Lately, I have found it difficult to find time to blog as Travel Tech Consulting juggles multiple projects across the travel industry, but I felt compelled to comment on last week’s news that Lufthansa would be charging 16 Euros for bookings through the GDS. I have read lots of commentary on this action ranging from support from fellow carriers and hoteliers commending Lufthansa as taking a bold move to shift costs to claims from the corporate travel community that this action will destroy competitive shopping. Over the last 3-4 years, Travel Tech Consulting has conducted numerous research projects interviewing airlines and corporate travel stakeholders so the Lufthansa announcement was not a complete surprise.
All the airlines have some common goals that point to this type of move:
I agree as many have argued, that the biggest obstacle to implementing a direct channel bias is the elimination of transparency to compare fares. The assumption is that the airlines will simply ignore this issue to gain the direct channel cost advantage, but that is likely underestimating the airlines understanding of the market. What if an airline implemented a competitive shopping engine on their airline.com site? The technology is already available by simply becoming an affiliate of a meta-search company such as Kayak or Hipmunk. In addition, with metasearch capabilities, the airline could see the offer from the competitor and use their merchandising software to sweeten a dynamic, personalized offer to the business traveler.
The other major obstacle is support. Progressive TMCs are using Concur’s TripLink API to bring an out of channel support application to the agent desktop. In fact, TMCs have an excellent opportunity to charge higher fees for support of direct bookings (a necessary revenue source to pursue if financial assistance disappears).
Of course the staggering of airline contracts has been an important GDS strategy to avoid a big bang shift from the airlines. Despite this fact, expect other airlines to implement direct channel shift strategies in the coming weeks and months. Not all will be as blatant as Lufthansa’s fee, but the desire and intention is clear. Also keep in mind, mobile apps, create a 1:1 opportunity for the airline for direct distribution beyond any fee or industry effort. With many corporations still struggling to manage travel apps, airlines (and hoteliers too!) may successfully implement share shift to the direct channel by simply using the app to present unique offers to their best corporate travelers. One thing is for sure, even if the Lufthansa move does not stand, we are on the cusp of some radical changes in corporate travel distribution.