Travel Retailing Takes Off. OpenJaw 2016 Insights and Predictions Report
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1 OpenJaw 2016 Insights and Predictions Report Travel Retailing Takes Off NDC's Impact And Other Travel Retailing Trends Will Bring Change and Opportunities for 2016 By Amanda Campbell and Paul Byrne OpenJaw Technologies January 2016
2 In 2014, the airline industry officially launched an important initiative when the U.S. Department of Transportation finally approved Resolution 787, the International Air Transport Association's (IATA) foundational document for New Distribution Capability (NDC). Initiated by IATA, the NDC program is designed to encourage the market adoption of an XML-based data transmission standard that significantly improves communications capabilities among the different participants in the travel ecosystem, in particular travel agencies, which still obtain and display airfare content using outdated systems. NDC modernizes the traditional airline-to-agent model, and NDC standards will change the way air travel is marketed, sold and purchased. With NDC, airlines, travel agents and distribution partners all have access to the same, rich information about available inventory, fares, routes, seat awards and upgrades, allowing them to sell, upsell and package an array of travel-related products and services. Competition for bookings will stiffen, and some travel partners will need to adopt new ways of doing business and sharing information. With NDC, travel purchases will evolve away from a series of one-off transactions with separate vendors into seamless, bundled and personalized travel packages creating new sources of revenue for airlines and agents and a more transparent shopping process for travellers. What Else is Up in the Air in 2016? In addition to NDC, other developments will impact the airline industry and travel retailing during 2016, including: New data-driven strategies, such as predictive analytics and machine learning. Supported by the single-view-of-the-customer and omnichannel retailing, these strategies will help airlines and travel retailers understand who their passengers are, what they might be interested in purchasing at each step of their journey and be able to offer it to them through a variety of sales channels. An inevitable move away from airline-provided seat-back entertainment systems. Instead, content, connectivity and travel-related activities will shift to passengers' personal mobile devices, with more connectivity, passenger self-service, and bring-your-own device activities and interactions. More changes for loyalty programs and the frequent travellers who use them, marked by a shift away from rewards based on miles flown to rewards based on the value of the spend. Although some airlines have begun experimenting with redemption options beyond airline seats, the status quo is still largely limited to redemption for travel only. With some of the major airlines already testing alternatives, expect to see both legacy and low-cost carriers change their program rules during The following pages share insights from the OpenJaw team and examine how travel retailing will evolve during the coming year. OpenJaw 2016 Predictions Report Travel Retailing Takes Off January 2016 Page 2
3 #1 NDC Will Remove Barriers and Create Travel Retailing Opportunities NDC will enable the travel industry to transform the way air products are retailed. The intent is to address the industry s current distribution limitations, especially around product differentiation, time-to-market access to full content about air travel and travel products, and transparent shopping experiences. The IATA NDC architecture provides a modular, flexible and scalable approach, allowing airlines to integrate best-of-breed vendor applications and deliver against customer expectations. This new "open" approach addresses past "closed" and restrictive architectures. Customer expectations around travel have been set by the broader retail industry, and NDC strives to align airlines with other retail segments in the ways they sell their products and services to customers. Indeed, the travel sector has a long way to go: a 2015 joint report about NDC by IATA and ATMOSPHERE Research Group shows the travel sector ranks second to last for passenger purchase satisfaction, compared to other segments. NDC will take root in 2016 as airlines begin to share and display the same content-rich, real-time information on their own sites and platforms as they do with agents. Passengers will find it easier to make decisions about products and travel services based on value, and they will be able to engage in "like-to-like" comparison shopping. Under the NDC standard, airlines also will be better positioned to use data to personalize their offers to known passengers, bundle products and services, and leverage real-time data to deliver and update offers. Several airlines have already rolled out NDC solutions. United Airlines has been selling seat upgrades through travel agencies since late 2014, and in November 2015, American Airlines began selling premium seats via travel agents using the NDC standard. Expect more airlines to follow suit in 2016 as they move from being travel product suppliers to true travel retailers better equipped to meet a broader spectrum of customers travel needs. UPSELL! VIA RETAIL VIA DESKTOP VIA MOBILE OMNICHANNEL END-TO-END CUSTOMER CONVERSATION PERSONALIZED BUNDLES HIGHER AIRLINE REVENUES OMNIPRESENT COMPARATIVE REAL-TIME SHOPPING OK! OpenJaw 2016 Predictions Report Travel Retailing Takes Off January 2016 Page 3
