Managed Travel 2020: Technology Drives New Opportunities

Transcription

1 PhoCusWright White Paper Managed Travel 2020: Technology Drives New Opportunities Sponsored by Written by Norm Rose PhoCusWright MARKET RESEARCH INDUSTRY INTELLIGENCE

2 This PhoCusWright White Paper is made possible by The International Air Transport Association (IATA) The International Air Transport Association (IATA) is the trade association for the world s airlines, representing some 240 airlines or 84% of total air traffic. We support many areas of aviation activity and help formulate industry policy on critical aviation issues. Page i

3 About PhoCusWright PhoCusWright is the travel industry research authority on how travelers, suppliers and intermediaries connect. Independent, rigorous and unbiased, PhoCusWright fosters smart strategic planning, tactical decision-making and organizational effectiveness. PhoCusWright delivers qualitative and quantitative research on the evolving dynamics that influence travel, tourism and hospitality distribution. Our marketplace intelligence is the industry standard for segmentation, sizing, forecasting, trends, analysis and consumer travel planning behavior. Every day around the world, senior executives, marketers, strategists and research professionals from all segments of the industry value chain use PhoCusWright research for competitive advantage. To complement its primary research in North and Latin America, Europe and Asia, PhoCusWright produces several high-profile conferences in the United States and Europe, and partners with conferences in Canada, China and Singapore. Industry leaders and company analysts bring this intelligence to life by debating issues, sharing ideas and defining the ever-evolving reality of travel commerce. The company is headquartered in the United States with Asia Pacific operations based in India and local analysts on five continents. PhoCusWright is a wholly owned subsidiary of Northstar Travel Media, LLC. Page ii

4 Managed Travel 2020: Technology Drives New Opportunities Written by Norm Rose Introduction Technology is changing every aspect of our lives, including the way business travel is planned, booked and experienced. Few would consider modern day business travel to be hassle-free, but technology is making business travelers more informed and able to add services that make their trips more comfortable. Most corporations have long recognized that business travel is one of the company s largest controllable expenses. In an attempt to manage this spend, corporate travel managers have created structured programs designed to reduce and control costs by leveraging volume to obtain supplier discounts. To manage these discounts, corporations have sought the help of dedicated corporate travel agencies or Travel Management Companies (TMCs), and have deployed web-based applications known as Corporate Booking Tools (CBTs). These traditional ways of managing travel are being disrupted by new technologies and standards that will change the face of business travel by These include the growth of personal device technology, new value-added ancillary travel services and emerging protocol standards that will provide greater choice of airline products and drive more personalized offers to travelers. Purpose of Paper The purpose of this paper is to examine the impact of technology on the way managed business travelers purchase airline products and services, predicting what will be the leading trends by This paper analyzes disruptive changes happening today and forecasts how they will impact the managed travel process, the traveler experience and their expectations in the near future, with a focus on airline booking practices. The paper is organized in four sections: 0 Part One Managed Travelers Embrace Smart Mobile Devices and Expect More Personalized Services 0 Part Two Technology Driving New Business Practices 0 Part Three Managed Business Travel in 2020 Greater Personalization 0 Part Four Conclusions Page 1

5 Methodology IATA Global Passenger Survey PhoCusWright partnered with IATA, adding 20 unique questions targeting managed travelers to the annual IATA Global Passenger Survey, conducted between July 29 and September 14, To be included in this section of the survey, the questions targeted travelers who work for companies that have specific policies regarding travel purchasing and reimbursement. The respondents needed to verify that their companies used one of these elements as part of a managed travel program: (1) expense policies (e.g., allowed and non-allowed expenses); (2) the use of preferred suppliers (e.g., airlines, hotels and car rental companies); (3) the use of preferred booking channels such as a corporate travel agency/ TMC or a company-provided online booking tool (also known as a corporate booking tool or CBT). The survey respondents represent a valid sample of 976 respondents from each of the major geographic regions of Europe, BRICs (Brazil, Russia, India and China), North America, Asia Pacific (APAC) and other regions beyond these four categories (see Figure 1). Interviews with Key Travel Industry Executives To augment the survey, PhoCusWright conducted 18 detailed telephone interviews consisting of: 0 Five airlines, four full-service carriers (FSC) and one low-cost carrier (LCC). 0 Five TMCs: two global TMCs and three large regional TMCs. 0 Five corporate buyers representing different industries and geographies. 0 Three global travel technology vendors. These in-depth interviews reviewed current and future trends in the managed travel sector, providing multiple perspectives on emerging trends impacting the market. These interviews helped us define the key issues disrupting the managed travel market today and tomorrow. Figure 1: Survey Regional Breakdown Europe BRICS 30% 30% North America APAC 18% 17% Other Regions 6% Question: What is your country of residence? Base: Business travelers (N=976) Page 2

