Ai Editorial: Selling in an open travel ecosystem – is it must for survival?

First Published on 6th November, 2018

Ai Editorial: It is important how airlines end up being part of what is being envisaged as an open travel ecosystem. Why running a two-sided marketplace, opening up APIs without losing control and sharpening data processing capabilities is becoming increasingly attractive, probes Ai’s Ritesh Gupta

 

Growth marketing is fascinating. The discussion around the significance of distribution in the digital realm is enticing. Attaining robust reach for a growth marketer is must, especially as they scale up. It isn’t a surprise when they place distribution over even the core strength of the product!

What can airlines learn from the same?  

Reaching out to brand agnostic customers via 3rd party sites is an old phenomenon in travel e-commerce. But being in control of the same isn’t – showing the product in a desired way, what to sell and to whom etc. 

How different is to work with an ecosystem such as Alibaba’s Fliggy vs. Ctrip in China? How can airlines make the most of a platform like Amazon or avenue like Instagram? 

It is vital for airlines to prepare in an earnest manner in order to support the idea of fragmented distribution. So from digital commerce structural design perspective, a travel e-commerce player today not only needs to prepare for their own digital assets. Rather, how to make the most of external ecosystems such as Amazon, Apple, Tencent, Alibaba etc. is also a critical decision.

“A company that wants to survive in today's extremely competitive environment has to embrace all of the three approaches (commerce-led, experience-led, and API-oriented methodologies): have a competitive product, content, and pricing; offer 24/7 customer service with all the global languages; and push a B2B business line via API to penetrate the market faster and leverage on the economy of scale thanks to high volumes generated by partners,” says Oliver Dlouhý, CEO of OTA Kiwi.com. “For regional/ local companies the experience-led approach is more important than the other two, but on the global scale, the company has to be universal enough to diversify between all the three strategies.”

Being part of open travel system 

It is important how airlines end up being part of what is being envisaged as an open travel ecosystem. One component is enabling a two-sided marketplace, are airlines ready to run a digital platform that would let other retailers, including airlines, to sell via their platform? What airlines can learn from Amazon is how to leverage economies of scale and scope i. e. to expand the basket of retail offerings plus letting other sellers use the same digital retail platform. So why an airline would sell another travel company’s offering? Of course, for revenue generation, but also to bring into action a data-driven learning loop. The way it would work is – a visitor on an airline’s two-sided marketplace might end up buying a flight from a rival, but in bargain the owner of the platform would end up gaining from behavorial data resulting from such facilitation. Another possibility would be cross-selling to the same passenger.

During the recently MegaEvent in Long Beach, California, Kevin O’Shaughnessy, CEO and co-founder, CityHook/ Indigo.gt, referred to the significance of APIs.

Airlines are becoming comfortable with open APIs, opening in all dimensions except the booking capability.

“Earlier there used to be concerns pertaining to unintentional impact of opening up APIs. The danger of losing out on owning the customer experience,” said an airline source.

But as, O’Shaughnessy, pointed out an API should be about clear boundaries and ease of reuse. APIs should be easy for developers to comprehend. This means designing them with clear uniform resource identifiers and non-complex data structure. At the end of the day, airlines can overcome limited number of coders within their setup and can leverage the prowess of APIs in engaging with 3rd party sites at their discretion. Also, in this context, IATA’s distribution capability, NDC, is being billed as a catalyst that would help airlines in showcasing their product better. If the airline can send new and relevant content via an intermediary that can display and transact on this content better than another intermediary, then competitive pressure gets created which is good for the entire travel supply chain.

As for those airlines trying to support distribution via their own APIs, they indicate that one shouldn’t underestimate what it takes to adopt and execute on a strategy of NDC API distribution.

By opening up requests for offers, airlines also need to look at the cost component. Plus, they need to sharpen their data processing capabilities, says Triometric’s SVP for Business Development, Jonathan Boffey. “Airlines need to collect and process the recent search data across all their channels.  They also need to have appropriate skills to analyse this data by market segment, formulate offers, set pricing and then adjust booking engine rules to deliver this at point of search.  This has to be a continuous process of set the rules, analyse the outcome and adjust.  In a NDC world this becomes dynamic.”

Specialists point out that opening up for offering trip essentials and even non-travel products (even letting 3rd parties to sell via one’s own platform) and sharpening APIs for external partners and even data processing for understanding the demand of traffic is must.

“In the digital space there are no enemies and friends any more. It all depends on a business model which is changing all the time. The flexibility of airlines to switch channels fast will prove to be very important as we go forward. Airlines will need to work with the big digital platforms and vice-versa. However, each should also make sure that they get their fair share of the value,” summed up Marko Javornik, VP/ GM Mobility and Travel, Comtrade Digital Services.

 

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