GDSs have finally started to roll out airline ancillary products, but has it been a game-changer for all stakeholders in the trade? Lee Pei Qi finds out
Slowly but surely, GDSs have finally begun to make available airline ancillaries, a move that has been hailed as “revolutionary” in the current evolving GDS environment.
While GDSs traditionally serve airlines by reserving seats for travel consultants, it is becoming increasingly common among them to distribute ancillaries in their quest to bridge the divide between travel consultants, airlines and travellers.
Amadeus, which claims to be the “first GDS in the world to offer an ancillary service catalogue”, has allowed travel consultants to view airlines’ services offerings in real time since 2010.
Martin Symes, vice president, marketing, Abacus International, said likewise to keep up with global competition, the company started offering ancillaries like excess baggage, meals, premium seats and Internet access through its Abacus Air Extras function introduced in 2012.
Ian Heywood, head of global supplier strategy for Travelport, said: “Travellers today are expert shoppers and are expecting to get more from their purchase.”
Travelport has recently unveiled its new Travelport Merchandising Platform in April this year, enabling travel consultants to access the full range of airline products and ancillaries.
Apart from GDS-pioneered initiatives, IATA is also seeking to “modernise air travel distribution” with their New Distribution Capability (NDC) introduced last October.
Although still in its trial stage, this new XML-based standard will provide identical retail capabilities across all channels, enabling travel consultants to sell the same products and services that often can only be found on airlines’ brand websites.
Unbundling trend driven by LCCs
According to Travelport, the number of LCC passengers in Asia-Pacific is expected to almost double from 171 million in 2010 to 318 million in 2016.
PST Travel Services’ CEO Ngiam Foon has seen the demand for LCCs from his clients grown from a zero base to 25 per cent over the past two years.
Likewise, BCD Travel’s vice president, sales & account management for Asia Pacific, Todd Arthur, commented that the demand for LCCs is “growing strongly” throughout Asia-Pacific.
He said: “We now have to offer LCCs in our proposition to our clients because we need to provide a complete package to show a full comparison of prices.”
The entry of LCCs is interlinked with the provision of ancillaries because budget airlines are highly dependant on them as a source of revenue.
Evan Kruse, manager of trade distribution, Jetstar Airways, said: “Merchandising is crucial to us because as a LCC we need to have low-cost fares to be competitive in the market.
“Ancillaries are critical for us in our business model because only by making money from them can we then continue to keep our fares low,” he said.
Emphasising the importance of ancillary revenue, Kaneswaran Avili, commercial director of Tiger Airways, said: “It will be a huge loss to us if we cannot distribute ancillaries through the GDSs because there is untapped demand there.
“We have observed that our customers will always make use of ancillary items be it to opt for baggage or an advanced seat selection,” he said.
Travelport estimated that the airfare ancillary market will be worth US$45 billion by 2015 to underline the rising importance of merchandising in the industry today.
Accessing ancillaries on the GDS
Will Horton, analyst at CAPA – Centre for Aviation, said: “Ancillary development was previously stymied by the lack of GDS’ ability to fully support ancillaries, but now as they better support ancillaries we can see that airlines will develop more.”
Horton pointed out Travelport’s new merchandising platform as an example that is “better at accommodating ancillaries”.
Through this platform, currently already live, travel consultants are able to sell ancillaries within their screen as well as aggregate on a single screen fares connected via ATPCO as well as an API connection.
Previously, travel consultants had to grapple with the additional workload of having to leave their workflows to find products and services from the individual airline’s websites.
Travelport is due to launch on the same platform the ability for airlines to let consultants see photos and details of their products by the end of this year. With this “revolutionary platform”, Heywood expects other GDSs to follow suit.
(From left) Arthur, Ler, Ngiam and Miyauchi opined that travel consultants should be
compensated for helping airlines sell their ancillaries.
What lies in store for travel consultants?
As airline ancillaries are increasingly integrated into the travel distribution landscape, travel experts that TTG Asia spoke to acknowledged the rising demand for ancillaries from travellers but also appeared ambivalent about the unbundling trend at the same time.
Steven Ler, senior vice president and head of supplier relations, UOB Travel, expressed his concern of the extra work and time now required on the part of travel consultants.
He said: “With all these merchandising in the picture, it means (consultants) have to spend more time explaining and promoting.
“In the past, perhaps you need just seven minutes to talk to the travellers, but now it may increase to 15 minutes and this will affect our productivity,” he added.
Echoing similar sentiments, Hankyu Hanshin Business Travel’s assistant general manager, Satoshi Miyauchi, said: “To provide more services means more workload for us because we have to invest time.”
Furthermore, there is a “lack of incentives and motivation” for consultants to put in the added work, said Miyauchi.
PST Travel’s Ngiam agreed that this will take a toll on manpower resources and urged airlines to reward consultants for the extra work.
He said: “Our commissions are already limited and this is going to further reduce our profit margin, so it would be adequate if airlines can reward us accordingly.”
Ler added: “We need to find a right balance and evaluate how this will impact the (consultants’) bottom line and then look at a way to compensate us for the extra services we are providing.”
A new GDS model of the future?
As GDSs begin to distribute ancillaries, airlines seem to be the triumphant ones reaping the benefits while travel consultants continue grappling with the “extra work”.
Horton said: “Travel consultants may not have a monetary incentive to sell ancillaries as this not only gives them no reward for their time, but no incentive to learn about the ancillaries.”
But nonetheless, Horton pointed that travel consultants may comply with the need to sell ancillaries to stay relevant.
PST Travel’s Ngiam said: “No one likes extra work, but we have no choice. I agree this is a good direction and we have to live with it but we have to see how we can be compensated better.”
Also applauding the model, UOB Travel’s Ler said it “looks good for now” but cautioned against hailing it as the new GDS model.
He said: “It is too early to testify its success because it is not tried and tested fully in the market yet, so we have to see how travellers will really respond to it then.”
