22 May 2010

Mass Customization and Ancillary Revenue

I am definitely between positions on the announcement by ATPCO of their "ATPCo bundled services product". The cabal supporting this consists of 27 Airlines and 6 Pricing Systems. The focus of the announcement is to talk about the "OC" optional services fare filing capabilities. FULL TEXT OF THE MAY 11th RELEASE BELOW. "Travel Agencies, Travel Management Companies, and GDSs Announce Support for Standards to Enable Shopping, Sale of Ancillary Products Across Distribution Channels."

A notable hold out is American Airlines who feels that the standards will interfere with their ability to individualize the relationship with their customers. AA's Cory Gartner was less than circumspect in his statement to The Beat this week "We are talking about Amazon style, where a customer is coming to us having purchased these things in the past, therefore these are the things that are going to be most profitable for American Airlines to offer because we think customers value these things and will pay for them."

And this is where my dilemma starts. On the one hand I firmly believe that standards are good for the world, but on the other hand I am a fanatic in the belief that suppliers and their customers should be able to define their own relationships. The web has done a great job in developing the abilities of individual relationships between business partners. Driven in part by the use of standards such as XML and HTML. The web enabled open standards and open source software in the process loosening the grip of Microsoft and IBM. But it also enabled the rise of the Google behemoth. Now we need to do things "the Google way". Not necessarily bad but not necessarily good.

Part of me wants to cheer the ATPCo standard. But then this other part of me (yes the older curmudgeonly bit) says - "hmmm seen this before" - and its just another effort to curtail innovation and control the market by those nice people who brought you high costs of distribution. Check out the quotes in the Press Release and indeed the strange bedfellows who combined to endorse the release.

My unease with the cabal of players who are running this are they are saying its a common standard among themselves and enforces the acceptance by the legacy GDS service providers. This represents a closed shop of the usual suspects. Thereby closing out other interested parties who are looking at the dissemination of the data results to the consumer. Specifically stating in The Beat Article:

"The coalition repeated the GDS companies' expectation that they would "provide corporations and travel agencies the ability to shop, book and fulfill airline ancillary services to travelers by late 2010." What remains to be seen, though, is how quickly that would happen and how pervasive it would become."

My unease is that there are many more people involved in search, shop, book and fulfill and itinerary management now as the product categories fragment and as new players emerge to do different/better jobs at serving the consumer.

My challenge is therefore to the "coalition" to show that they are truly open and will publish the standards and make them available - for example under the Open Travel Alliance (OTA) rather than just ATPCo. So that other players who are involved in the travel provision can take advantage of the "standard". At the same time others who chose not to file published or other fare types via ATPCo - such as private fares outside of the Cat 15/25/35 categories - can adopt the same standard. And what about other users such as Tour Operators etc? I think you get my point.

If this is to be a standard then make it truly open so that anyone involved in travel can take advantage of it.

And another point while they mention EMD, the BSPs (in international markets are ignored). As I have written before - the financial fulfillment process of Ancillary Revenues is the Achilles heel.

In the mean time - I think I will continue to cheer on others who are bringing new and better products and services which add value to the whole market and helping build better relationships between business partners, not just the old guard finding more ways to put fences around the existing legacy GDS based "one size fits everything" model.

Anyone willing to take me up on this challenge?


Here is the full text of the Press Release:

Travel Agencies, Travel Management Companies, and GDSs Announce Support for Standards to Enable Shopping, Sale of Ancillary Products Across Distribution Channels

NEW YORK, NY, May 11, 2010 - The industry’s leading travel management companies, online agencies, and global distribution systems (GDSs) today announced their support for plans to implement recently developed, industry-wide technology standards which enable shopping, booking, payment, and reporting of ancillary services. These standards will also facilitate the use of new capabilities that are being developed by the GDSs to help agencies manage the complexity of unbundled offerings, while enabling airlines to differentiate through the sale of ancillary services across all distribution channels. Use of these common and recently launched technology standards will create the opportunity for airlines and agencies to sell ancillary services seamlessly, and corporations to optimize their business travel programs by better anticipating and tracking their full air spend.

American Express Business Travel, BCD Travel, Carlson Wagonlit Travel, Despegar, Expedia, Egencia, HRG, Opodo, Orbitz, Orbitz for Business, Travelocity, Travelocity Business, Amadeus, Sabre Travel Network and Travelport have agreed to support common technology approaches for the merchandising of airline ancillary services.

