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Travel 2020: The distribution dilemma - Enhancing collaboration to enrich the traveler experience and improve profitability

At the height of the Internet revolution, the travel industry was expected to be among the greatest beneficiaries of new, low-cost, information-rich distribution opportunities. More than a decade later, however, online channels have done little but focus travelers on price. But new technologies and business models finally offer the potential for online differentiation and the provision of value-added services and features for which travelers will pay a premium. To capitalize on these developments, enhance the consumer travel experience and create opportunities for improved financial performance, the travel ecosystem must learn to “play well” with others.

The travel industry has worked for decades to put the customer first. Unfortunately, the end result has often been unrealistic and unconnected traveler interaction and booking processes that frequently require customers to self-assemble itineraries from multiple sources. A customer interaction on an airline website, for example, often must be followed by similar attempts to engage with hotel, car rental or related sites.

To solve this problem, consolidated websites were created to provide customers with a single source to book multiple travel modes. But the resulting increase in customer convenience was counterbalanced by a loss of customer intimacy and personalized merchandising opportunities. As a result, travelers, frequently presented with conflicting incentives, dissimilar methods of interaction and competing business models, were largely left to fend for themselves in a confusing, timeconsuming and often undifferentiated travel distribution landscape.

Customer service has been further diminished by the economics-driven focus of many travel executives to lower distribution costs. Automated interactions have replaced labor-intensive call centers for both suppliers and travel agencies. Unfortunately, the purchasing services provided through these channels were also excised, which, again, left travelers to manage their own cross-mode travel portfolios. Perhaps the correlation between travel distribution cost reductions and decreasing rates of customer satisfaction is not coincidental.

Travelers aren’t the only ones “lost at sea” in today’s distribution landscape. Providers also find themselves adrift by a distribution model that rarely casts their products and services in the perfect light. Consumers already have a well-documented tendency to focus on price, but many online channels make this outcome almost inevitable by displaying few, if any, of the features and benefits that distinguish competing options.3 Global distribution systems (GDS),such as Sabre Holdings and Amadeus, and the on- and off-line agencies that rely on their data, serve up only the most basic information – price, availability, and general category of service – about flight and hotel options. This suboptimal method of selling predictably produces less-than-desirable results.

Even travel distributors, which have fared much better than travel providers in the past decade, struggle to find their rightful place in the travel ecosystem. Financial returns are inconsistent among major distribution players. The competitive environment is awash with discord between distributors and major travel providers seeking to lower fees or bypass distribution systems altogether.

Fortunately, this morass of competing priorities, objectives, and technologies can be addressed by a dedicated commitment by the industry to put the customer first. The future of distribution will be defined by the success of the travel ecosystem in meeting unique customer needs. Much of that battle can be won with more coordination among competing travel providers and distributors. By sharing information about traveler preferences, the distribution community can formulate a collaborative, more complete view of customers, enhance online interactions and, ultimately, transform the customer experience. The net result promises to be an industry with happier customers and more solidly positioned for healthier financial returns.

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Content provided by IBM Institute for Business Value
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