Stuck in the middle seat: how agencies can take control of their future
February 16, 2023
Travelers dread the middle seat on a plane – they avoid it at all costs despite airline lotteries enticing passengers to choose it. The seemingly unfortunate position that passengers find themselves in has similarities to travel agencies in today’s evolving travel retailing landscape.
As airlines experiment with distributing new content and global tech providers develop new solutions for future retailing at scale, travel agencies might feel powerless without a say in these developments – they’re stuck in the middle seat. So how can agencies join the conversation and take control of their future?
Travel agencies play a significant role in the industry
In 2023, travel agencies – including online travel agencies, travel management companies and leisure agencies – are expected to account for more than 40% of gross airline bookings. Contributing such a significant proportion of bookings means they play an integral role in the relationship between travelers and travel suppliers.
Travel agencies are experts in understanding and delivering great travel experiences. Travelers choose agencies rather than booking directly with suppliers for, among other reasons, breadth of content from multiple suppliers; comprehensive disruption management; itinerary planning and local destination knowledge.
When travel plans are impacted by cancellations, delays, labor strikes, weather events, etc., agencies can quickly rebook travelers’ flights, airport pick-up and more – or present them with new travel options. When travelers are planning a complex itinerary of excursions or business meetings, travel agencies can recommend accommodation, transport options and local experiences from multiple sources. When travelers are going on a special trip like a honeymoon or important business event, agencies can arrange special extras like VIP airport pick-up or hotel room upgrades.
Like all industry players, agencies are facing emerging and persistent opportunities and challenges. And agencies’ proximity to travelers and deep understanding of customer needs means they’re uniquely positioned to capitalize on the opportunities and tackle the challenges.
There’s a $40bn revenue opportunity for airlines – but what about agencies?
The frequently cited 2019 report by McKinsey in partnership with IATA demonstrates a $40bn additional revenue opportunity ($7 per passenger) for the airline industry from future retailing enabled by offers and orders. This helps make the case for airline investment in tech transformation.
Although the report was produced through an airline lens, travel agencies should take note. Benefits of future retailing include additional revenue from new ancillary products and personalized, dynamically generated offers at a wider range of price points. It also includes costs savings through simplified downstream processes, efficient cross-supplier order management and automated accounting with real-time data.
While the monetary opportunity for agencies is unclear today, it’s abundantly clear that the success of future retailing efforts relies on the large-scale adoption of offer and order-based retailing in the indirect channel. Airlines will start to achieve the additional revenue and cost savings as agencies improve conversion rates and per passenger revenue with personalized offers, and as they save time on manual back-office tasks with streamlined order management workflows.
The industry is transforming its tech, starting with NDC
The pace of developments on offer and order-based retailing solutions has increased in recent years, building on New Distribution Capability (NDC) and ONE Order standards. But for the industry to realize the benefits, airlines and Global Distribution Systems (GDSs)/tech providers – the suppliers and main distributors of air content – need to invest significant time and resources.
Dozens of airlines are experimenting with NDC as a starting point towards offer and order-based retailing including American Airlines, Lufthansa Group, Qantas, Avianca Group, Qatar Airways and Singapore Airlines. However, progress varies across the industry. While some airlines have made bold commitments – Finnair plans to phase out EDIFACT distribution by 2025 – many more are yet to publicly announce commitments or development updates.
Major GDSs are investing heavily in the future of travel retailing and new startups are emerging with the sole focus of NDC distribution. At Sabre, thousands of travel agencies are already shopping, booking and servicing NDC content from seven airlines. Sabre has a robust NDC pipeline including more than thirty airlines and is launching seven leading airlines in 2023 including American Airlines in April.
The International Air Transport Association (IATA) continues to release updated NDC schema versions, most recently 21.3 in November 2021, following consultation with industry stakeholders. The organization has also completed nearly a dozen pilot programs with airlines and tech providers on ONE Order capabilities – the industry standard designed to streamline servicing and accounting by combining multiple traveler records into a single order.
