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Travel Industry Travel News

Feeling The Shift In Airline Commoditization

It’s kind of funny. As technology continually advances, our expectations also change. We are living in an interesting age of requiring immediate results and instant buyer satisfaction. If we don’t see what we want, we can find it somewhere else. It might not surprise you that this is prominent in the travel industry. As consumers, we have any hotel and their reservation system at our fingertips. There is complete control over when and where we stay, and usually with some persuading discount. Same can be true with flights. We can decide when, where, negotiate on price and even pick our exact seat. However, some people believe there is still room for improvement.

The everyday traveler mainly uses travel booking websites to research and book future itineraries. We decide when we want to travel and where; and these sites help us find the cheapest fare. The search functions are primarily price and date. You decide when you want to travel and they find the best deal. But what if we want more? Robert Albert from RouteHappy wonders if perhaps consumers want more options. Albert explained during the Skift Global Forum in New York City last September that this commoditization is a big problem with airlines.

For example, think of that last flight you had with a low-price, low-value airline. Yes, your original booking price was low, but factor in the carry-on luggage fee, food and drink fee, and the minuscule leg room and you were left feeling cheated. Yes, it’s the best price, but was it worth feeling used and spit out? Not likely. And more and more people are seeing this.

As our buyer behavior and expectations continue to evolve, our expectations become more defined. While other industries, like hotels, have design overhauls to capture emerging buyers, shifting airline brand messaging or selling points is harder to do. It’s easier for a boutique hotel to pinpoint a demographic niche and jump on it, than the mammoth airline industry. In essence, there this room for opportunity to capture the growing needs of demanding airline passengers, but the industry may be too far behind to catch up.

As Albert said in his Skift Forum presentation, the biggest trend in the airline industry right now is the focus on ‘commoditize to differentiated.’ It most likely started with offering checked baggage options. Cabin upgrades came next. But is it enough?  Albert found an interesting niche in the travel booking world. Why have online travel booking be based solely on price? He has found that consumers are willing to pay extra for these upgrades. Flyers no longer want the cheapest price, but would rather see the value in the money they spend. Try booking based on amenities, travelers scores, plane type, legroom, and duration of flight. It’s an innovative look at travel booking in a seemly stagnant industry.

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Travel News

The Unbundling Trend

This past week I had the opportunity to attend the EdCon Conference for SGTP (Society of Government Travel Professionals) in Washington DC. The focus was “Trends Affecting the Government Travel Landscape: A Probable Future?” Here is a piece of what I took away:
Trends are predictions about the future based on our knowledge of the past and present. The interaction between the trends is as important as each individual trend. There are many trends with in travel: higher fares; TSA requirements; and more noticeably, the unbundling of services by airlines.
So what does the trend of unbundling airline costs tell us about the future? Unfortunately that they are here to stay! This unbundling trend presents several challenges.
The first is the limited time between the notification and effective date or the lack of notifications by the airline to the consumer/travel management company (TMC). It’s frustrating to get to the airport and unexpectedly need to pay for an additional service. Once the airlines have found all the possible services that they can charge for, I believe the notifications will stop. Hopefully there won’t be any more surprises to the consumer or the agency.
The second is the inability of the TMC to assist the consumer by directly charging for unbundled services. To correct that, ARC (Airline Reporting Corporation) has recently come out with a document that will allow agencies to charge for these services. This will result in corporate travel cards or UATP cards being able to be directly charged.
This document also solves the third challenge: travel reconciliation for the corporate customer. Once the services can be charged directly through the TMC, clients will no longer have the hassle of tracking down traveler receipts for reconciliation. Currently the traveler is presenting a receipt (if they have one) for these additional services. When TMCs can charge for these services, they will be present in reporting as well as on credit card statements. It will also clear up confusion on whether an unbundled service is reimbursable or not. When the client has determined which services are reimbursable, they can be noted in the company travel profile for company-wide implementation.
The process isn’t complete, but once the airlines have “all their ducks in a row,” the TMCs will be able to ensure accuracy and customer satisfaction when reconciling and managing unbundled fees.