4 #2 On-Point Personalization With Predictive Analytics and Machine Learning Personalization has been a hot trend in travel for several years and will remain so, indicated by IATA's focus on personalization as a main benefit of the NDC initiative. Some travel retailers, working to serve customers better while increasing revenues, are cutting through the clutter of products offered by presenting customers with the right products to suit their preferences and needs. For many travel retailers, however, personalization can be a labor-intensive endeavor. It involves creating personas, compiling scenarios, identifying optimized retailing experiences, analyzing data and configuring behind-the-scenes rules to reflect the personalization retailing model. The model also requires constant evaluation for continued improvement. Technologies such as predictive analytics and machine learning can aid the process by advancing the way travel retailers approach personalization. Predictive analytics uses data to: Understand travel customers' interests and intentions Predict which products and offers align best with customers' needs Present offers to customers in the form of recommendations, promotions or cross-sell opportunities In the retail or loyalty sectors, predictive analytics can draw from a rich stream of data using a customer s shopping and transaction history. Travel, however, is different because most consumers travel less frequently than they shop, meaning less historical data is available to make predictions. Instead, travel-based predictive analytics uses real-time behavioral data from digital interactions, such as online searches and selections, to help understand customer intent and predict which products will best meet a customer s need. At the heart of effective predictive analytics is machine learning, a technology that trains itself through self-learning algorithms to understand data patterns and customer intent from such data points as online searches or in-store behavior. Machine learning increases the accuracy and reduces the overhead of effective personalization strategies. It can also continually adapt the rules that trigger product offers to make a travel retailer s personalization strategy more targeted and effective. During 2016, the value of customer data will grow in importance, and companies will increasingly leverage data using machine learning techniques to enable more effective personalization and customization for their customers. OpenJaw 2016 Predictions Report Travel Retailing Takes Off January 2016 Page 4
5 A SINGLE CUSTOMER VIEW : CROSS-REFERENCE FOR PRECISION #3 Much attention in the travel industry is currently focused on omnichannel retailing, a direct reflection of mainstream e-commerce trends. Large retailers such as John Lewis, Marks & Spencer, and Walmart, for example, are working to integrate brand, shopping and service experiences across brick-and-mortar and online stores to accommodate changes in consumer behavior and demand. One of these behaviors was identified as early as 2012 as "showrooming,"or the tendency of consumers to treat brick-and-mortar stores as on-site showrooms before making purchases online at lower prices. In this changing landscape, High Street retailers are turning to omnichannel retailing to provide a seamless brand experience across both physical and online stores. Omnichannel retailing differs in the travel sector, however, because there is little or no connection between in-store activities and an online store. Instead, travel shopping is a longer, more complex process, and it results in the purchase of a journey or experience rather than a physical product. Likewise, the act of purchasing travel tickets and products can involve numerous searches that occur across multiple channels, touchpoints and devices. For a travel retailer to meet modern customers' needs successfully, omnichannel retailing must take a holistic view of a lengthy and often complex customer experience. The cornerstone of omnichannel retailing is the single customer view (SCV). A consolidated set of data that encompasses numerous consumer interactions across all touchpoints, the SCV enables a retailer to crossreference data and tie it back to an individual consumer. In a nutshell, it provides a meaningful view of the customer that can be used to service the customer's need across channels. Supported by the SCV, omnichannel retailing can deliver increased customer satisfaction and boost the sale of ancillary products. Successful omnichannel retailing, for example, can push contextual offers based on specific stages of a customer's journey, such as an offer to upgrade to a superior hotel room two days prior to departure, or the offer of a fast-track pass delivered to a customer's mobile app on the way to the airport. Together, omnichannel retailing and the mobile environment present new opportunities for travel retailers to connect with their customers, anticipate needs and deliver the products customers want and at any stage of the travel journey. During 2016, these concepts will become increasingly important and prevalent as more travel companies incorporate SVC data and omnichannel retailing into their strategy. OpenJaw 2016 Predictions Report Travel Retailing Takes Off January 2016 Page 5
