Notes from a recent travel buyer-only meeting staged by the UK and Ireland’s Institute of Travel Management show just how concerned travel managers are becoming about New Distribution Capability.
NDC was launched by the International Air Transport Association more than a decade ago as a modern airfare distribution alternative to the traditional EDIFACT-based global distribution system channel used by the vast majority of travel management companies and online booking tools.
A number of European airlines began removing some fares from EDIFACT channels several years ago, but buyer disquiet has intensified in 2023 as more North American carriers followed suit – notably American Airlines, which has withdrawn up to 40 per cent of its fares.
One ITM buyer, according to the notes, had “no solution to losing 40 per cent of their fares through a particular airline. The TMC has not presented a solution. The buyer feels completely in the dark and will have a deluge of complaints from travellers seeing fares outside their policy.”
Another buyer “expressed concern over leakage increasing and that buyers may need to accept this. Travel managers and travel teams have spent decades articulating the value of a managed travel programme and this initiative erodes that work. In the event of a major disruption or travel stoppage, the fallout would be very concerning.”
Despite airlines giving abundant notice of their intention to adopt NDC, buyers in the ITM discussion “stated their frustration at the lack of readiness by TMCs, OBTs and global distribution systems given the length of time this has been on the way.”
Amid this rising anxiety, BTN Europe asked five industry thinkers that are close to the subject how they summarise the situation buyers now face and what they should do next.
Is it becoming harder for corporate travellers to access a full range of fares through their usual TMC and OBT booking channels? If so, are travel managers beginning to experience leakage from approved booking channels?
Paul Tilstone, managing partner, Festive Road, and former adviser to the International Air Transport Assocation, which created NDC: Yes, although I’d argue this isn’t new. Since the arrival of the internet as an effective direct sales channel, new entrants such as low-cost carriers have drawn travellers outside traditional managed channels and TMCs/OBTs have had to deal with it. Even the big legacy suppliers in air and hotel have been exploring direct strategies for some time.
Travel manager, Germany (speaking on condition of anonymity): It has become increasingly difficult to access full content ever since Lufthansa Group began charging for distribution [originally in 2008] and culling fares from the GDSs [in 2018]. Whether or not the fallout since then has been necessary is an interesting question. Some players, mainly aggregators and small-to-medium TMCs, have prepared; others, mainly GDSs and mega-TMCs, saw less opportunity and more disruption to their existing business models. There will be leakage but the bigger impact overall is financial fallout.
Guy Snelgar, global business travel director, The Advantage Travel Partnership: Right now, this doesn’t seem to be creating an increase in leakage. If anything, Advantage members are reporting that growing complexity is driving a greater share of the travel programme to the TMC.
Tristan Dessain-Gelinet, CEO, Travel Planet, a TMC which has developed its own technology to book NDC-piped fares: Definitely yes, and it will become harder. For the first time in 40 years travel content differs according to the channel used. Travel managers now have to ask their TMC what content they will get. For clients with TMCs on exclusively GDS-based solutions, leakage and price increases will get bigger and bigger.
Has anything really changed this year for Europe-based travel managers, or is the current outcry over NDC a panic in the US over fare withdrawals from GDSs by North American carriers?
Paul Tilstone: The difference is that the changes by North American carriers have affected a bigger number of buyers, with bigger programmes, across a bigger percentage of spend and with bigger price variances. These changes mark a visible acceleration in distribution reform.
Jorge Díaz, CEO and founder, AirGateway, an airline content aggregator: For Europe-based travel managers I don't think there has been too much change this year, except maybe for a second wave of full-service carriers joining the direct distribution coalition. These include SAS, TAP and LOT, with more in the pipeline.
Guy Snelgar: It certainly could seem like North America is joining the discussion we have been having in Europe for several years now. Perhaps the sudden removal of content by some carriers there from the GDSs has made this seem more dramatic compared to the steady movement over several years in Europe. But in reality, we have been living with content fragmentation across air, hotel and rail travel for a while.
Tristan Dessain-Gelinet: What has happened in North America started in 2016 in Europe. Lowest fares have disappeared from Lufthansa and British Airways but European travel management has been in denial about this change, relying on the GDSs to fix it.
What steps can travel managers take if they are worried about content fragmentation?
Paul Tilstone: In the short term, fully understand your TMC’s short- and long-term strategies. Understand as well any additional fee implications and, when impacted fare classes are known, check the volume of transactions affected to assess the size of the issue for your business. Decide also if you should focus on direct booking or alternative content sources, plus whether you need a book-direct data capture tool like Traxo or TripLink, and what you will communicate to executives and travellers. Establish reporting to capture cost impact, and by which channels fares are booked, to empower future action.
