Opinion: Technology will change the rules by which the industry is run

By Travolution
By Travolution
December 18, 2013 03:11 PM GMT

Technology is going to continue to evolve at a frightening pace and the rules by which the industry has been run are about to change, warns Ken McLeod of Advantage Travel Centres

Every agent should have been in Dublin in October to listen to 600 airline and distribution chain representatives at Iata’s World Passenger Symposium.

Sitting in the audience I realised the possibilities offered by Iata’s New Distribution Capability (NDC) are dwarfed by the challenges facing the industry as it undergoes a fundamental change to distribution, pricing and relationships.

The airline world has been evolving faster than ever.

Systems have been remarkably efficient, but as airlines become more complex and revenue management and yield ever more important, the process is becoming more difficult to control.

NDC was discussed in almost every session at the symposium. While we know change is on the way, the questions raised were what will it look like and how fundamental will it be?

Only in one of the final sessions did we hear GDS, agency, airline and corporate representatives agree that collaboration, transparency and value have to be at the heart of any change.

Diversity of opinion

The GDSs were well represented throughout and talked some sense, especially the fact that customers’ trips are not just only airline seats but also hotels, car rental and many other services.

The airlines are fixated on reducing the cost of distribution and raising more revenue through ancillary sales. However, you only have to consider some of the statements made over the three days to understand the diversity of opinion:

“Airlines have less control on pricing than almost any other industry.”

“NDC is a key component of change in revenue management.”

“It’s not about the price of the ticket. It’s about what passengers will pay in total for the travel experience.”

“There is a complete lack of trust between stakeholders on NDC.”

“The marketplace must determine solutions.”

“Who is paying for all this?”

NDC is only part of a creative and technological evolution that will impact an industry that has lived, until now, with margins of $2.50 per seat.

As one speaker pointed out: “Starbucks make that on every cup of coffee.”

No understanding at the top

It reminded me of something B&Q is experimenting with: trialling different pricing for the same products on different days of the week, with products more expensive at weekends and cheaper on quiet days.

This leads to a variety of pricing elements for loyal customers and allows the company to link offers such as two for one to certain clients.

Why is B&Q doing this now? The technology available makes it easy.

Technology is going to continue to evolve at a frightening pace. The rules by which the industry has been run are about to change.

On leaving Dublin, I had mixed feelings. On the one hand, a lot was achieved in understanding the challenges. But I couldn’t help thinking those at the top of the tree do not get the message.

My opinion is that travel management companies and agents are not ready for the change. It will happen soon, maybe gradually to begin with, but many will be taken by surprise.

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