IATA NDC and Direct Connect Opportunities and Challenges for Travel Agencies and Airlines Prof. Dr. Stephan Bingemer

Transcription

1 ITB Workshops Day 1 March 7, Convention Hall 4.1 Room Regensburg IATA NDC and Direct Connect Opportunities and Challenges for Travel Agencies and s Prof. Dr. Stephan Bingemer 1

2 Agenda DirectConnect andiatandc Whatisthedifference? Disruption in Distribution Change drivers towards Direct Connect Major gaps in the implementation of IATA NDC Call foraction: Whatdo travelagenciesneedtodo? 2

3 What has happened, so far? 2009 AA announces Direct Connect November 2017 BA GDS Fee 2010 AA GDS Fee October 2012 IATA Reso 787/NDC approved 2017 AF Direct Connect August 2014 DOT approves IATA Reso 787/NDC April 2018 AF GDS Fee September, 2015 LH Direct Connect September, 2015 LH GDS Fee July, 2015 BA Direct Connect (BA API) Sources: IATA, AA, AF, BA, LH 3

4 NDC is a standard for modern travel distribution better consultancy customer experience customer knowledge NDC is about giving travel agents the same capability as airline websites Source: IATA individual products imagery and visuals more functionalities 4

5 IATA NDC a closerlook IATA Resolution 787 New Distribution Capability (NOT: Channel) Approvedat theiatapsc 2012 in Abu Dhabi A Standard for Distribution Messaging NOT a product NOT a software Based on extensible Markup Language (XML) Looks similar to HTML Machine and human readable 5

6 EDIFACT, XML, JSON whatisthelanguageof travel distribution? UN/EDIFACT XML JSON? United Nations Electronic Data Interchange For Administration, Commerce and Transport extensible Markup Language JavaScript Object Notation Source: 6

7 Direct Connect vs. GDS explained using the analogy of CD Player vs. Record Player CD Player terms Corresponding Direct Connect terms Record Player terms Corresponding GDS terms CD player Direct Connect system Record player GDS system Compact Disc Internet Record Proprietary Intranet Chinch plug API DIN plug Webservice CD Music Digital MPEG recording standard Direct Connect Content NDC XML standard Record Music Analogous recording standard GDS Content UN/EDIFACT standard (in future: NDC standard?) 7

8 Offer Creation and Offer Aggregation are the key functionalities of the GDS 1 GDS Offer Creation 2 schedule GDS GDS Offer Aggregation availability OFFER + GDS fare product Hotel Hotel ancillary Car 8

9 In theiata NDC setupoffercreationisdone by the provider, Offer Aggregation remains with the GDS 1 Provider Offer Creation 2 schedule GDS Offer Aggregation OFFER GDS GDS availability fare product Hotel Hotel ancillary Car 9

10 How do s build a Direct Connect? sphere of airline control Direct Connect Engine schedule System availability OFFER API Ideal world One plug fits all fare product Merchandise & Rules Engine ancillary 10

11 What is an Application Programming Interface (API)? Can yousend methe file please? Sure. Hereitis! An API enables connected systems to access the operating system s functionality via a documented set of functions. 11

12 Agenda DirectConnect andiatandc Whatisthedifference? Disruption in Distribution Change drivers towards Direct Connect Major gaps in the implementation of IATA NDC Call foraction: Whatdo travelagenciesneedtodo? 12

13 Disruption in Distribution Technology cycle based on Anderson & Tushman(1990) EraofIncrementalChange elaboration of a dominant design EraofFerment (Eraof Fluent) design competition and substitution (no clear standards) Era of Incremental Change elaboration of a dominant design GDS era DC New Entrants GDS New Design -integrated aggregation New NDC GDS landscape New non-ndc GDS landscape Mixed NDC DC/GDS landscape DC Dominance New aggregation formats New E-Commerce platforms from outside the airline industry [ ] Technological Discontinuity Dominant Design Technological Discontinuity 13

14 Agenda DirectConnect andiatandc Whatisthedifference? Disruption in Distribution Change drivers towards Direct Connect Major gaps in the implementation of IATA NDC Call foraction: Whatdo travelagenciesneedtodo? 14

15 Direct Connect drivers and inhibitors High search performance Capability to search for new items (e.g., WLAN) Ancillary shopping Full application of all elements of the NDC standard Completeness of the NDC standard for volume use Mid-and back office processes available Search capabilities Technological readiness Commercial model NDC GDS Market power GDS fee Incentive payments Business models Offer differentiation Dominant design convergence GDS resistance Dependency of travel agents Cooperation vs. Confrontation Offered content Fare bundles Individualized ancillary services Better display options Easy to use processes NDC standard usage Number of carriers participating Degree of adaption to the standard by each airline 15