6 Part 1: Managed Travelers Embrace Smart Mobile Devices and Expect More Personalized Services In order to understand how emerging trends will impact managed travel programs in the near future, it is important to understand the perspective of managed travelers today. Corporate Travelers are Not Completely Satisfied One quarter of the respondents said they were very satisfied with their corporate travel service, and another 44% were only somewhat satisfied (see Figure 2). Among the 75% who were not completely satisfied or even dissatisfied, the number one reason was, I can find lower fares and better rates online (see Figure 3). There is no doubt that the belief that lower prices can be obtained online continues to be a source of frustration for the managed traveler. With 35% expressing a desire to book airline reservations directly with suppliers, direct booking creates friction between managed travel goals and business traveler preferences for about one third of travelers. Managed Travelers Own Smart Mobile Devices The survey revealed an almost universal adoption of smart devices by managed business travelers worldwide (see Figure 4). Through their smart devices, managed business travelers are now connected 24/7 with untethered access to travel information. Managed Travelers Book Airline Reservations through Preferred Channels More than two thirds (67%) of today s managed travelers book air through preferred channels. Nearly four in 10 (38%) respondents book their air reservations through their company s website, 11% have assistants make their reservations electronically for them, Figure 2: Satisfaction with Corporate Travel Service Very satisfied 25% Somewhat satisfied 44% Neither satisfied nor dissatisfied 19% Somewhat dissatisfied 9% Very dissatisfied 3% Question: How satisfied are you with the current corporate travel service provided by your company/and corporate travel agency (Travel Management Company/TMC)? Base: Business travelers (N=976) Page 3

7 Figure 3: Reasons for Dissatisfaction I can find lower fares and better rates online 56% I prefer to book my travel directly with my favorite suppliers 35% The process is complicated and takes too long 30% I am unable to buy optional airline services such as better seats or early boarding It does not deliver my personal flight preferences The choices conflict with my supplier preferences (e.g., favorite airline, hotel chain) 21% 24% 24% I am unable to make the reservations using my preferred device (e.g., smartphone, tablet, laptop) 13% None of the above 6% Other (please specify) 5 % Question: Why are you not completely satisfied with your current corporate travel service? Please select all that apply. Base: Business travelers (N=731) Figure 4: Device Ownership Smartphone (i.e. mobile phone advanced functionality such as access to the Internet, capabilities and the ability to download applications e.g. Apple iphone, Samsung S5) 95% Tablet (i.e., portable touchscreen device such as ipad, Samsung Galaxy, Amazon Kindle Fire) 76% Desktop/laptop 93% None of the above 1% Question: Which of the following devices do you own? Base: Business travelers (N=976) Page 4

8 and an additional 18% have their assistants book travel via the telephone (see Figure 5). Only 15% book their air travel directly on an airline website. Optional airline services, also known as airline ancillary services, have a higher level of direct bookings with airline websites, at 22%. Six in 10 respondents have booked optional airline services. When asked about their preferred booking methods for air travel products, an interesting shift emerged. Whether booking directly with the airline supplier or with the travel agency, the desktop/laptop is widely preferred over the smartphone or tablet. However, when asked about mobile apps, 39% of respondents stated a preference for booking directly on the airline s smartphone app, compared with only 10% that preferred the TMC or company-provided app (see Figure 6). Figure 5: Airline Products Booking Method Airline tickets Optional airline products/services Through my company travel agency (TMC) website or my company-provided website 8% 38% My assistant calls my company travel agency (TMC) for my reservations 6% 18% Directly via the airline website 15% 22% My assistant makes my travel reservations electronically using the airline, corporate travel agency (TMC) website or app 4% 11% Through my company travel agency (TMC) app or my company-provided mobile app 6% 5% Online travel agency/portal (e.g., Expedia, Booking.com, Orbitz) 5% 3% Directly via the airline app 4% 6% Calling the airline directly 2% 5% I never purchase optional airline products/services 0% 40% Question: Please identify your main method for booking airline products for your business travel. Choose one for each category Airline Tickets and Ancillary Services. Base: Business travelers (N=969) Page 5

9 Figure 6: Preferred Device for Booking Airline Products Smartphone Tablet Desktop/laptop Not applicable Directly via the airline website 6% 13% 23% 59% Directly via the airline app 9% 16% 39% 37% Through my company travel agency (TMC) website or my company provided website 3% 10% 21% 66% Through my company travel agency (TMC) app or my company provided mobile app 7% 18% 21% 54% Question: Please indicate your preferred device for booking airline products for business travel. Choose one device per activity. Base: Business travelers (N=685) Seats Dominate Airline Ancillary Services Nearly half (49%) of managed travelers ranked preferred seating/extra legroom as the most important airline ancillary service. Highly ranked second place choices were fast-track security screening (18%), lounge access (16%) and early boarding (17%) (see Figure 7). With a large percentage of corporate travelers already at a high frequent flyer status level, some ancillary fees such as baggage charges and preferred seating are less of an issue, since they are often complimentary. The pain point is the infrequent travelers, where these fees have the greatest impact (see Figure 8). Nearly three in 10 (28%) respondents book ancillary airline services directly on the airline website (see Figure 9). Today, there are major challenges with selling ancillaries at the travel agent point of sale (POS). POS capabilities are emerging, and may shift the sale to the TMC. CBT displays will also need to be adjusted to accommodate ancillary services at the point of sale. Page 6

