Successfully Delivering NDC 2020 Vision

Transcript

Damian Hickey:So, let me talk about NDC and what's going on in the world of NDC. NDC has been around for 7 years, believe it or not, and we're still talking about it. And there's still, unfortunately, probably as much confusion as to what is NDC all about, what it means. What's happening? Why is it going on forever and ever? And why are we still talking about it? So I'm going to try and share a little bit kind of my perspective as to, you know, why, why this is actually taking so long and why it's still a key topic in the industry. It's very complicated. Okay. In reality, what we're trying to do is to rebuild the whole distribution landscape that's been evolved over the last 30 to 40 years. I think that's Catherine mentioned earlier, there's just layers and layers of legacy technology, processes, you know, human resources, all built around the way that we've done distribution for the last 30 to 40 years. And we're trying to completely rebuild that on a modern technology platform. So it's very complicated. If you talk to Yannick, who's— Yannick Hoiles, who's the head of distribution, new distribution for IATA, He would be quoted to say that 2018 was the year of the plumbing. Getting all the plumbing in place so that we can get the base level of infrastructure in place and now we can start to build on that capability. There's still lots more plumbing to do. And this is just a snapshot of all the kind of things that we're used to in the world of distribution that we have to rebuild in this new NDC landscape. It's not just about making, you know, shopping and booking and it's all about, you know, what happens after you make a booking? What happens when you do a schedule change? How do you handle issues such as ancillary sales? We're moving from the world of, you know, fare quotes to offers, a whole different way of dealing with distribution. So it is very complex. So 2019 in reality is still the year of the plumbing, but fortunately we're coming out at the end of that, right? And why I think what is really exciting right now is that in coming into 2020, we're actually starting to see new real deployment of new capability, and that's really what's exciting. And we'll talk a little bit about that. What also makes things very confusing is that when people talk about NDC, there really are 2 things going on in the world at NDC. There is a whole technical stream of activity around NDC about the technology. If you talk to people about NDC, New Distribution Capability, it's a technology standard. It's an XML schema. It's how you actually plug into the distribution channel as an airline, how you, how you take that content out as, as an agent or a corporate or, or, or into your, into your infrastructure. So a lot of the discussions, a lot of work going on has all been around building connections. That's the plumbing, making these 2 ends meet. In order— once you get that plumbing in place, then you have to build up all that capability I just talked about. About, you know, not just shopping, not just booking, but about servicing, handling all of the, the processes that our, our industry, uh, you know, works on in the background. So that stream's been going on, but in reality, part of the reason there's a confusion is there's another stream on the bottom which is all around the commercial landscape, all around the desire that airlines in particular have to take back control. Peter talked about it earlier. Taking back control of distribution. So there's a whole commercial arena around that. There are airlines who are out there experimenting with new financial models. So you will hear things interchanged around activities that are going around, things such as private channel activity and surcharging and different commercial models going to market that are going— are interchanged with NDC. Um, because airlines are taking advantage of this new capability to look at actually changing the commercial model and how they can use that capability. What makes it more confusing is nobody will talk about the commercials because the commercial landscape is competitive. It's the competitive advantage that the airlines are looking for. No airline's going to get up here and you can try and ask, you know, Catherine and Don about, you know, the commercial implications of NDC. In reality, in a public forum, they're not going to talk to you about that. They're not going to talk about their, you know, the commercial realities and what they're going to do in a public forum. But they will talk to you on a one-on-one basis. So I would encourage you to have those conversations. So that's created some confusion because people don't know, is this about technology or is this about commercials or is it a combination of both? So that's a— that's actually fueled a lot of the confusion that's going on in the market. But in reality, what is really driving this and where the real power of the capability comes in is all around improved sales capability. And I'm not going to go through each one of these, but these are key elements of why airlines have invested, why IATA has driven and focused on this initiative for the last number of years, is because airlines want to have improved improve sales capability in the indirect channel. They've developed great capability in terms of how they interact with customers in their direct channels, whether that's a .com or Direct Connect or other direct channels, the ways they have of dealing with their customers. They want that same capability in the indirect channel. They want to have that consistency. So when a customer as a traveler wants to go and interact with that airline, they