So listen up boys and girls – in case you think that Merchandising is coming down the pipe sometime – maybe never… guess again. The days of speculation are over. UA alone is at a run rate of $5 Billion per year. American I would say is already higher. Thus the estimate by Ideaworks that this is a $10Billion business is already on the low side.
The Beat recently sad down with the honchos of AA’s New Direct Connect platform. One quote really caught my eye.
Cory Garner: “We have an XML direct connection in production today for use. We envision that an XML pipe will exist in parallel with legacy pipes for some period of time; it's just that the XML pipe is where that additional merchandizing capability will be. Our legacy pipes will not have that. We are not interested in putting development dollars in a standard that will be going away at some point. It will be just a matter of when GDSs cut over, when agencies cut over--at which point we will decide when the legacy technology is no longer necessary.”
Over the past few weeks I have been working directly with merchandising players both on the supply side and the intermediary side. We have developed solutions for merchandising on a wide variety of levels. These range from seats to bags to non-air. While there are still holes in the infrastructure – most of them are now covered. The missing pieces I am not waiting for – we will work those out.
What amazes me is that after so much talk about how important ancillary revenues are to airlines – how little engagement there has been in the process from the Intermediary side. I have been trying to analyze why this would be the case. I believe it is because they are “waiting” for the GDSs to come up with the answer. What I see in the statement above is that the airlines are clearly ahead of the GDSs. Now the GDSs must play catch up. If I look at the recent press on Amadeus’s efforts – one could be easily forced to interpret that they are slowing things down waiting for some magical industry standard. Again – I would say get over it.
Ancillary Revenue and its companion Merchandising are clear differentiators for an airline. Intermediaries better get on board with the airlines or there will be a period of difficulty when the two are not partners. As noted above – there are many people not waiting. If your teams are not heavily engaged in integrating merchandising functionality at your point of sale then you are already late. Smart players are already building tools for bundled and unbundled products. Early adopters will be winners. Late adopters will be road kill.
So fair warning – better get out there… Your number 1 New Year’s resolution better be to be ready for this. Smart players will figure out this is a great revenue opportunity with Airline product. Dumb people will be waiting again this time next year for the GDS to give them what they think will be easy. And even then – they wont know what to do with it….
Do you want seats with that?
Cheers
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