Philippines Tourism Company reposted this
Travel distribution trends (3/4): Travel agent incentives and commissions are the next logical target for many airlines. As major airlines tackle commercial distribution, breaking free of full content to regain control is a top priority. The first challenge for airlines is managing the often drastically increased costs associated with being outside GDS full content. Surcharges and channel shifts are proving to be effective cost-mitigation tools. The result is an increase in direct connect and NDC shares (GDS and non-GDS). Consequently, a more direct relationship between airlines and travel agents arises. This then also concerns commissions and incentives. Additionally, the GDS distributors do not necessarily pay travel agents the same incentives for NDC- as for legacy content. Amadeus, for instance, back in 2023 had published terms and conditions for travel agents stating that specific NDC content will no longer qualify for incentives from the GDS - see my colleague's post on this from six months ago: https://lnkd.in/egwvhhDb Consequently, travel agents find themselves increasingly dependent on airline incentives. As a result, incentives and commissions to the travel agent are the next logical target for many airlines. Prominent examples of recent changes include American Airlines and United Airlines. For more details and a projection on the major trends for 2024 and onwards, download our 2023 Distribution Insights: https://lnkd.in/eePZS-y4 #NDC #distribution #GDS #incentives #airlines #travelagent
Hi Daniel Langhage, thanks for the very clear graph, i m wondering 1. If you have any idea of the NDC direct connect share at the moment? 2. If you know how many airlines are actually using NDC solution provided by GDS
To me the interesting thing about airline distribution is how relatively low cost/ risk it is. Amazon starts at 8% for example, plus a unit charge per sale. And a bad debt ratio (thanks to BSP) that means even for international sales your risk is low (because of the anti-competitive stance of IATA that a bad debt to one airline is a bad debt to all, and payment terms must be the same to all) Will be interesting to see - if a large OTA said to airlines with low market presence - sure, direct connect, but we will pay you 60 days after departure, and if you want to be on the first page of results, we need a stocking payment, i.e behaving like retailers in most markets.
Daniel Langhage. Nice post, thanks. Travel agency incentives from GDSs did not necessarily disappear in the case of GDS NDC content deals. This was a clear case of size matters. The very large OTAs were paid incentives for an initial period, which varied by GDS, region, aggregator competition, and strategic value. Many or most of these may have been phased out by now, but I would not be surprised if some remain in effect.
Interesting to see that direct connect and NDC Aggregators payout is expected to be greated than the other channels...so what are we gonna see happen..?. GDS's morph into NDC aggregators ?. and the same old players to remain..no doubt legacy agency processes will need the aggregated content to continue to reduce their transation process cost..online players that I know of still depend on brick and mortar back end to support their business process ..aggregated content either through legacy GDS or any other will continue to be the key to distribution..
Thanks Daniel Langhage, great post. I agree to some extend, GDS's inventives have biaised the relationships between Airlines and Travel retailers. But, but, but (and there are many but) the value of GDS's haven't always been taken into account by all players of the value chain. IT developments for both Airlines and Travel Retailors are and will continue to be massive in the NDC world. Productivity (for offline retailers) will be catastrophic (unless they invest more again in IT). Several products and services as well as automation will disappear and some will never be recovered, such as #TravelInsurance (I can explain in DM if needed) for offline retailers. Yes, Airlines are today paying or subsidising all of these costs but who will pay tomorrow? The traveller? And do you think ticket price will reduce accordingly? I am not sure... Then, where is the real gain and for whom?
Daniel Langhage There is of course always the argument that "Brick & Mortar" Travel Agents will have to diversify their income channels further and should charge the customer for their service. In a world with super slim margins for airlines per serviced customer, there is less money to go around. Agree with Ann Cederhall that there is a wider discussion to be had.
If travelers realized just how little commissions are paid for the services provided by a Travel Agent...they'd likely be quite surprised. Like many other service industries, Travel Agent services are about achieving volume, not making a lot on a single of few bookings.
I am struggling to see such how they can predict such an increased number of bookings made using NDC by the end of 2024. Currently there are so many restriction on what it is possible to be booked via NDC and also the airlines are not necessarily delivering what they are promising .
What seems to be amazing to me is that FCAs still exist after the 2022 US Court ruling. Why would any airline sign such a contract? #askingforafriend
Thank you so much for posting. Totally agree, breaking free from Full Content has to be a top priority and to be in control of distribution. Sadly incentives have created this very warped model and why the correlation has been there and still is to some extent I struggle with. If GDS want to pay its users I guess that is fine although a very strange business model for sure. And of course as an airline I only want to incentivize an agent that is doing good business with me and should be unrelated to the GDS. Why they haven't modernized this model? Ot is it too gigantic a model to change? And lastly, agents should pay for tech.