can choose whether they want to go direct, whether they want to go to a traditional travel agent, whether they want to go to an online travel agent, whether they are corporate and they need to work with their travel management company because they have duties of care and policy and everything else. The airlines want to have all the capability that they've built in direct channels and bring that into indirect channels. So you'll, you'll see some of these elements coming through as airlines talk about why am I doing NDC. Elements like they want to know who the customer is. Not after they made the booking and put in their PNR details and even their frequent flyer things. They want to know at the time somebody's looking to buy a seat so they can make an offer to them based on who they are. Not anonymously, not the same as everybody else. So they want to know the customer, and we'll dig into that a little further. They want the ability to be more agile, particularly for traditional legacy carriers who are competing with the low-cost carriers who already have a lot of this capability built out because they have a much more direct channel to market. And you have the panacea on the bottom— personalization, differentiation, data, all of that. That really is where they want to get to, is actually to be able to get down to personalizing an offer for an individual, whether it's a corporate, whether it's a particular persona of a type of traveler, to be able to get down and really know, I want to make an offer to that individual based on their needs. And Damian, I think that's a great segue. based on now that I know them, this is what I want to do. So that whole side, when I talk to airlines around the world, these are the things they're talking about. We're no longer talking about fares. You move away from the world of fare filing, you know, in ATPCO and putting those fares in there and publishing those fares and going through all that process. It's all about making offers. You'll hear, you know, airlines talking about, I want to make corporate offers. I want to make leisure offers. I want those offers to be tailored. I want them to be real-time. I want them to be dynamic. I want to know that if my competitor is doing something, I can react and make a different offer in order to remain competitive. And to grow ancillaries, huge drive within the airline community. Right? A lot of the airline community as a whole only makes money because it makes ancillary sales. How do they get ancillary sales into the indirect channel? The indirect channel is abysmal for selling ancillaries. Now you can argue, argue, as many agents will do, that, well, it's too complicated and I'm not getting rewarded from it and it's only extra work and so on. So airlines have a challenge, and NDC is a way of saying, how can I make it easier to get ancillaries into that channel so I can actually start to make some real money, generate some real revenue? You'll hear a lot about additional price points, dynamic pricing. Um, you know, in the current environment, most airlines are restricted to your classic, um, you know, 26-character RBD environment, um, and price points tailored to that. Airlines are looking to smooth out that so they can have continuous price points, you know, in between the classic price points that you have, and that you're no longer limited to those 26 different buckets that you have to price in. That's a big focus. And as I mentioned, personalization is really where people want to get to. I doubt in the near term whether that'll come down to an individual where it's, you know, just because I know who you are, I'll give you a particular offer. But certainly if I know that you're a particular corporate or you're particular— particular profile, that are your particular type of leisure customer that's more or less more price sensitive, or you're going to a particular market, I can tailor my offer and make it more personalized. You'll also see a lot going on in the market, uh, what we call carrots and sticks. Okay, airlines, now that they've invested in building this capability, they want to make sure the industry adopts it. All right, now there are different ways of doing that, um, um, you know, in terms of, you know, encouraging. And encouraging is nice because you can encourage with carrots or you can encourage with sticks, um, but there are different ways of doing it. So you'll see on one side lots of carrots, You know, particularly in, in, uh, you'll see, for example, in the US market, some of the airlines looking to reward agents and their travelers for using NDC-based capabilities. So they're incentivizing them, whether that's on giving, you know, additional frequent flyer points, or in some cases, I'm financially rewarding you for making bookings using NDC capability rather than legacy capability. But on the other side, and it's more frequent at the moment in the European market, Um, you have the opposite effect, which is airlines who are penalizing, um, their agents or their, or their customers by surcharging content that's not delivered through NDC, or removing content and saying, well, those fares aren't available in my traditional non-NDC environment. Um, so there's a mix, and then sometimes you'll see a mix of both, and we'll see this evolve over time. But ultimately, the whole reason that this is happening is because The reality is we're on a journey to NDC. Airlines want to move on this, this diagram to move from the current traditional ATP, CO, EDIFACT world to IATA NDC. Now that journey is going to take a long time. Let's say we're— NDC standard was actually originally published 7 years ago and we're only just getting into