British Airways, Delta Air Lines, LAN and WestJet support the development of this capability as an option for distributing new products and services. Additionally, Air New Zealand has confirmed that it is mobilizing OC and EMD projects.

By combining ATPCO’s (Airline Tariff Publishing Company) category for optional services “OC” fare filing capabilities with soon-to-be-enabled Electronic Miscellaneous Documents (EMD), airlines will be able to quickly introduce their revenue-building ancillaries to the broadest travel audience through both indirect and direct distribution channels. The group of travel industry buyers also endorses the development of common messaging standards for direct API solutions for those airlines that wish to manage the ancillary data directly with a GDS, enabling the easy and efficient shopping, selling, payment and reporting of ancillaries.

Travel agencies are experts at selling airline products to their customers, and they have keen insight into how these groups want to buy airline products. By using industry technology standards, airlines can quickly deliver the ability to sell ancillary services. Additional capabilities will emerge throughout the year to enable corporations, agencies and airlines to complete the sale and fulfillment of these products within the GDS, enhancing agency efficiency at the point of sale, and integrating into existing back office systems.

Over the past year, many airlines have evolved their business model in an effort to generate incremental revenue by either creating product bundles that differentiate their offerings or by bundling and unbundling various products and services, such as premium seating or baggage fees. Today’s announcement aligns GDSs, online travel agencies and travel management companies around support for the use of recently developed technology standards to help airlines introduce new unbundled fare structures, and demonstrate what is included in bundled fares, while also providing consumers and business travelers full choice and value in their air travel options.

Many capabilities enabling the sales of ancillary services already exist within the GDS environments. Airlines that adopt industry technology standards are expected to plan how to best leverage it this year. The GDSs plan to provide corporations and travel agencies the ability to shop, book and fulfill airline ancillary services to travelers by late 2010.

“It is a great achievement to have all these parties endorse the best way forward for the travel industry. We believe supporting these technology standards will benefit everyone in the travel value chain, from providers to travelers. Airlines will be able to differentiate their ancillary services offer and market it more effectively through travel agencies and to consumers,” said Philippe Chérèque - executive vice president, Commercial for Amadeus.

American Express Business Travel
"When it comes to providing merchandising options to our valuable customers, its critical that we have broad access to such supplier content, that fully integrates into our downstream processes," said Michael Qualantone, vice president/general manager, Global Supplier Relations, American Express Business Travel. "We want proven, reliable and efficient technology to avoid additional cost, processing errors and service disruption."

BCD Travel
Rose Stratford, senior vice president of global supplier relations for BCD Travel, said “We applaud a standardized approach that will enable us to better serve our corporate travelers. It will offer us the opportunity to better manage our traveler needs while providing our clients with the transparency and reporting necessary to manage ancillary fees more efficiently.”

Carlson Wagonlit Travel
Matt Beatty, vice president, Global Supplier Management for Carlson Wagonlit said, “With the GDSs providing quick and easy access to ancillary products and services via common, industry-wide technology standards, we can help our clients and their travelers make better-informed choices to meet their business travel needs while optimizing the efficiency and cost management of corporate travel programs.”

“Delta supports this development of technology that facilitates the potential distribution of new ancillary products and services. We are continuously seeking distribution methods that satisfy the marketplace, and this technology is an option we are considering. It is important that we work with our agency partners to find the best possible solutions for our customers,” said Jim Cron, senior vice president, Global Sales and Distribution for Delta Air Lines

"Despegar.com believes that customers need clear information in order to choose wisely. By setting these standards the travel industry is moving one step forward towards price transparency," said Roberto Souviron, chief executive officer, of Despegar.

"It's important for the industry to come together to solve our common issues," said Rob Greyber, president of Egencia, the corporate division of Expedia Inc. "By adopting these technology standards, we can increase the visibility of ancillary costs to travelers, which is good for airlines & travelers, and keep corporations ability to control spend. Policy controls govern financial accountability at the point of purchase, lessening the audit burden for corporations.

"A concerted effort like this to make these products bookable in the most prominent booking channels sets up all parties for success," said Gary Fritz, president of Expedia Partner Services Group. "These standards pave the way for making a la carte airline products more transparent and accessible to leisure travelers, which in turn will lead to higher adoption rates."

