There is little doubt opportunities lie ahead for airlines when it comes to merchandising, retail and customer service up in the air.
But, there will be challenges too.
During last week’s IATA World Passenger Symposium tnooz met senior Sabre executives for a frank discussion of the main priorities for airlines as they improve their IT infrastructure and business strategies.
Stan Boyer, vice president solutions marketing; Kathy Morgan, vice president, product marketing, travel product solutions; and John Samuel, senior executive, product & technology innovation, at Sabre Corporation share their perspectives on the landscape.
They also touch on the sticky topic of systems security.
Building loyalty on the back of NDC
On fostering brand loyalty, Boyer says:
“Certainly there is always a case for loyalty, but is it loyalty as we know it today? For the frequent traveler, of course it is, because they are entrenched in that [rewards] model. I also think that the influence of social media has a bigger impact today, with regard to enhancing that customer satisfaction in real-time.
“Whether it’s loyalty, or affinity, there’s an argument to be made that price is a driver. I think for a certain segment of the population we are seeing that. But I think, the smarter consumers become, the more likely they are to make logical choices. And, therein lies the opportunity for an airline.
“That’s the promise of a capability like NDC where you are standardizing a more full-featured offer than what airlines may have had in the past.”
Better merchandising through technology
On using the broader range of product features which can be presented with NDC to encourage repeat value purchases rather than relying on fares deals alone, Morgan says:
“It’s even broader than the standard of NDC. It is really to the core of how we are evolving our shopping capabilities, on this concept of going from the lowest fare to the best fare—and best is based on a whole lot of different things.
“That’s a core area, whether the offer is coming via an NDC source or through traditional channels.
“The key that we are focused on is to recognize the lowest price as important as a price of entry, but then being able to succinctly articulate that next step up, and what you get. That is a core component of our shopping evolution.”
“I think that’s being played out in the US carriers in basic economy. You can see that the big three rolled out basic economy and it has had the impact of causing customers to purchase up to a more standard fare.
“If you think historically, network bandwidth played a large role [in the limited retail offering]. Many years ago, when everything was cached, you were trying to get the least amount of information to come across the line that you needed; which was at that point was availability.
“Today, with bigger bandwidth, and the evolution of the shopping capabilities, that’s not as much of a constraint. You can push larger volumes of data across.
“Now the challenge becomes aggregating and sifting through that to make competitive offers.”
Samuel suggests that this new capability to offer richer product features offers airlines an opportunity to better evolve their retailing models around experiential factors, matching a hospitality strategy.
“The air experience, while there are some differences, could certainly look more like the hotel experience. Already, in travel, we have a product that is not sold solely on lowest price, but is sold in a variety of factors that contribute to the value. There’s no reason why the air-side of the travel business can’t do that.”
“With the hotel whether it’s two twins, a double or a queen, the core room is basically standard but rarely are you selling the core room.
“As a housing decision, people are buying the amenities that go with the purchase price. As the airlines start to expose more of the components that make up the offer, there’s opportunity in that.”
“From a retailing point of view, it does become more about emotion. What carriers would like to do is introduce the emotion into the shopping process, like other brands do with other retailing experiences.
“So what your brand means, and what they promise and hope to deliver, that’s what carriers are talking about they would like to do. And, yes, they want technology to support that.
“I think, especially as carriers start to see a revenue uplift from those features then absolutely [airlines will focus more on the merchandising of experiential factors].
“I think it will happen most obviously in the places that you expect: longer haul flights, premium cabins. That’s where I think it gotten the earliest traction, for obvious reasons: you experience that product a lot longer. But it will find its way all of the way through. Again, it will be like hotels. Even when you book a less expensive hotel, you’ll want to know about certain factors.”
Getting value from GDS
On the contentious topic of GDS fees, Morgan argues that what matters most to airlines is ensuring “a strong value proposition.”
“Cost of distribution is actually one of the smaller costs associated to the costs of booking for airlines.
“When you factor-in all of the benefits of indirect distribution—that customer acquisition costs are much lower, a lower cost of ownership of that customer, and the agency channel shields a lot of the service and support costs across the lifecycle of that product.”
“We simply must do a better job of articulating that value, as well as delivering on the product promise that we have with airlines. That is around rich content, better visualization of how they want their product sold.