Jorge Díaz: It might be as simple as opting for a more tech-enabled travel seller.
Travel manager: Wherever you can, access NDC fares for NDC-enabled airlines. Do not follow the dual EDIFACT/NDC approach argued by some sections of the industry. I see no benefit to EDIFACT moving forward other than to TMCs earning their GDS incentives. Speak to your TMC and compensate for its lost incentives via your fee models.
Guy Snelgar: First and foremost, talk to your TMC. Discuss how important these fares might or might not be for your travellers and any current limitations or increased costs around servicing, changing or cancelling those bookings. Then you can discuss the fare savings that NDC might offer versus any potential additional costs around the manual intervention sometimes needed to manage those trips.
Tristan Dessain-Gelinet: It has become an urgent priority to evaluate your TMC based on its content offer.
Is the solution for travel managers to sit tight and wait for the GDSs to start offering a critical mass of NDC-piped fares through their platforms?
Paul Tilstone: Those who don’t want to disrupt their existing supply chain and look to the GDSs for providing solutions at scale should wait. Those with an appetite to take advantage of the disruption to re-think why they use different parts of the value chain, and for what, can make this an opportunity to move to more of a micro-services approach. But don’t underestimate the “will, skill and bill” involved.
Travel manager: The biggest problem for buyers is that they are not truly in control of their own destiny because the decision to wait for the GDSs is realistically not theirs, but the TMCs’ and the GDSs themselves. There should have been a dual development approach to integrate aggregators into the booking process while the GDSs continued honing their platforms. The major issue slowing things down is the retrofitting of mid- and back-office technology. It is an immense development overhead. So, the only decision buyers can make, and some have, is to exchange one player for another.
Guy Snelgar: We are now several years into the rollout of NDC, so suddenly expecting a GDS silver bullet that will solve everything is unrealistic. I do believe this year will see real progress, both in the functionality actually available through NDC and in the GDSs’ ability to integrate this content into their platforms. But it will be a while before NDC matches the servicing functionality historically available through the GDS.
Tristan Dessain-Gelinet: GDSs have little interest in adopting a low-revenue business model by moving to NDC content. Airlines’ decision to open their content for connection to any tech-capable TMC makes the GDS channel much less attractive.
How well currently are TMCs able to handle post-booking management of NDC-piped fares?
Paul Tilstone: I haven’t heard of any TMC with the perfect solution at this stage because the airlines themselves don’t have everything solved. But the capability of TMCs to manage the changes varies considerably. What’s clear is that culture and capability to manage these changes are now a key differentiator for any buyer looking at potential TMC partners.
Jorge Díaz: Servicing in NDC involves big mindset changes for TMCs. This transformation creates more complicated processes in a relatively small percentage of cases, but also some big advantages in terms of automating tasks like refunds and reissues. TMCs can make huge workforce savings because they no longer need agents with decades-long-experience of complex fare calculations. Any junior agent with good service skills can become a great travel agent for corporate travel.
Travel manager: Smaller TMCs have this stuff figured out better, with less dependency on legacy technology.
Guy Snelgar: Some servicing is not yet technically possible through the NDC functionality currently in use, although these gaps are getting smaller. Making changes can be manual, long-winded and possibly more expensive. For many TMCs it is a question of whether those very high-touch, resource-heavy functions can be delivered at a price the corporate customer is prepared to pay.
If your TMC or OBT is currently unable to offer NDC-piped fares, or is surcharging significantly to book them, is it time to switch to another provider?
Paul Tilstone: It’s important to assess their longer-term strategy before you decide to switch because of short-term impacts. The cost and complexity of change is itself highly disruptive. It’s how TMCs approach all the changes we are experiencing in our sector, including issues like sustainability, diversity and talent, that makes for a great partner.
Jorge Díaz: Whether the surcharges are relevant to your company is a decision for every travel procurement manager, but I think we can at the very least describe them as “notable”. GDS NDC-enabled platforms can incur hidden fees too and buyers should factor them in.
Travel manager: If you’re a large organisation with one or two global players serving you, you will have a challenge moving to more modern providers that right now may be less scaled up to manage your business. But that’s not to say they won’t be able to in two or three years time.
Guy Snelgar: For some travel managers, flexibility, efficient management of bookings and support for their travellers will outweigh access to slightly cheaper fares. For others, as with non-refundable air tickets or hotel rates, a cheaper price will be the main driver, while understanding the potential limitations of support for those options. But as the technology improves over the next few years, NDC fares will become just another source of content that TMCs’ systems are able to consume and manage, as they already do with web-based content from across the travel industry.