“Following our call for common standards last year, joining this group enables us to continue with our drive in this very important area. It will enhance the way we deliver our products and service changes to our customers so that it works for everyone in the value chain,” Bill Brindle, Business Technology and Distribution Director for HRG.

“Convinced that merchandising and ancillary revenues are an effective way to differentiate and diversify in an industry highly pushed towards commoditization, LAN initiated a couple of years ago an important effort in order to actively participate in these business streams,” said Sergio Mendoza, vice president, Distribution and Revenue Management at LAN. “A multichannel strategy definitely helps us better serve our customers and represents a competitive advantage. On the other hand, standards are necessary in order to simplify and make the multichannel distribution feasible and efficient. We have a huge challenge defining those standards for a business model that is being created as we speak, but that is what makes all this so much fun.”

“To agree on the use of common industry standards in the merchandising of ancillary products is a crucial development for the travel industry. We are proud to be part of a move which will ultimately enhance consumer protection and trust,” Ignacio Martos, chief executive officer of Opodo.

Orbitz/Orbitz for Business
"Orbitz Worldwide has been in discussions with the airlines regarding how to appropriately merchandise their ancillary services for an extended period of time, but finding an efficient technology solution has been a major barrier to progress. Establishing industry standards will result in more productive conversations with our airline partners that will allow us to focus on their business needs rather than technology solutions," said Michael Nelson, president of the Partner Services Group, Orbitz Worldwide, Inc. "The end result will be that our business and leisure customers will have access to the information they need and the products they desire."

Sabre Travel Network
“Everyone wants a healthy travel industry, and it’s clear that ancillary sales have been successful in helping airlines increase revenues,” said Greg Webb, president of Sabre Travel Network. “But this revenue success for airlines has come with a number of challenges for consumers, travel agencies and even the airlines. We intend to solve these issues so the real value of travel can be experienced by everyone.”

“Our top priority is making it easy for consumers to understand the perks and costs of choosing different airlines, and we’ve got several tools on the site today that help,” said Noreen Henry, senior vice president, Partner Marketing for Travelocity. “But, with the increasing number of add-on fees, it’s important to establish a common way for airlines to deliver that information to sites like Travelocity. Having these standards is a necessary step in helping us show consumers all of the possible options and the associated costs.”

Travelocity Business
“In business travel, lack of visibility into ancillary fees is not just a challenge for the traveler, but also the corporation that tracks and manages the total cost of each trip,” said Yannis Karmis, president of Travelocity Business. “A universally-recognized set of programs, delivering an accurate measurement of overall value for selling, tracking and accounting for ancillaries would offer transparency benefitting both airlines and travel meets the requirements of CFOs at all parties.”

Travelport’s mission is to deliver informed choice to business and leisure travelers throughout the world – which means ensuring that each and every search results in a complete and comparable display of competitive travel options,” said Gordon Wilson, deputy chief executive officer of Travelport. “In this context, accelerating the adoption of industry-wide technology standards for airline ancillary services will bring greater transparency and choice to travelers, while enabling airlines to merchandise their products in the way that they want to sell them.”

“WestJet sees the sale of ancillary products via all distribution channels as an important part of its value proposition going forward,” said Catherine Dyer, WestJet vice president, Distribution. “We think it’s important that our valued agency partners have the ability to sell these products to our guests in a way that is efficient and convenient.”

Air New Zealand Amadeus
Mark Street Corporate Communications
Mark.Street@airnz.co.nz +34 91 582 7809
North American Media Contact
Debbie Iannnaci
+1 305-499-6448;

American Express Business Travel BCD Travel
Tracy Paurowski Thad Slaton
+1 212-640-8409 +1 678-441-5292
Tracy.j.paurowski@aexp.com thad.slaton@bcdtravel.com

Carlson Wagonlit Travel Egencia
Kim Derderian Paige Young
+33 (0) 141336044 +1 425-679-4053
kderderian@carlsonwagonlit.fr pyoung@egencia.com

Expedia HRG
Katie Deines Fourcin Sallyanne Heywood
1 425-679-7991 +44 (0) 1256 312624
Katie@expedia.com Sallyanne.heywood@hrgworldwide.com

Orbitz/Orbitz for Business Sabre Travel Network
Brian Hoyt Nancy St. Pierre
+1 312-894-6890

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