"Both direct and indirect channel are consumer requisites"
Published: 20 May 2008
Travel Distribution Europe Special, from London
What role is direct and various indirect distribution channels are enacting today for a supplier? Is partnering with intermediaries are win-win situation for suppliers? How are approaches different within different models of airlines and hotels?
These were some of the issues which were brought to the fore as the cream of the travel distribution industry congregated here in London for EyeforTravel's Travel Distribution Summit Europe 2008.
" It's (online) a maturing channel as the realities of bricks and mortar catch up with online. An intermediary OTA must provide significant value-add and a niche-service while fostering closer direct collaboration with suppliers," Cormac Whelan, CEO, Datalex, a speaker during the inaugural session that focused on direct versus indirect distribution, EyeforTravel.com's Ritesh Gupta.
" A maturing web-channel, emerging economic realities and new distribution technologies continue to introduce new paradigms in travel distribution and consumer behavior. Most profitable can be in some cases lowest cost and in others highest yield. Both direct and indirect channel are consumer requisites and strategies for both should be aligned to maximise value. Key to this will be ensuring that you do not have disparate systems running disparate channel content and pricing," said Whelan.
From a hotelier's perspective, Andrew Rubinacci, vice-president - Distribution Marketing EMEA, InterContinental Hotels Group said much has changed over the last five years and the direct vs. indirect distribution battle isn't really a true reflection of the situation. "The biggest change is that from win/ lose mentality, the industry has move towards a partnership mode and its now a win-win situation. Intermediaries can extend reach of our brands and give access to a customer that has not made the brand choice. Both sides must provide leadership in creating and maintaining win-win relationship"
He said that all the five channels - hotel direct, voice / reservation center, 3rd party Internet, brand web and GDS / agency still have value.
"It really depends on where the customer chooses to book. This often varies by occasion. That being said, I believe the Hotel Direct channel is becoming less important as the Internet grows and single image inventory becomes the standard across all hotels," said Rubinacci.
Sinead Finn, head of sales and marketing, Ryanair said suppliers should aim to protect their sites, product and customer. She recommended: Only basis for selling via 3rd party sites if;
1. All information is made available to the customer.
2. Pricing remains the same.
3. You need the incremental business.
Regarding airlines' approach, Whelan said as the airline objective is to maximise the direct channel through more adept fare merchandising and maximising genuine ancillary revenues, it is paramount that they view their direct channel as prime retail estate that can compete with OTA's in the richness of its content, choice and service.
"Our airline customers are leveraging the power of their brand; integrating ancillary content and service with their core product; using advanced calendar, availability and business rules to drive choice and value," he said.
Suppliers are investing in new opportunities such as the Internet and Web 2.0, OTA XML interfaces and mobile technologies. So while the GDS is a proven, historically cost-effective distribution channel, is it time for major innovation and/or new lower cost transaction models that need to be developed for GDSs to compete more effectively in the future?
" It's a difficult wrangle for the GDS between preserving the old 'status-quo' and re-inventing to embrace new distribution realities. Either way, the pace is slow. Suppliers and distributors move ahead with less and less reliance on any single intermediary for cost-effectiveness or profitability. Major innovation is already here, lower cost transaction models are already here. Platforms such as our Travel Distribution Platform are already enabling suppliers to reach high yield trade channels directly and agencies can connect to multiple GDS and supplier CRS based on business rules such as point of sale, route, region, airline or booking quota," said Whelan.
Rubinacci said all channels need to constantly reinvent themselves in order to offer value to there customers.
"The GDSs have made many investments in order to remain relevant to agencies and their customers and I assume they will continue to do so going forward. If one of them comes up with an innovation or new business model that gives them a competitive advantage, that would just be another step toward those goals," he said.
On revenue optimisation strategy, Whelan said key factors for airline suppliers will be ability to revenue manage all parts of the ancillary product and core product – its Super PNR. This will require better collaboration with ancillary partners in analysing market behaviors; pricing, forecasting and capturing revenue opportunities.
"Also as the airline supplier evolves its direct distribution capabilities with trade retail partners, removing reliance on intermediaries, it will require again better collaboration in revenue optimisation," he said.
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