLO)? It will take some time to perfect this model. Still, by leveraging artificial intelligence and machine learning, you can create a travel policy that makes sense and adapts to current market conditions.
If you are interested in exploring these topics and more, join us at FLX-Disrupt 2020. Taking place April 27 – 29 in Miami, FLX-Disrupt is a complimentary event for airline professionals seeking to take their revenue management, merchandising, and distribution strategies to the next level (maximum of three representatives per airline). For more information, visit www.flx-disrupt.com.