Airline Retailing Nut
A Conversation About NDC And
Beyond With Rodrigo Celis and
Kathy Morgan, Sabre
There have been significant discussions around airline retailing for quite some time, and rightfully so. Today’s consumers have access to endless rations of data to help them get the most value for their money. These tech-savvy consumers don’t simply prefer personalized offers and complete transparency from the companies in which they conduct business … they expect it.
For airlines, however, cracking the retailing nut hasn’t been easy. Every airline has its own ideas about how to build the most optimal retailing and distribution strategy and how best to execute it. Some have made enormous strides in this area, while others have merely scratched the surface.
No matter how sophisticated an airline is in terms of its retailing initiatives, and no matter how large or small the operation or the carrier’s business model, technology is essential in helping airlines satisfy their retailing goals. That’s a given.
In addition, IATA’s New Distribution Capability (NDC) standard adds a new level of sophistication for airline retailers. Simply put, it enables airlines to communicate their rich, unique product data to travel agents. Moreover, their new products will go to market much faster, and they will be able to extend personalized offers to customers who prefer this channel.
Agents, on the other hand, will have access to airlines’ products and services currently only available in airlines’ direct channel.
Then there is the consumer, who can comparison shop and find the best value for the price because of all the choices and transparency afforded by NDC.
While the NDC standard is not an industry requirement or mandate, it is the distribution piece of an airline’s retailing strategy, and it can significantly boost the success of airline retailing.
In a recent interview with Ascend, Rodrigo Celis, vice president of product management for Sabre Airline Solutions, and Kathy Morgan, Vice President of NDC for Sabre Travel Network, share their expertise on how airlines can become better retailers, and how technology and NDC play a role in the retailing space.
Question: Why is the NDC standard at a pivotal point for the travel and transportation industries?
Kathy: There are three key areas that make NDC vital: market dynamics, product complexity and airlines’ evolving retailing strategies. From a market-dynamics perspective, the way consumers want to purchase products is driving different requirements in how airlines — along with every other retailer in the world — need to bring their products to market. From a product-complexity perspective, airlines’ products are becoming very dense. It is hard for consumers to know what they will get as airlines look to differentiate their brand through bundling and unbundling strategies. Therefore, the need for a new type of communications protocol to be able to articulate in a much richer way becomes extremely important.
Rodrigo: Like Kathy mentioned, the third area is around airlines striving for product differentiation and to be better retailers across all channels. Quickly getting their products into indirect channels such as travel agents requires real-time communications. NDC enables that level of two-way communication and is essential to helping airlines become better retailers.
Q: Why now?
Kathy: The market is finally ready. Standards have matured to a point that technology can be built on top of them. Moreover, airlines now have a much clearer product strategy that enables them to leverage these standards, along with their technology solutions, to support that strategy.
Q: What are some highlights of Sabre’s NDC vision?
Rodrigo: For Sabre, NDC is one of the components; however, it doesn’t define our vision and strategy. NDC is an industry standard, not actual innovation. Therefore, it is just a piece of it … our vision is much broader. With our revenue-management history, there is a lot of opportunity using decision support to make our execution engines and our offer-management system a lot smarter, a key differentiator for us.
Kathy: While we will differentiate in terms of offer creation, the delivery of that offer is another area where we see significant complexity and shortcomings for airlines. We are one of two travel-related companies in the world that can deliver across the end-to-end customer journey from offer creation all the way to fulfillment. NDC is the last piece. It’s the distribution component of an airline’s retailing strategy. To that end, we are driving innovation across the spectrum from demand stimulation, shopping and booking, and consumption, to delivery of the products. This holistic approach positions us to really differentiate in this space.
Q: Offer management appears to be a central component of this new ecosystem and Sabre’s NDC vision. How is Sabre thinking about the components of a smart offer-management system?
Rodrigo: First, you must have intelligence, through data science and decision support, that powers your offer-management system. Without it, you have nothing. Moreover, the system must have the ability to get smarter as you go. Then we look at ancillaries and help airlines determine the products they want to sell and how they want to sell them. Our retailing platform then defines rules around what to sell, at what price, when and to whom based on channels, segment, customer, et cetera. Finally, a next-generation shopping engine enables us to provide responses that are 10 times faster than what we see today, as well as have the intelligence that optimizes shopping responses based on the type of device, the customer’s segment and other information.
