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The Future of Travel Distribution
February 12, 2013
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The Shifting Distribution Landscape
• Multiple Distribution Paths Co-Exist• The Problem with Direct Distribution• Mobile as THE Platform for Direct Distribution• The Impact of Consumerization• The Emergence of Mobile Smart Services• Consumer Mobile Ecosystems• The Alliance/Joint Venture Ecosystem• The Threat of Mobile OS initiatives• Summary
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Multiple Distribution Paths Co-Exist
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Traditional Airline.com
Multiple distribution paths will continue to co-exist• Driving personalization based on customer value is a key airline driver• Hybrid models where ancillaries are sold direct while primary air
reservations continue to be driven through the GDS may enable co-existence between models
GDS
Leisure Distribution Platforms
Direct Connect
CBTsOTAs
Leisure TMCsMeta-Search
Merchandising engines
Meta & OTAs
Personalized fares and ancillary bundles
Direct airline distribution enables greater personalization
NDC
Direct Distribution
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The Biggest Challenge with Direct Distribution
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Why?• Fragmented Market –Thousands of TMCs worldwide• TMC/GDS have entrenched relationships (financial & processes)• Corporate Travel Manager turnover and shift to procurement
result in a lack of C-Level understanding around distribution• Lack of clear corporate benefit
The Corporate Traveler
But… this is all changing as….
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Mobile is not simply a customer touchpoint but the new platform for direct distribution
Mobile becomes THE Platform for Direct Distribution
1980s 1990s Early 2000s
June 2007 2008-2009 2010 2011-2012
Mobile Timeline
2013 +
Mobile Ecosystem
Within five years the concept of mobile as a separate channel will disappear as the majority of travel search and booking will be on mobile devices
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The Corporate Travel Market Direct Distribution Obstacles
Why the GDS will struggle to retain single-source role as the market becomes increasingly fragmented
Fragmenting ForcesSingle Source Proponents
• Mega TMCs• Regional/Local
TMCs• Large Multinational
Buyers
• HBAs
• OTAs
• Rail
GDSs continue an effort to capture fragmented inventory, but HBAs, OTAs, rail and airline merchandising continue to disrupt GDS aggregation goals.
Source: Adapted from PhoCusWright's European Corporate Travel: Fragmentation and Technology Special Project
• LCCs
• Airline Merchandising
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Consumerization is Driving the Mobile Trends
Consumer travel habits and generational shifts are impacting behavior and expectations for travelers
Source: Tnooz and American Express Insights
Mobile Devices Apps Location-Based Services
• With significant smartphone penetration and adoption of tablets, travelers have untethered access to travel content 24X7
Millennials
• Visit 10.4 sources of online information before buying• 75% have a social media profile• 83% sleep with their mobile phone by the bed• 84% say user-generated content has a real impact on their travel
decisions• 57% update social media every day while traveling
• Millennials entering the market have different travel booking habits
The traveler is driving the trend
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Differing Reactions to the Emergence of Consumerization for Managed Travel
Consumerization of Corporate Travel
Capture
Simplify
Prohibit
Prevent
Source: PhoCusWright's European Corporate Travel: Fragmentation and Technology Special Project
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Two different technology approaches pushing change for corporate travel management
Door-to-Door Simplification vs. Open Booking
These technologies are just emerging and it is unknown if either will have a sustainable impact on managed travel . Open Booking has the greatest potential to support airline merchandizing efforts
• Encompasses entire door-to-door booking experience
• Uses expense insight to estimate expenses such as transfers, meals and multi-modal
• Simplifies the number of clicks needed to complete the transaction
• Allows travelers to book through dotcom sites and receive corporate discounts
• Collects itinerary elements for duty of care
• Flows all information into expense reporting process
Source: Adapted from PhoCusWright's European Corporate Travel: Fragmentation and Technology Special Project
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Open Booking
Supplier.com integration, TripIt itinerary aggregation and supplier e-receipts form the foundation for a new managed travel booking model
With the growth of Open Booking Airline.com sites have an excellent opportunity to capture more direct corporate business integrating merchandising strategies with corporate discounts
Allows traveler to book at supplier.com sites and still
receive negotiated discount
Captures itinerary elements from multiple sources
E-receipts flow into expense report
Feeds itinerary elements into expense reports
Source: Concur
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Not all Corporations are Alike
There are 100’s of 1,000s Small and Micro-Multinational Companies Worldwide that will benefit from Open Booking
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Technology Enabling Smart Corporate Travel Services Services that anticipate your needs are the future of mobile services
Consumer Interface Smart Services
Proactive Disruption Services
Driving Vendor Compliance
You’ll Miss Your Flight Based on your current
location and traffic patterns, you will miss
your flight. Shall I book a later flight?
Pro-active Mobile Services
• To be effective, smart services need to work with all points of traveler contact
• Truly smart services will focus on improving service for disruptions, drive greater compliance and adoption, and anticipate services based on multiple sources of information
Source: Adapted from PhoCusWright's European Corporate Travel: Fragmentation and Technology Special Project
Smartphone
Tablet
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Airlines’ Mobile Focus and Challenges
Opportunities Challenges
Direct DistributionAbility to integrate with corporate goals and programs
Providing the right services to the right passenger at the right timePersonalized Interactions
Airlines can use mobile technology for more direct distribution and continuous customer engagement but offers must integrate with corporate goals, be personalized and contextually relevant
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Additional Challenges
To be effective airlines must work across traditional silos to deliver a single user experience
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Distribution Strategy
Siloed Nature of Airline Strategy and Execution
E-commerce Marketing
Mobile Strategy
Revenue Management Pricing
Airport Management ITLoyalty
All these departments have role to play in customer centric distribution strategy
Airlines can only use mobile technology for more direct distribution and continuous customer engagement if all airline departments work in concert to deliver customized, personalized services.
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Competing Consumer Ecosystems
Proprietary ecosystems are driving unique purchasing paths
Closed Mobile Consumer Ecosystems• Though shopping content may be available across ecosystems – purchases are
often only available within the ecosystem (e.g. iTunes, Amazon video)
Control over mobile Local
Search
Customized Audiences
iTravel ?Flight Search Hotel Finder
Amazon Travel?
Amazon smartphone ?
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Airline Distribution Ecosystem
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An airline mobile ecosystem may emerge providing unique content across alliance/ joint venture airlines customizing the experience across airlines
Airlines can create an unique ecosystem based on alliance/ joint venture relationships
VS
The challenge remains to capture a competitor’s frequent flyers
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Potential Impact of Mobile OS on Travel Distribution
Online Travel
Web
Pre-Web
Traditional Travel Agents
Consumer Interface Intermediaries
Global Distribution Systems (GDS)
Suppliers
Smartphone
Mobile
OTAsMeta-Search
OTAs
Meta-Search
GDS
GDS Direct Connect
• Mobile OS providers may act as the consumer gateway to all travel transactions
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Summary
• Multiple airline distribution paths will co-exist• Mobile is THE platform for distribution• The corporate travel industry has been the major
obstacle to alternate booking paths• The trend toward Open Booking will enable
corporate travel to be booked at airline.com sites • Airlines must execute a consistent customer
interaction strategy across traditional organizational silos
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