‘The Battle Over The Customer Is At An All-Time High’ – Sabre Highlights Latest Travel Trends

Transcript

Alessandro Ciancimino:So the key trends that we've seen over the last couple of years are actually having a significant impact on retailing, distribution, and fulfillment. Just a few things from a retailing perspective in 2018, we've seen the highest growth in terms of new routes that have been opened than what we've seen in any year in the decade prior. prior to that. 55,000 routes opened in 2018. But this is not just the only revenue lever that the airlines have been using to generate more revenue. Of course, we keep seeing steady growth in ancillary revenues. The latest estimate in 2018, the airlines would generate about $92 billion in ancillary revenues, or 11% of their global revenue. From a distribution perspective, a slight decrease in indirect distribution, but mainly driven by the disproportionate increase of capacity of low-cost carriers that predominantly distribute direct. And then from a fulfillment perspective, clearly digital, mobile, online. Nowadays, by far the preferred way to check in is online through a smartphone, and this is changing also the way the airlines are communicating with customers as it relates to, for example, irregular operations and disruptions as well. Yeah, we recently surveyed a number of airline leaders and we asked a couple of questions. One was, what is their current focus from a retailing perspective, in which areas they are investing? And clearly there are 2 areas that stand out. One is pricing And revenue optimization, and the other one is distribution strategy. No surprise, this is like the groundwork, the fundamentals of retailing that is currently in its infancy. The second question we asked, where will you focus next? What is the next area? And this is where we have more like a mix of interesting answers, but the one that got the highest was— Product. Pushing revenue management and the bundles to the shopping path. So moving more towards real-time, which is the key theme. And real-time is going to be a great opportunity for the industry in terms of, again, retailing, personalization, and customization, but also a big challenge from a technology and from an operational perspective. Yeah, so the battle over customers from an airline perspective is at an all-time high, and being able to generate relevant offers to specific customers or groups of customers is critically important. In an environment where there is this proliferation of ancillary services, the risk is that you can provide a very long shopping list of ancillary services, to a customer, many of which are completely irrelevant to that customer and could have a counter-effect. So being able to generate offers that are really significantly relevant for a specific customer is going to make the difference and generate the competitive advantage for the airline. Yeah, so again, the fundamental of this is being able to Mine the data. If there is something that airlines don't lack, it's data. The key point is how to mine the data to retrieve useful and relevant insights that can be used to build a new offer. So from that perspective, machine learning, artificial intelligence is what will make dynamic offers real. For the time being, we've seen the infancy of true retailing, but still we haven't seen the dynamic portion of it. It's still everything pretty static. Now with the new end-to-end platforms that will enable true retailing, and with the support of machine learning and artificial intelligence algorithms, is where we will see a completely changing pace, and airlines will be able to generate then specific offers tailor-made for specific customers or group of customers. So one of the challenges, as I said before, is the real-time aspect that is behind dynamic offer. And what I mean by that is that even in a traditional world, what we've seen over the last few years is an exponential growth of shopping transactions. If we now move on to the new paradigm of dynamic offers, and in an NDC world where airlines will have to generate and bundle and create these offers in a sub-second response time, this is again, this is a big challenge because one thing is conceptually, being able to build a dynamic offer. Another thing is being able to execute that at scale in an environment where if you're not able to provide your offer again in quasi-real time, then you're at competitive disadvantage. And then actually this again could have a counter effect. So this is again, I think, is the ground where we will see who will succeed Who will succeed and who will fail from a dynamic offering perspective? Thank you.

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