6 BYOD #4 Customers Will Leverage Mobile For Control and Information Passengers' rapid adoption of mobile devices and technology has disrupted the ways in which travel retailers reach and fulfill their customers' needs, and 2016 will be no different. The role of smartphones, tablets and wearables in omnichannel retailing is secured by the always-present, always-on nature of these devices. In the travel retailing sector, self-service and onboard bring-your-own-device behaviors are just a few of many mobile activities that will have an impact during Self-Service Today's passengers are interested in three things as they travel: Communication with travel providers, real-time information about their trip, and a sense of control. In their quest for all three, passengers are turning to selfservice opportunities across all channels. According to SITA s 2015 Airline IT Trends survey, this preference for self-service is apparent in activities as simple as communication and check-in: By 2018, passengers will choose a variety of channels for check-in: 29% in-person at the counter, 20% from a desktop or laptop, 20% from a smartphone, 17% from a kiosk, 10% via automatic check-in and 4% from a tablet, according to SITA predictions. More than half of airline passengers prefer to receive flight updates and information on their smartphones rather than from a customer service agent. For self-service interactions to happen, airlines and travel retailers must identify their customers and address their needs in real time across devices. Technology exists for travel retailers to do this: to recognize and communicate with passengers, provide them timely information, support automatic rebooking, and facilitate self-service so that travellers are empowered to help themselves. Based upon OpenJaw s experience, the best approach is a single retailing platform that provides rich data and insights about customers as they travel, opening doors for communications, service and retail interactions throughout the journey. On-Board BYOD (Bring Your Own Device) When they originally began appearing onboard aircraft, seat-back screens displaying movies and inflight entertainment (IFE) were novel and unique. Fast forward 30 years, and 97% of passengers now bring at least one mobile device (a smartphone, tablet or laptop) on board, 20% carry all three and 77% are open to wearable devices to aid in the travel process. With this much technology at their fingertips, today's passengers can watch the movies and content they prefer, whenever and wherever they want. It's possible that the bring-your-own device trend will fundamentally shift how IFE is used. An IATA Global Passenger Survey found that nearly half of North Asian passengers prefer their own devices, and at the 2015 IATA World Passenger Symposium, a Qatar Airways executive predicted IFE's eventual demise. Airlines and inflight entertainment vendors may shift their business models to accommodate more streaming by: Allowing passengers to pre-purchase content and download it to their own devices to watch at their leisure. Enabling passengers to rely on in-cabin Wi-Fi services and in-air connectivity to download content provided by the airline or a third-party vendor to their own devices. Providing discounts to passengers who pre-order and download content to their personal devices. OpenJaw 2016 Predictions Report Travel Retailing Takes Off January 2016 Page 6
7 Encouraging passengers to use mobile apps as a replacement for IFE also has multiple advantages for airlines in terms of retailing and customer service: The airline is always present on passengers' devices, fostering valuable two-way communication between brand and customer. The mobile environment can identify passengers who remain "signed in," facilitating customer recognition and increased levels of personal service. It should come as no surprise that "content" on airlines will undergo significant change, too. The same is happening elsewhere, as today's consumers continuously change their consumption of media, whether the content involves network or cable television programs, print and online versions of newspapers and magazines, movies, or online, downloadable mobile content. In 2016 and beyond, airlines will provide a wider variety of content and entertainment solutions that work for them, their entertainment vendors and their mobile-enabled passengers. #5 Airlines will turn to next-generation merchandising strategies to generate additional revenue streams. Some trends to watch are: Dynamic Bundling. We will see more airlines dynamically create packages or bundles of products/services that enhance the flight experience. Elements will include baggage fees, seat upgrades, onboard meals, in-flight connectivity, onboard entertainment, comfort items, or airport-related services, such as fast-track passes, lounge access and airport concierge services, etc. Branded Fares. Also look for more airlines to adopt branded fare strategies that enable customers to choose from a selection of flights and ancillary bundles. Ancillary Price Optimization. Airlines will combine demand forecasting, price elasticity and competitive pricing to better manage product inventory. Personalized Pricing. NDC will provide airlines with full price control and the capability to set product prices specifically for the individual. WITH SCV DATA, AIRLINES CAN NOW CATER TO EVERYONE OpenJaw 2016 Predictions Report Travel Retailing Takes Off January 2016 Page 7
