Watching how adoption of new distribution technology plays out in this early stage can give us a look into what to expect in the future. Especially if direct distribution ever moves into other areas of travel booking, like hotels.
With BCD Travel acquiring Japan’s Hitachi Travel Bureau, and Flight Center buying majority stake in Australian corporate travel company 3Mundi this past week, the business travel industry is showing further signs of consolidation.
Big players are, once again, getting bigger.
This trend matches up with industry predictions from global distribution company Amadeus, released in a recent report on how tech is influencing the future of business travel. After talking to key players around the industry, the company viewed a more centralized industry as one in which information is pooled across different platforms, helping to foster a more personal user experience.
“As content is aggregated, business travel agencies will be able to offer more choice to the individual traveler’s profile and allow corporations to control what the traveler sees. This will create a tailored experience right from booking, through to trip, and manage costs for the corporation,” the company said.
Fewer businesses will control more user data and have access to a wider variety of content, making it easier to recommend options to different users.
“At the moment, business travel agencies have to navigate their way through mountains of fragmented content across several platforms,” said Renaud Nicolle, vice president of business travel in Asia Pacific. He added that Amadeus was shifting away from being a traditional global distribution system in order “to offer one platform of choice with huge amounts of content for travel distributors and providers.”
The European Market
The report goes on to suggest that New Distribution Capability will only accelerate this trend, in part because direct distribution works best in a more centralized market, where one or two main channels for booking is a viable option.
In fact, this is something that may make the International Air Transport Association’s industry standards for new distribution capability easier to implement in Europe than in the US, according to Kristen Pratt of U.S.-based travel management company Travel and Transport.
“Depending on sort of what market you’re looking at, there are different drivers that have impacted the adoption of it,” Pratt said, referring to direct distribution. “Take British Airways or Lufthansa, for example, where they’ve implemented surcharges against airline content that’s distributed and they’re starting to limit content in certain channels. They’re in a much different position over there because they don’t have strong competition within their own market.”
Europe is home to some of the largest airline groups in the world, which span multiple countries. Lufthansa, the biggest in Europe in terms of passengers, is made up of subsidiary passenger airlines including Austrian Airlines, Swiss International Air Lines, Brussels Airlines, and Eurowings, while the International Airlines Group is made up of subsidiary airlines British Airways, Aer Lingus, Iberia, and OpenSkies, among others.
“They kind of own the market and their cost of distribution is higher because a much greater percentage of their volume is international,” Pratt added. “They are sort of leveraging [direct distribution] to drive their own distribution strategy. I think it causes confusion in the U.S., because it’s just one channel.”
Meanwhile, airlines in the U.S. may be equally as large, but the majority of their flights are domestic, where they exist alongside other major U.S. airlines, which are also mainly flying domestic.
She added that this is part of the reason the new technology is not currently being expanded beyond airlines, to booking hotel rooms and event spaces. With such a wide variety of different hospitality companies, a central, direct booking channel is still a long way off.
That being said, an increasing number of companies in the U.S. as well as in Europe are continuing to adopt the technology. Last month, travel management company TripActions announced a partnership with United to offer more streamlined booking, and TravelPerk partnered with Lufthansa to do the same.
While the technology is still in early stages, it is slowly but surely coming along, and becoming a more important part of the corporate travel landscape.
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Photo credit: Lufthansa Airbus A321-200 Lufthansa