A relative newcomer to the corporate travel industry, Fox World Travel CIO Sam Hilgendorf submitted this column on the New Distribution Capability initiative and its implications for airline distribution, the travel supply chain and corporate travel.
"Why can't we just build our own global distribution system and online booking tool, and just simplify the whole travel supply chain?"
This is the question I asked a little over a year ago, on my third day of joining Fox World Travel as CIO. That question has become infamous within our executive team. After the briefest moment of everyone struggling to suppress their laughter, the team responded with, "We just love that you have such an unbiased view of travel."
Prior to joining Fox, I spent over 20 years in the technology services industry as an engineering consultant, project manager and executive. Over these past two decades, I worked across several industries and all sizes of corporations from the small and midmarket, up to and including the Fortune 10. I have had the benefit of seeing many different supply chain models including manufacturing, retail, healthcare and finance.
When Fox fully introduced me to the corporate travel supply chain, I was completely shocked at how many different parties needed to be involved for me to walk onto an airplane for a business trip. From an outsider's view, it all just seemed excessive.
As I began to learn all the concepts behind NDC, I became immediately excited for the potential innovation and changes it could bring to the supply chain. Several aspects of this supply chain evolution I am interested in seeing come to fruition.
Next Generation Storefront
Of all the links in the supply chain, I believe NGS is absolutely the most critical for successful adoption of NDC. This is simply because it will be the interface that the consumer interacts directly with, whether that consumer is a traveler or an agent. NGS will be key in both the creation and presentation of the robust and relevant content that NDC promises.
Consumers have more power than ever to drive meaningful change of a supply chain through their technical savvy, social media presence and the vast amount of information available. Once a consumer can easily compare the options and value between carriers in NGS's "buckets," it will push suppliers to drive innovation and differentiation in the products themselves. This will, in turn, require the full NDC capabilities to deliver. After this tipping point is reached, I expect a frantic rush to NDC adoption for any remaining holdouts, as it will be key to retaining customers.
NDC is forcing the modernization of the agent desktop experience, which has limited innovation in content creation. The additional content promised in NDC cannot be delivered through the legacy cryptic systems. Converting to a graphical user interface, or GUI, will allow for creation of this richer content. This new agent desktop experience is also needed to start training a new generation of travel agents, who simply do not understand the older technology.
Distributors are already transitioning their agent desktop to a modern GUI platform, with flexibility to adapt as the content changes. At the same time, new entrants are starting to emerge with distributor-agnostic agent desktops, which will allow for direct connections to suppliers. Having viable aggregation alternatives will force additional innovation in improving the agent desktop experience itself. This will create an entirely new competitive market for providing agents with the most robust set of tools.
Aggregation and Distribution
Having the option for anyone to connect directly to suppliers is going to put needed pressure on the oligarchical distribution model. Once fully established, NDC will provide immediate alternatives to the legacy GDS model to receive content. Distributors will have brand-new threats from both suppliers and new entrants in aggregation.
Distributors will need to be much more innovative in how they organize and present this content to the consumer. They will need to be faster and more consistent and provide a better consumer experience than going direct to the supplier.
Fortunately for distributors, NDC also creates robust, dynamic and personalized content. This means aggregation and distribution will become much more challenging to present the right offers at the right time to the right consumer. This additional complexity will create opportunities for distributors to innovate their already-established delivery algorithms. They can quickly create a better experience for consumers than the newer alternatives.
Corporate Travel Programs
One downstream aspect of NDC that is exciting is the impact it will create on strategies around corporate travel policy. There will be brand-new decisions that companies will have to make around this new content, and how it is applied within their travel program. These new decisions will come with ambiguity on the impact on the financials and to the traveler experience. NDC will create new opportunities to provide a consultative service on the risks and rewards in travel policy design and management.
NDC will also create additional data within travel operations, including more fare types, ancillaries and flexibility options. This creates an opportunity for more detailed reporting on behaviors, preferences, and the impact of loyalty programs and status on the program. At the same time, as more personalized offers are presented to travelers, ambiguity and confusion will be created on what is within policy and what is not.
With all the change NDC will bring to corporate travel programs, education services, reporting and analytics services, and consultative account management all become more valuable as the complexity of content increases. The more complexity within the content and options, the more valuable a managed travel program becomes to an organization.
Timing and Dependencies
For a supply chain to make a shift to the extent that NDC promises, all the key players must evolve at roughly the same pace, which then creates tension for the change across the industry. For NDC, this includes suppliers, distribution, travel management companies, online booking tools and corporate travel programs. Fortunately, it appears that NDC has advanced to the point that we're starting to see this tension between providers increase.
We are now seeing efforts among competitors to leapfrog each other or be the first to grab a marketing headline on an NDC booking, while at the same time we also see an industry-level apprehension of falling behind others. These are all signs of stress and uncertainty, signaling the change is happening.
At Fox World Travel, we often talk about viewing the future of travel over a 30-year horizon. While NDC will still take years to mature, the foundation it creates will be a cornerstone to managed travel programs over the next several decades.
While still a new member to the business travel industry, I am excited, and even a bit impatient, for all the new challenges and opportunities that NDC promises to create for the supply chain of business travel.