“We are also innovating significantly in that right now. I personally believe that aggregation has value for a very long foreseeable future. It’s up to us to be able to compete and win in that space.”
Samuel added that a key will be helping airlines better differentiate their offering in an increasingly competitive marketplace.
“The need for comparison shopping, the need to be able to understand what you get with an offer, is going to go up instead of down.
“The need to allow travelers to comparison shop is going to go up. Anytime you have a product that is a little bit more sophisticated to purchase, having an intermediary help you choose is added value.”
Profiting from touchpoints with TripCase
There are also more opportunities for retailing at various points of the journey, and systems should be flexible to offer value solutions throughout the trip, as Samuel explains:
“I think we appreciate that there are more touchpoints than just the purchase touchpoint. In fact, I think there’s going to be a lot of value. Often, you don’t think about upgrading, or whether you want to go to the lounge in advance.
“Frankly, you don’t think about a lot of things in advance, when you’re booking your flight a couple of weeks before you trip. But when your trip happens, you’re tired, your meeting runs late, then those products might have a lot more value
“Having more touchpoints, and more vehicles to talk to the traveller and make the offer at the right place at the right time—when they might be more in a mindset to buy that lounge pass and relax for a little while—I think that’s going to be important.
“That works for the seller of travel, but you also have to have products that the traveller wants to use. That’s the promise of TripCase.
“One of the thoughts behind TripCase was that being aware of the whole trip has a lot of value. You bring a lot of value to the traveller, by having all of your stuff in one place and mixing that with the ability to find out about products and services that maybe you wouldn’t have discovered otherwise or thought about.
“That’s the strategic value that Sabre can bring into the mix: that we participate across the whole trip, and not just the air experience.”
NDC progress backed by business strategy
Samuels adds that NDC integration will boost the opportunities for airlines to merchandise at different stages of the journey, but there still needs to be a business strategy to back it.
“I would say that the adoption of the NDC standard and need for a standard is a good thing. I think that’s going to happen, but there is a lot more to [merchandising] than just a data standard.
“There’s the idea that you, as a carrier, are going to get asked for an offer, and you need to have the [business] intelligence behind your systems to be able to provide that offer, and to deliver that offer all the way through your systems.
“That’s a change from how airlines operate today. There are the parts that we touch, but a lot of parts that we don’t touch that airlines have to think about and re-structure, to support where they want to go. That will take time, but the need for a standard is still there.”
Morgan says we might expect NDC integration to be a prolonged process, as airlines refine their systems to make the most of NDC capabilities.
“There will be a world of duality for a very long time. Even the carriers that have implemented or have NDC applications, it is typically implemented in a market-by-market view, because there are a lot of things that we still have to learn about the scalability and the rigor of the standard, and the back-end processes.
“NDC, by definition, is the distribution component, but in order to have that you have to have the retailing component and order management. It is just one building block of many components.
“I like to say that it’s an evolution, not a revolution. It will happen slowly, over time, because of the complexity of what it takes to make the whole end-to-end process work.”
Making security a priority
With intensifying cyber threats to aviation, having the right partnerships will be key, as Samuels explains:
“Working with a trusted technology provider of travel, who is working with trusted technology providers outside of travel to provide as secure an environment a we possibly can I think is important.
“It’s harder than everybody thinks it is. There are people outside of the industry that that are doing this at scale and putting in industrial-strength security procedures in place.
“We’re trying to work with as many of those as we can. For a typical airline, it might be difficult for them have the scale to work with these providers.”
IT upgrades, including NDC integration initiatives can also help strengthen cybersecurity, Samuels adds:
“NDC initiatives will help, on issues like security. As we are updating the capabilities and modernizing some of the elements in our stack, that almost always leads to a more secure solution than the previous one.
“I think a lot of this change will benefit security.”
“This is an area where we’re making progress, and seeing the NDC standards solidifying, with more companies like Sabre working to integrate them.
“It’s not just about the security threats, but data privacy, with new regulations like GDPR (General Data Protection Regulation).
How those concepts have been factored into the NDC standard is something that we’re only starting to scratch the surface on. They are really important areas, that we have to be sure are included as we look at new ways of exchanging data.”