What will the future of travel distribution look like?
Status quo in travel distribution has been disrupted, and capabilities, technology choices, and business models are under scrutiny. In this context of change, New Distribution Capability (NDC) has been much talked about in the last few years as a new way forward. In this post, I’d like to reflect on Amadeus’ role in the travel industry, and share my view of where travel distribution is heading.
They say that it takes time for change to happen. But when it happens, it happens quickly. This certainly describes the Travel Industry. We’ve had many articles and reports trying to predict the future of travel distribution. Questions have been raised about capabilities, technology choices, and business models. And anyone active in the travel industry couldn’t possibly have missed the talk about New Distribution Capability (NDC) as a new way to retail travel content.
We see trends that sometimes are moving in the same direction, and sometimes in conflicting directions. Some airlines are experimenting with alternative distribution routes. Others are coming back to a Global Distribution System (GDS) – or coming to it for the first time. In parallel, travel agencies of all types are trying to navigate through these choppy waters.
Direct, indirect, or intermediated channels?
Looking at our own role in this, I can’t help but being struck about how much has happened. Once Amadeus’ distribution business was irrefutably a ‘Global Distribution System’. Our technology enabled travel agents to book a flight for their travelers, on behalf of an airline. But the nature of travel commerce has since expanded significantly, and so have we. Today, we are less and less, only a GDS.
One of the fundamental value shifts we have witnessed has been the move from processing demand – executing transactions on behalf of providers, to creating demand – generating business for providers. The GDS has traditionally focused on executing transactions. The world of demand creation has exploded with the need for digital traffic acquisition and lead-generation; shifting the focus from booking to converting.
You would believe that this means that consumers go directly to the web site of the provider, but in reality a consequence of this shift has been an increase in the number of intermediaries between consumers and providers, not a decrease.
To me it’s clear; it’s no longer only about “direct” or “in-direct” channels, but rather intermediated channels. Where consumers can end up buying provider services from a variety of pathways, be it travel agencies, metasearches, digital advertising, search engines … And for these different pathways, different types of technology and services need to be deployed in a cohesive manner.
This is where we, Amadeus Distribution, are today. No longer just transacting, but generating business for providers. No longer only a GDS, but something else. Something more.
Merchandising – a proof point of change
One proof point of this is how we, over the last years, have ushered in the era of merchandising. In 2017 we saw a 31% increase in ancillaries sold via Amadeus travel agents. And more than 40 Online Travel Agencies (OTAs) are delivering improved shopping and comparison features to travelers through our merchandising technology. Our Fare Family solutions allows for easy upselling capabilities through travel agencies, and the uptake is huge.
All this seems far removed from the historic view of processing demand. So when you take one step back and reflect, you realize just how much Amadeus is doing in the digital distribution space. In connecting airlines with travel sellers and travelers, and how far gone the days are of being “just a GDS”.
Innovation is part of our DNA
Once again, Amadeus was ranked top investor in travel technology R&D by the European Commission. 2017 was a landmark year for Amadeus, when we completed our TPF decommissioning and moved to 100% open systems. We are proud to be the first and, to date, the only travel technology provider to have accomplished this milestone. For outsiders, this could sound boring, but this milestone paves the way for collaboration and for more innovation, flexibility and agility across the industry.
IATA NDC is starting to reach a protocol that can be industrialized and we are more committed than ever to making NDC work across the industry. In addition to our level 3 certification as an IT provider, we also attained Level 1 certification as an aggregator in 2017 and will be Level 3 certified in 2018. But we are also looking beyond industry standards and actively working on a next-generation JSON REST API for content integration.
This is why I started by saying that once changes start to happen, they happen quickly. The travel industry has witnessed a lot of change over the last 12 months. We have seen the pressure and demand for this change for a while, but now it is taking off. I am glad to say that for Amadeus, the digital transformation journey is well underway. Many of the elements needed are in place and we know where we want to get to.
However, I truly believe that we, as an industry, need to collaborate and work together. Only then will we really be able to deliver on all the opportunities ahead of us.
About the author
Jesper Söderström is the Scandinavian general manager of Amadeus since 2011. He has been in the travel business most of his grownup life, and started at Amadeus in 2000. Besides riding his bike (preferably in Mallorca), Jesper enjoys challenges which puts him outside his comfort zone and “breaks the equilibrium”. So, today’s travel industry should be a good spot to be in...