Airline Distribution Strategies Complicate Life for Travel Agents

Having had their airline commissions cut decades ago, travel agents have struggled to justify the time and expense that they invest in helping their clients book their air segments.

But as more airlines seek to drive down the cost of offering flight, fare and fee information through multiple distribution channels, agent frustration is starting to bubble up.

At the August American Society of Travel Agents (ASTA) 2017 Global Convention, agents and agency owners voiced their disapproval during a special lunchtime discussion about developments in New Distribution Capabilities (NDC).

NDC is a technology standard that provides direct connections between airlines, travel agencies and travel technology providers, bypassing traditional GDS like Sabre and Amadeus. It’s similar to how consumers book directly with airline websites. A key strategy for the airlines is avoiding paying the GDS a fee for them hosting their data in the larger aggregated marketplace.

The problem is, airlines are going about surcharges, incentives and direct connect capabilities differently and on different timelines, providing different fares and other services through these various channels. Often this means agents have to toggle between various websites and tools to complete a single booking.

American Airlines earlier this year announced it is offering a $2 incentive payment to agents per segment booked through their NDC connection.

Conversely, for two years, Lufthansa has been penalizing agents and consumers by charging a €16 non-refundable fee for bookings made outside of its website and call centers – a move that is now being investigated by the European Union.

Lufthansa does offer a booking site (www.lufthansa-agent.com) where agents can book surcharge-free Lufthansa flights. The EU is investigating Lufthansa and the impact of different distribution channel strategies on competition and consumers.

The online travel publication, Skift, recently quoted Christoph Klenner, secretary general of the European Union’s Technology & Travel Services Association, as being concerned about how airlines like Lufthansa are “making available different content to different channels.”

Additionally, International Airlines Group (IAG) subsidiaries British Airways and Iberia will introduce a €9.50 (US$10) per “fare component” surcharge on November 1, 2017 for all non-NDC bookings.

Industry acknowledges NDC issues at ASTA conference
During a press conference at the San Diego ASTA conference, Mark Meader, ASTA senior vice president of marketing, industry affairs and education, called the luncheon discussion “lively and insightful,” though some attendees off the record described many agents in attendance as  irritated with the airlines and GDS actions.

Reached after the conference, Wendy Burk, founder and CEO of Cadence Travel in La Jolla, CA, said the variety of booking channels can undermine an agent’s credibility with their customer. “When a travel agent puts in work to provide thoughtful air options at just the right cost with just the right details, nothing is worse than a client responding with, ‘I found it cheaper online,’“ Burk said.

“Of course, they’ll be back when they see the middle seat and 12-hour layover, but avoiding this frustration altogether comes down to changing the perception of the client. We explain that our state-of-the-art technology gives us access to information that can’t always be found online, like the quantity of aisle seats left at the most updated lowest fare.”

Investment in NDC connections will cost agents
Then there is the cost and effort imposed on agents and agencies to build NDC connections.

“Any agency large or small looking to build a connection into an airline would need a certain amount of resources to do that. It is a big undertaking for any organization. You have to either invest yourself, or pay a third party to do it,” Meader said at the press conference, which included representatives from American Airlines, Amadeus and Travelport.

“We would like NDC adopted across the industry. We recognize there is a challenge in that. There is effort in that,” said Neil Geurin, American Airlines director of distribution strategy.

Scott Alvis, chief marketing officer with Amadeus North America, said “Most travel agencies are not interested in building an IT shop” to build NDC connections. “They would love for the GDS to take care of this. We are putting our plans in place to do that.”

Meader said that ASTA is also concerned with how NDC will impact a variety of other agency systems outside of bookings, like customer relationship management databases and payment solutions. “What might this mean from a settlement perspective? Are there training implications?” he added.

Will Owen Hughes, senior director of air commerce at Travelport, said his company is monitoring the impact on agencies. “There are a lot of processes agents use through our system. We need to make sure we integrate the NDC content” with those processes, he said.

Long-term, the value of agencies will change, but won’t diminish
Interviewed by phone after the ASTA conference, Patricia Simillon, head of strategic marketing, Airline IT, Amadeus IT Group, said she believes NDC developments will only assist agents long-term.

 “The value of travel agents is there. It will not disappear, and in fact, their importance might be increasing. The shift is going to be in the job of a travel agent to be more consultative, presenting options based on their knowledge of the client,” she said. “Travelers can find information through meta-search, through a number of channels. What they cannot find is the human relationship that an agent has with them, supplemented by an in-depth customer profile.”

Travel reservations are “not just about marketing” fares, schedules and other services she said. “It’s also about the upsell. You have to have the right value at the right time for your clients, because all of us are emotional, and not always rational, and therefore the data can help build that offer for the client who travel agents know best.”