"Airlines need to move away from white label providers"
Published: 22 May 2008
Travel Distribution Europe Special, from London
XML is in vogue because of its promise to take costs out of the process of building one-to-one connections.
So what role is this technology set to play in future especially when it is being said that Open Travel Alliance (OTA) has been working very hard on expanding their transaction sets to provide viable options for more trading partners?
John Lambe, CTO, OpenJaw Technologies says establishing connections to new partners should ultimately be a configuration exercise, not a programming exercise.
"The industry is not there yet, however the effort to establish connections to new partners is decreasing all the time. In OpenJaw's experience, it takes us far less time and effort to integrate a partner that has implemented an OpenTravel XML interface, than if they have a proprietary interface. While OpenTravel has been working hard to define new and expanded message sets, it is also working, in areas such as content distribution, to standardise processes. These are all essential steps to reach the endgame to minimising effort to add new partner connections for both suppliers and intermediaries. Standardisation benefits everybody and significantly reduces cost. Companies need to take a long term view, implement the standards and work with OpenTravel to evolve the standards to meet new business needs," said Lambe.
In an interview with EyeforTravel.com's Ritesh Gupta, Lambe spoke about online distribution challenges and much more. Excerpts:
Ritesh Gupta: Suppliers are investing in new opportunities such as the Internet and Web 2.0, OTA XML interfaces and mobile technologies. How do you see these developments from OpenJaw's perspective?
John Lambe: These are all very useful technologies, however we are seeing travel companies struggle to find the right approach to dealing with social networks, user generated content and mobile. In some areas, such as mobile, the investment costs can be high due to the lack of standardisation of devices, while the financial returns can be low as users have not yet fully embraced mobile for travel booking. Sometimes a new approach is needed, not just to migrate existing applications to a new platform. For mobile, focus on 'in travel' applications such as checkin, booking modify and disruption handling. There are also big opportunities in pushing promotions, targetting commuters with time to browse. In time, as mobile devices become more standardised and mobile browsers improve in capability, the implementation costs will lower and the opportunities will increase for mobile booking services.
Ritesh Gupta: Low-cost carriers have unique online distribution challenges. They behave like online retailers with heavier home pages, more embedded and interactive content. In fact, an easyjet executive recently referred to stretching the supermarket e-commerce analogy to airline environment. In such scenario how do you see your role evolving when it comes to relationships with airlines?
John Lambe: Airlines are one of OpenJaw's most important customer categories and we see that importance growing over the coming years as airlines further embrace ancillary sales and dynamic packaging. Most airlines are still at the start of the process of fully utilising their websites to drive additional revenue. Most airlines still use 'white label' providers for car and hotel sales.
In my opinion, airlines need to move away from white label providers and fully integrate ancillary sales into their flight selling. They should not be handing off the customer to a third party. To make this change, they need organisational as well as technical changes and will need to gain in house expertise in the various product areas.
With airlines flying globally, they need multiple ancillary partners who can provide the geographic and product coverage needed to maximise revenue. It is unlikely that one supplier can provide that global coverage or provide the differentiated products to serve all the airline's target customers: short haul, long haul, business and leisure travellers, retail and net rates. Full integration of ancillaries also boosts dynamic packaging opportunities, allowing the airline to push distressed inventory as apart of an opaque package without discounting their headline fares.
Airlines also need to see the huge revenue opportunities their loyalty programmes can provide by adding new loyalty partners, increasing redemption options and fully integrating their loyalty programmes into their main websites.
Ritesh Gupta: Recently, Ryanair mentioned that ancillary penetration continues to increase, and the airline is on target to achieve ancillary sales objective of 20% of revenues over the next three years. In this context, how do you see opportunities and challenges shaping up for OpenJaw?
20% of revenues will probably also equate to 100% of profits! Effectively, Ryanair will be running the airline as a marketing tool to attract customers for their ancillary product sales. For Ryanair to achieve this goal they will need to move beyond white label partners and take a more integrated approach to how they sell ancillaries. They will also need to widen the range of products and suppliers within the different categories.
They will have challenges, and their low fares model restricts options that are open to full service carriers. Loyalty points/miles can be one of the most lucrative ancillary revenue opportunities for full service airlines. However redemption is of limited attraction to the member if the airline sells seats for 1c.
Ritesh Gupta: For their part, customers increasingly expect access to every choice available and at every price point. What technology can be implemented to ensure your search and booking capabilities provide the customer with what they are looking for?
John Lambe: Travel websites need a wide variety of content and inventory to offer choice and to differentiate their offering from their competitors. To simplify the process for customers, they want to add calendar functionality and show more options in terms of alternate destinations and products. This all increases the number of transactions and volume of data transferred between partners. Many of the supplier systems cannot cope with the volumes involved. OpenJaw is working on advanced caching technology to allow travel websites provide a wide range of options in a more targetted manner and to reduce the data volumes to supplier systems.
Ritesh Gupta: In your opinion, do alternative direct distribution and marketing tools such as widgets and other desktop applications lead to higher conversion rates?
John Lambe: Primarily, they should be viewed as marketing tools that increase brand awareness and customer stickiness. However it is important to strike the right balance between providing offers that may interest the customer and bombarding them with useless information that the customer doesn't care about. Customers should see these applications as a help not a hindrance. If targetted correctly, they can drive conversion in the same way email marketting does.
Ritesh Gupta: What according to you are major challenges when it comes to centrally managing hotel descriptive content, negotiated rates and inventory allocations for all hotel suppliers of online travel agencies?
John Lambe: Travel companies need a single flexible system that will allow them manage their content and inventory and support multiple inventory sources (local allocation, supplier direct connect, merchant/ net rate intermediaries, extranet) for a single property. They need automated supplier content import, the ability to enhance and translate that content locally and to support multiple copies of static content if they are dealing with multiple external inventory sources. On top of that, they need the capability to automate increased allocation requests and notification processes to their suppliers and to handle disruption events.
Full service agencies need the capability to modify and rebook customers without losing inventory. This is especially complex when the hotel booking is part of a dynamic package with products from multiple suppliers.
We at OpenJaw understand these challenges as we faced them all when building xHotel V2.0 which provides all these capabilities.
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