The Future of Travel Distribution

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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


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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


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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