16 The lack of a clear commercial model is an inhibitor of successful direct distribution models asis DC with incentive DC without incentive ticket + 8 USD* booking GDS ticket + 5 USD* booking ticket + 0 USD? booking ticket + 4 USD* booking Travel Travel Travel * Exemplary values 16

17 Ifnoincentiveispaidthencontentneedstobe the new currency DC without incentive Without Direct Connect incentives, content is the currency! Exclusive fare products for Direct Connect customers Additional ancillary products exclusively available via Direct Connect ticket + 0 USD? booking Easier processes that allow quicker turnaround Access to dedicated personalized content Access to better availabilities and/or fares Direct Connect promotions Travel Better search and display options Better after sales service 17

18 Even for the middlemen, the commercial models need to be revisited asis pure aggregation model fair share model ticket + 8 USD* booking ticket + 0 USD booking ticket + 4 USD* booking GDS New entrant New entrant ticket + 4 USD* booking ticket 1 USD* booking ticket 4 USD* booking Travel Travel Travel * Exemplary values 18

19 An analytic view on potential models reveals the options of future business models s pays - gets Less incentive than GDS fee Less incentive than GDS fee Travel Agencies gets - pays Fair share model low cost GDS classic GDS model DC with incentive Aggregation model Direct Connect with exclusive content New models withexcl. content and paid incentive Exclusive content dealsforta Aggregator pays exclusive access fee and earns from volume Third party pays from other sources (data access, ad models, ) driven by LCC DC with content 19

20 Agenda DirectConnect andiatandc Whatisthedifference? Disruption in Distribution Change drivers towards Direct Connect Major gaps in the implementation of IATA NDC Call foraction: Whatdo travelagenciesneedtodo? 20

21 There is a lack of consistent implementation and completeness of the NDC standard, today! NDC API External aggregator Internal aggregation IBE Incoherent NDC standard implementation throughout the chain of distribution! blue: lacking NDC functionalities replaced by proprietary API functionalities grey: lacking NDC functionalities, replacable by proprietary API functionalities 211

22 The lack of coherence in the implementation of NDC is a burden to its success as it drives agency IT cost up Incoherent NDC implementation Coherent NDC implementation 1 standard but 6 plugs = complex integration 1 standard& 1 plug= easeof integration IN IN One standard but incoherent interfaces One standard and one coherent interface 22

23 Search will be key to success in future distribution Howcanyoufind something thatyouarenot abletosearchfor? 23

24 Agenda DirectConnect andiatandc Whatisthedifference? Disruption in Distribution Change drivers towards Direct Connect Major gaps in the implementation of IATA NDC Call foraction: Whatdo travelagenciesneedtodo? 24

25 Be where your customer is on the Internet! Travel Agencies need to build omnichannel capability Internet search offer& pre-book Social Media get inspired post images Travel agency get consultancy Call Center askforhelp Mobile get boarding passes use maps 25

26 There are always reasons why to do nothing and wait Barriers to adapt e-commerce in the classic tourism industry: limited knowledge of available technology lack of awareness cost of initial investment lack of confidence in the benefits of e-commerce cost of system maintenance shortage of skilled human resources resistance to adoption to e-commerce Source: Kim, C.(2004), E-Tourism: An Innovative Approach for the Small and Medium-Sized Tourism Enterprises (SMTES) in Korea, OECD Publishing. 26

27 And there are reasons why not to wait any longer ecommerce is coming independent of Direct Connect! The distribution landscape will change there is no way back in time! Disruption happens quickly and it doesn t wait for you! The customer is more important than ever you need more differentiation, soon! Get the right people aboard for your digitalization journey! Build distribution know-how and get into the topic! Get your IT setup right omnichannelsales is not possible with older systems. Work on your strengths no one is better in personalization than you are use it! 27

28 Conclusion The current implementationof the NDC standard throughout the distribution chain is a major hurdle for travel agencies as currently, there is no such thing as ONE PLUG. Current business models in the marketplace are not sufficiently attractive for travel agencies. s willing to use Direct Connect concepts shall review their commercial models. However, it is time to move for travel agencies as changes will happen quickly. Waiting is not a true option. Invest in own customer-oriented capabilities and online capability first and in distribution next. Keep your own flexibility by applying a multi-source approach. 28

29 Study Tourism& Event ISM Campus Frakfurtam Main Prof. Dr. Stephan Bingemer Professor of Business Administration and Tourism International School of Management Campus Frankfurt Mörfelder Landstr. 55 (Südbahnhof) Frankfurt am Main 29