deployment. So this journey will take several years. So the industry is doing everything it can to encourage more and more agents, more and more airlines to participate in this. Hence why you, you have the, the IATA 2020 leaderboard. And if you're not familiar with that, it's 21 airlines who have signed up to commit by the end of 2020 to have 20% of their indirect distribution through NDC connections. And that's a significant, you know, commitment that they've signed physically signed pieces of paper. Look, whether they will get to 20% or 15% or 18%, or whether it's 21 airlines or 15 airlines, it doesn't really matter. But it's created a momentum where the industry is starting to move along this journey to get to this point where ultimately, you know, we will be in the world of new capability and starting to take advantage of all those things I just mentioned. Um, the interesting thing right now where we are, and this will be interesting topic for the panelists, is everything to date has been centered around the airlines driving NDC in the market. IATA was criticized early on in the, in its engagement on NDC that it wasn't inclusive enough, that it was a driven— it was only the airlines in, in the initiative that were driving it forward. Um, I think they would, they admit that that was, that was a mistake. So they, they now are much more inclusive on bringing in the agency community, bringing in the corporates Even bringing in the traditional GDSs into the discussions to make sure that they can drive NDC and drive it at scale. But there's an opportunity here as well, now that we're at this point where we're starting to get capability, and this is a message out to the agency community, is take control of this and now start to look and have the conversations with your airline partners as to how can you now work with them better. How can you now actually work with an airline and saying, actually, I'm, I'm a really good agent for you. What are you going to do differently for me? Now you know who I am and now you know my customers are. How are you going to give me special offers and particular offers and don't treat me just like any anonymous travel agent around the world? So there's an opportunity to enter into new kind of deals, new kind of relationships, and not look at it as a threat but actually use an opportunity to enhance that relationship between the agency community and the airline community. And I think now is the opportune time to start to have that discussion. So this is my last slide, you'll be glad to know, and then we'll get into the discussion with the panel. So where do I see where things are going? And these are really my kind of personal crystal ball over the next 6 to 12 months. You know, right now I think technology and that top level of that diagram I showed you, the connectivity, the capability, building out that technology 2019 really is, you know, the end of that core plumbing. So up to now, technology actually has been a barrier. It has been holding back deployment. But I see going forward the next 6 to 12 months, technology will no longer be that barrier, that we'll actually have leading airlines connected, leading airlines connected to their traditional distribution channels and starting to get agents having access to the NDC content and that new capability. So it'll no longer be an inhibitor but actually enable you know, that journey and start to move that forward. You'll also start— you start to hear airlines talking about what new things they're going to do. The industry has been very critical about the fact that up to now the airlines have been very quiet about actually once they get this capability, what are they going to do differently? Why is it going to be better for me as an agent? Why is it going to be better for me as a corporate? Why is it going to better me as an individual traveler? Now some of that, as I said, is for competitive reasons. They don't want to go out and say, I'm going to do all these wonderful things. But you'll start to see, and we're already starting to see, some of the airlines talking about, I'm going to do dynamic corporate bundles or dynamic leisure bundles that I couldn't do before. I'm going to do more continuous pricing. So you'll see a much smoother pricing curve so that if one fare family sells out, you don't suddenly have to jump $500 to the next one. You can go up with $10 increments and start to fill up that curve rather than you know, going through this. So much more competitive in the market. Um, and I think you'll start to see agents and airlines having different discussions, different discussions about, okay, how are you going to, you know, enter into a different kind of agreement, recognizing my value differently, recognizing different ways of compensating me, different ways of rewarding, measuring, and so on. So we're going to have some of that. And yes, I have no doubt we will continue to see sticks and carrots or I think somebody at a previous concert talked about carrots as being very lightly boiled carrots, so they're still big sticks. Um, but you'll start to see more of those as, you know, the industry wants people to start moving down the NDC path at scale, um, and actually really driving volume, which is the ultimate goal here. So, you know, I get back on the stage and in 6 months' time or 12 months' time, hopefully I won't be proven wrong. At least some of these will have materialized, but I think we really are beyond the point where we're talking about, you know, what's going to happen here. It's now how do we actually get this to work and see the real capability come through. Travelport.

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