8 #6 It's clear that frequent flyer and travel loyalty programs are undergoing a massive transformation. Several legacy carriers (e.g., Delta, American) have started issuing rewards based on the value of the fare rather than the number of miles traveled a concept borrowed from the retailing industry. Airline loyalty programs are also changing the way in which seats can be redeemed, using dynamic data ("destination, demand and other considerations") to determine the points-equivalent value of each seat. The loyalty shift is equally apparent now that Expedia and Orbitz, two major online travel agencies, offer their own rewards programs. Among the rewards-related changes that will emerge in 2016, look for: More flexible and dynamic redemption schemes for miles, built on an "any time, any product, any airline, any flight" framework. Ideally, rewards members will no longer have to book their points-based flights months in advance, nor will they encounter numerous travel blackout periods. Instead, they will enjoy greater freedom to convert their points into the passenger products they want when they want them, rather than choose from a finite pool of flights or services. More fluidity in how airline miles can be redeemed, including the ability to redeem miles for products other than airline tickets. Examples might include redemptions for travel insurance policies, hotel reservations or ancillary products in the cabin. In 2016, we will continue to see changes in loyalty programs and related retailing strategies. Frequent flyer programs represent valuable assets to airlines, and data available about their members can help fuel the new bundling, marketing and communications strategies around travel retailing and NDC. BEYOND FREQUENT FLYER MILES AND POINTS OpenJaw 2016 Predictions Report Travel Retailing Takes Off January 2016 Page 8
9 Final Thoughts on What s Ahead in 2016 Airline passengers, already accustomed to many changes in the travel industry, will experience new ways of searching for, purchasing and planning their trips in 2016, based on a series of industry shifts in how tickets, fares and travel-related products are promoted and sold. Using the NDC standard, airlines and travel retailers will find new ways to compete, market and sell their products and services, and passengers will notice the increased ability to package and bundle all of their travel-related purchases from a single platform. The ability to collect passenger data from all channels and funnel it through one platform will enable airlines and travel retailers to better predict passengers interests and likelihood to buy. With this information in hand, offers can be personalized and targeted in real time. It's quite possible that passengers will not be aware at first of the impact and implications of the industry's NDC initiative as it rolls out in Nevertheless, the changes are intended to be profound, so that the airline industry and all related travel partners can take advantage of data, information, emerging technologies and business-building opportunities that materialize across the travel spectrum. The anticipated changes will bring the travel industry into the mobile-empowered, data-enriched, omnichannel marketplace of 2016 creating new opportunities for growth within the industry, and crafting even more pleasurable experiences for the passengers who get on board. OpenJaw 2016 Predictions Report Travel Retailing Takes Off January 2016 Page 9
10 About OpenJaw Amanda Campbell Amanda Campbell is Marketing Communications Director at OpenJaw Technologies, where she is responsible for the strategic maintenance of OpenJaw's reputation, brand development and lead generation. Since joining the team in 2011, she has spearheaded the redevelopment of OpenJaw's corporate identity, and worked to communicate the benefits of travel retailing to the wider travel industry. She joined OpenJaw after stints at NewBay Software and Marketing Network. Paul Byrne Paul Byrne is Senior Vice President of Development at OpenJaw Technologies, where he oversees product planning, product roadmap, pre-sales support and strategic partnerships. He also sits on the Board of Directors of The Open Travel Alliance, which supports an interoperable infrastructure for all travel-related trading partners across communications, supply and distribution. He regularly participates in IATA s Distribution Data Exchange Working Group (DDXWG), which is creating the NDC standard. He previously worked at Datalex before joining OpenJaw in 2007 as Head of Product Development. OpenJaw Technologies Limited, a GuestLogix company, is a leading online technology partner of the world s biggest travel brands. Guided by the OpenJaw four principles of t-retailing, and leveraging the power of its dynamic t-retail Platform, OpenJaw is dedicated to helping airlines and other large travel companies to become travel retailing innovators. OpenJaw s customer portfolio includes British Airways, Cathay Pacific, Hainan, S7 Airlines, TravelSky, Aeroplan, AIR MILES, Four Seasons Hotels and Resorts, voyages-sncf.com, and Viajes El Corte Ingles. Founded in 2002, OpenJaw is headquartered in Dublin (Ireland) and has offices in Galway (Ireland), Madrid (Spain), Kraków (Poland) and Hong Kong. Web: info@openjawtech.com OpenJaw 2016 Predictions Report Travel Retailing Takes Off January 2016 Page 10
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