Corporate travel has not done a good job at solving the problems faced by actual business travelers. Smaller corporate travel companies, along with travel providers and technology startups, are working hard to find solutions to the most enduring problems across the sector.
In this interview series, we will break down the silos between travel sectors to find out from leading travel executives how they are working to make the business travel experience more enjoyable for travelers and simpler for the companies sending employees on the road.
New Distribution Capability, or NDC, has been getting a lot of press over the past couple years, and increasingly global distribution providers, travel management companies, and airlines are adopting it. The technology is purported to make the booking process better for business travelers, giving them access to better deals and more content.
Still, for all the buzz around it, adoption is slow and it can be hard to get a clear answer as to why. Plus, for the layman, New Distribution Capability can seem so overly-technical that it’s hard to pin down what, exactly, it is.
Ilia Kostov is the senior vice president of global accounts and business travel at Amadeus IT Group, one of the leading global distribution systems, and he is deeply embedded within the world of New Distribution Capability. In 2018, Amadeus formed an advisory council called NDC-X, bringing together airlines and travel agencies to discuss the progress and pitfalls surrounding the new distribution capability.
Skift spoke to Kostov about how New Distribution Capability works, what is holding it back, and how this all affects the business traveler.
This interview has been edited for length and clarity.
Skift: Could you just give me your most basic explanation of New Distribution Capability?
Kostov: Sure. If you go back to the original idea of NDC, it was all about having new technology that would help airlines distribute their content better — this means marketing their content better, as well as helping them differentiate their services and offerings from one another. It was about leaving the constraints of the mainframe world behind and doing distribution with, at the time, new technologies based on a computer mark-up language called XML.
In response to this, the industry – the International Air Transport Association (IATA) – developed a bunch of standards on how this new distribution system should work. It took quite a few years and a lot of different versions and releases for those standards to mature. Currently, these standards as well as the technologies are continuing to slowly be refined, which will help make NDC better for all players involved.
Skift: What are IATA standards, and why do we need them?
Kostov: Simply put, you have a bunch of airlines all around the world, and everybody does things differently. There are a lot of players in the mix, and a lot of different airlines that are pushing NDC in somewhat different directions. We’d never be able to get traction with NDC without a set of standards in place for how things should run. But as you can imagine, with so many different players moving in so many directions, developing standards is a complex and slow-moving process.
These standards are really important for distributors like ourselves, as well as travel management companies. It means we can basically get maximum coverage, as long as we put in a reasonable investment. Travel agencies are supposed to bring choice to the traveler. They are supposed to aggregate all this content and they’re supposed to bring a variety of options to the traveler. It’s very, very hard to do this when different players are pushing in different directions, if that makes sense.
Skift: There has been so much hype around how New Distribution Capability will make the booking process better for business travelers. But so far, it hasn’t really caught on the way I think a lot of people expected. What have been the challenges to adoption of the technology?
Kostov: Well, for one, a lack of post-booking services has been a big issue. For many, many years, most of the NDC investment by airlines has been all about the initial booking process, and typically simple bookings. They have not addressed the more complex parts of the booking process, like multi-segment bookings or the post-booking services.
As you can imagine, for a business traveler, the booking is important, but the process doesn’t stop there. As a business traveler, you’re changing plans frequently. Sometimes the plans change while you’re on the road. The client meeting may take longer than expected, or you may finish that meeting early. You may need to go somewhere else, as opposed to back to the originally planned destination.
Cancellations, changes, refunds, etcetera — those all happen. And historically, this post-booking servicing has not been well thought out, or sometimes not even addressed, by the standards that IATA originally put together.
At this point, IATA has recognized this issue and they’ve come up with a first generation of standards for it. But these standards need a lot more refinement, and additional standards to be developed. And this won’t be a quick process. It will take a few more iterations before they get to a more comprehensive set of post-booking servicing standards.
Skift: So besides post-booking services, what are some other issues you’re seeing with New Distribution Capability when it comes to making booking better for business travelers?
Kostov: I’d say the other issue is scalability and performance. It’s not enough for an airline to say that they’ve put together the capability to book through this new distribution channel. That booking capability needs to perform on a large scale. What I mean by that is: A traveler is not going to wait 10, 20, or 30 seconds to start getting offers for flights. In some cases, it takes a lot longer than that for the offers to come in from some of the airline systems.
So airlines are going to need to invest in technology in order to be able to process massive amounts of data at high speed. This is really important. This is something that Amadeus has invested in over the 30-plus years that we have been in business. We process huge amounts of data daily. In a lot of ways, we had shielded the airlines historically, prior to NDC, from all this data processing because all of the offers effectively were created in Amadeus. We would take an airline schedule, airline surge, and then the offers would be constructed by the travel agents in order to meet the traveler needs.
Now, in an NDC world, the offer’s going to be done on the side of the airlines. So that will require some massive investments for them in terms of data processing. Right now it is lacking and lagging.
Skift: Even with these tech problems New Distribution Capability has, it still feels like adoption is really slow. What’s behind that?
Kostov: Well, a lot of this comes down to conflict on the business side of things. In the traditional model, airlines pay for distribution. The airlines get value because ultimately their tickets are the ones that are being sold, and that’s why they pay for it.
But with NDC, some airlines are pushing for a model where the travel agencies or the global distribution systems pay for distribution instead. Of course, these companies don’t want to end up footing the bill for NDC, so they’re not interested. They don’t want to pay for airline distribution, and that’s become a big obstacle to more widespread adoption.
At the same time, there are a lot of productive airlines that are focused on a win-win-win situation: a win for the airline, a win for the distributor, and a win for the travel management companies. These airlines are not only making all the content available, but they’re also figuring out the right economics for it. Ultimately, this means a win for the traveler.
Skift: It seems like European airlines have had more success in getting more widespread New Distribution Capability adoption. I’ve heard it’s because the airlines there have a little more power, making it easier for them to push for their preferred distribution methods. What are your thoughts on that?
Kostov: Huh. That’s an interesting thought. I mean, it’s not, in my mind, an accident that there’s been a lot of airline consolidation in Europe. You can find entire sets of countries in Europe, or subregions in Europe, where there is not a lot of airline choice. You have airlines that went bankrupt and ceased to exist in key markets like Germany, or in the U.K. That has led to more concentration of power into the hands of a single airline or airline group. Whether this leads to NDC adoption, it’s not for me to say, but it’s clearly a concentration of power in certain parts of the airline industry in Europe.
Skift: With New Distribution Capability all about airline booking, it seems like it leaves out a lot of the other aspects of business travel. This biggest one that comes to mind is booking hotels. How come hotels aren’t getting more involved in these distribution discussions?
Kostov: Well, content in the hotel industry is so much more fragmented than in the airline industry, which makes NDC not as viable, at least right now. If you put yourself in the shoes of a business traveler, there is so much more opportunity for savings when booking a hotel room, as well as getting a better, more suitable travel offer. Plus, hotel content is very dynamic. It changes all the time. NDC doesn’t really have the capacity to handle this right now.
At Amadeus we developed our own solution for it. We’ve invested heavily into our hotel platform, which went live some years ago, and we’ve continued to invest heavily into it since then. This platform brings together not only all of the hotels on the global distribution system, but it also brings together content from other aggregators, such as Expedia and Booking.com, and other active aggregators from around the world.
This ultimately benefits both the corporate and leisure traveler because it gives them more choice than we think anybody else out there. When we measure the amount of hotel properties we have, as well as the number of combinations and permutations of hotel properties, plus the number of sources we get the content, we think what we have is very unique.