Kathy: I agree … you must have an offer-management system that gets smarter as you go, because winning in this space is about getting to the “yes” fare … getting the relevant offer in front of the customer as fast as you possibly can. We are in a very unique position given the data airlines have in their systems and the data in our distribution channels. This gives us the ability to achieve more intelligent offer-management systems than other players in this space.
Q: Decision-support plays a key role in powering offer management. What investments is Sabre making in decision-support solutions?
Kathy: First, we start with big data — a key area of investment for Sabre. We have tremendous amounts of data, but up to this point, the tools in the marketplace were not necessarily equipped to be able to consume and process it. We’re coming into an era where big-data automation is a must because humans can’t possibly manage it. Leveraging those types of big-data tools — and adding machine learning and intelligence so the data is consumable — subsequently drives and powers our decision-support capabilities.
Rodrigo: Revenue Optimizer is a great example of how we leverage this data by bringing the concept of revenue optimization and inventory together in a more real-time fashion. The next piece revolves around marrying flight and ancillary revenue so airlines can start revenue managing all of their offerings. On top of it, you can add customer data so you know exactly who to target in every segment. Finally, you bring real-time market conditions into revenue management to start optimizing availability. Fusing the data into a revenue-management and availability solution gives us something unique that nobody else has and can really change the game in terms of how airlines think about revenue management.
Q: How will the PSS need to evolve in terms of next-generation retailing?
Rodrigo: The core PSS will get smarter. More data will simplify interactions, and there will be more automation. In addition, some offers will be distributed via traditional channels such as ATPCO while others will be distributed using new methods. Our PSS will take a hybrid approach, supporting both traditional and dynamic offers. In addition, our commercial-platform strategy will come into play, bringing pricing and decision support into the PSS to make it smarter. So it’s critical for it to evolve and be more modular.
Q: How do you see airlines’ adoption of NDC varying?
Kathy: Some airlines have played a thought-leadership role in retailing, and they are further along on the NDC spectrum. Others are just beginning to look at NDC and evaluating what role it can play in their product and commercial strategies. An airline’s adoption of an NDC strategy is usually parallel with their retailing and distribution strategy and should align with how they want to differentiate, what types of products and services they want to bring to the market, how they think about personalization, etc. This all has a direct effect on how they adopt NDC.
Q: What are some of the key considerations as airlines incorporate the NDC standard into their retailing strategy?
Kathy: The process begins with a product orientation to understand the opportunity. There are several questions to consider such as: How do you think about bundled versus unbundled? What are you thinking in terms of brand? What is your market opportunity? Who are your competitors, and how do you differentiate against them? What is your marketplace promise? You take that information and determine how you go to market, which is really the key of what NDC enables.
Rodrigo: Once your organization is aligned around those responses, it’s important to recognize you won’t become an NDC airline overnight. There is a methodical approach to building out next-generation offer and order-management systems, and there are technology and product evolution steps that are required.
Q: What investments are in place to make this vision a reality at Sabre?
Rodrigo: Airline retailing has been vital to our strategy for the last several years, so we aren’t starting at ground zero. We have made significant investments in our core ancillary and offer-management systems, which is key to dynamic airline retailing. We’ve invested in several areas such as customer data, pricing, revenue management and digital experience. Those are some of the foundational investments we’ve made, but there are many more on the horizon that will contribute to lucrative airline retailing. Innovation in pricing optimization, a next-generation shopping engine and reimaged graphical user interfaces for airlines and customers allow us to intelligently optimize products and deliver personalized offers across the customer journey.
Kathy: As Rodrigo mentioned, we’ve already made huge investments from an airline perspective, so this is about an evolution not a revolution. On the distribution side, we are bringing new products to market which provide rich visualization around merchandising capabilities and is the natural evolution in our shopping solution. We have already contemplated how to include aggregated content that is sourced through multiple channels so buyers and sellers in our marketplace have access to all content and the ability to comparison shop across content, which is vital to the agency channel.
Q: What would you say to airlines that don’t have the capital to build an NDC platform?
Kathy: There are numerous ways to be able to market and sell merchandise with existing capabilities. For those who aren’t ready to make the investment, start with your product and retailing strategy. We have been delivering significant ancillary revenue for airlines, so this is not new territory for us. NDC creates a new way in which you bring products to market, and we can help you determine what makes the most sense for your airline now and in the future.