The industry conversation is focused on large stakeholders as they build, test and release NDC and offer-order solutions. In the meantime, agencies are waiting to see how this will impact them; tangible benefits are slowly emerging, and agencies are expected to consider changes to their businesses in the months and years ahead.
Four ways agencies can take control of their future
IATA has set an ambitious target of 100% industry readiness for offers and orders by 2030. And while the bulk of the work needed for the industry to transition from traditional to future retailing sits with airlines and tech providers, agencies need to get involved in the transformation to stay competitive and avoid business disruption.
1. Learn about NDC and offer and order-based retailing
There are big changes on the horizon that will impact the industry for years to come, so travel agencies need to learn about the industry standards and concepts being introduced. Sabre’s NDC resources for travel retailers and Future is Open campaign are starting points to understand the technical standards, structural industry changes and potential benefits.
2. Discuss the future of travel retailing with tech providers and airlines
Agencies can start discussing future retailing challenges and opportunities with their suppliers, tech providers, and content distributors. Asking questions about NDC and offer-order commitments, plans and progress can help agencies get ready.
For example, what content and capabilities will be available? How does this differ from what’s available today? What does NDC mean for travelers? How can agencies balance existing and new technology?
3. Plan for business changes
After learning about the opportunities and challenges, it’s time to start planning. Agencies should expect to make changes to commercial, operational and technical aspects of their businesses.
Bringing leaders together from across the agency will be crucial to make sure all aspects of the transformation are considered: revenue streams, customer acquisition and loyalty, online booking tool workflows, value proposition, customer support, training requirements and more.
4. Attend travel industry events
Lastly, agency leaders can have their voice heard at industry events. Travel media groups and associations like Skift, Phocuswright, World Aviation Festival and Global Business Travel Association host events around the world for industry professionals to discuss trends, new technology and challenges facing the ecosystem. IATA also hosts their own events like the annual World Passenger Symposium which is open to agencies as well as airlines and tech providers.
Travel agencies’ voices are heard by Sabre
As a major technology provider, Sabre works with the entire travel ecosystem, including thousands of online travel agencies, travel management companies, leisure agencies and corporations. Agencies that work with Sabre have their voices heard through a number of channels including strategic partnerships, an NDC customer advisory board, and Sabre-hosted events.
Strategic partnerships. Sabre has initiated significant new partnerships and renewed ongoing relationships with travel agencies in recent years. Last year, Sabre and American Express Global Business Travel signed a 10-year partnership to develop the distribution ecosystem for corporate travel. Sabre and Hopper also renewed and expanded a partnership with a joint roadmap to evolve the online travel marketplace and customer experience. Partnerships like these focus on the specific wants, needs and frustrations of travel agencies.
NDC Customer Advisory Board. More opportunities for agencies to discuss their needs include the Sabre NDC Customer Advisory Board. The CAB group brings airline executives together with leaders from travel agencies, corporations, and other travel technology providers to explore what NDC and offer-order based retailing look like for the whole industry. Giving agencies a seat at the table means Sabre considers them throughout the tech transformation process.
Sabre-hosted and industry events. Sabre also hosts workshops throughout the year and attends dozens of industry conferences and symposiums to meet agencies – customers and non-customers alike – to discuss the latest developments and challenges they’re facing.
All the insights from partnerships, events, and one-to-one business support gives Sabre a complete view of agency needs. These combine to build a foundation for offer and order-based retailing that values the role agencies play in the global travel ecosystem.
To take control of their future, travel agencies need to be proactive. Through education, planning, discussions, partnerships and more, travel agencies can get out of the middle seat and have a say in the future of travel retailing.
About the Author
Jonny Blackler is part of the Sabre team exploring what the future of travel will look like, what it means for travel agencies, and how agencies can transition their businesses to make the most of emerging technologies.
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