10 Figure 7: Airline Ancillary Services Importance Ranking 1st rank 2nd rank 3rd rank 4th rank 5th rank Statement not chosen I do not purchase optional airline products/services Preferred seating/extra legroom 49% 12% 11% 7% 4% 10% 7% Fast-track security screening 13% 18% 18% 11% 9% 10% 21% Lounge access 12% 16% 14% 13% 10% 10% 25% Early boarding 6% 17% 13% 11% 12% 10% 32% Checked bag fees 4% 5% 7% 9% 10% 10% 57% Onboard entertainment (e.g., movies, games) 2% 8% 8% 14% 14% 10% 44% In-flight Wi-Fi 2% 4% 6% 7% 12% 10% 59% Onboard meals 2% 11% 13% 17% 19% 10% 29% Question: Please rank the airline ancillary services below in order of importance to you (1 = most important, 2 = somewhat important, 3 = neutral, 4 = less important, 5 = not important) when traveling for business? Base: Business travelers (N=976) Page 7

11 Figure 8: Airline Ancillary Services Payment Complimentary based on my frequent flyer status My company reimburses me I personally pay for these services Not applicable Preferred seating/extra legroom 13% 22% 22% 43% Early boarding 5% 12% 28% 55% Onboard meals 12% 25% 31% 32% Expedited security screening 5% 12% 39% 43% Lounge access 7% 20% 24% 49% Onboard entertainment (e.g., movies, games) 4% 18% 30% 47% In-flight Wi-Fi 12% 16% 22% 50% Checked bag fees 11% 22% 30% 38% Question: Please indicate which statements are true regarding how you pay for ancillary services when traveling for business. Check all that apply. Base: Business travelers (N=883) Page 8

12 Figure 9: Preferred Methods for Purchasing Ancillary Services Directly via the airline website Through my company travel agency/tmc and/or my corporate online booking tool I would prefer that all optional airline products/services be bundled into my ticket price Directly via the airline website/app on my smart device (smartphone or tablet) 18% 24% 26% 28% From a kiosk at the airport 3% Calling the airline directly 1% Other (please specify) 0% Question: How would you prefer to purchase ancillary services for your next business trip? Base: Business travelers (N=389) Figure 10: Changing the Airline Booking and Communication Experience I will make the majority of airline arrangements on my mobile phone I will interact with electronic messages sent to my mobile device at every point of my journey; these messages will be personalized to my preferences and offer trip advice My mobile device will strore my preferences and my airline will use those preferences to book my reservations My mobile device will automatically change all my reservations (e.g., air, car, hotel, etc.) when I change my flight schedule 46% 44% 42% 38% My mobile device will notify designated contacts in my business and personal social networks when my flight schedule changes 31% I see little change in my airline experience I will use wearable computers (e.g., smartglasses, smartwatches) that will transmit my preferences, improve the efficiency of the process and offer personalized services 19% 24% I believe the airline experience will get worse due to more weather delays, crowds and technology failures 0% Question: How do you see the airline experience changing for your business travel over the next 3-4 years? Choose all that apply. Base: Business travelers (N=976) Page 9

13 Travelers Expect More Automation and Personalization Managed business travelers expect that 46% of airline bookings (up from less than 10% today) will be made via the smartphone within 3-4 years (see Figure 10). They also anticipate interaction with electronic messages sent to their mobile device at every point during the journey. Managed business travelers are expecting personalized service at all touchpoints, and that their preferences will be stored on their mobile device. Nearly half of respondents (45%) would like to have their preferences stored and their flights automatically booked based on these preferences (see Figure 11). The managed traveler expects technology solutions that anticipate weather delays and automatically rebooks or provides alternatives. The managed traveler is also looking for automated ways to change flights when their itinerary changes, or when flights are late or cancelled (51%) (see Figure 12). Managed travelers want greater integration with calendar appointments (26%). There is some interest in optional services such as hotels, cars, restaurants or ground transportation (11%). Figure 11: Top 3 Ways to Improve Booking, Purchase and Pre-Flight Experience 1st Choice 2nd Choice 3rd Choice Store my preferences and automatically book my desired flights, seats and optional airline products/services 14% 17% 45% Anticipate weather delays and automatically rebook or provide alternatives 22% 24% 24% Automatically rebook my flight if I have a change in my flight schedule 18% 33% 25% Automatically rebook all related itinerary elements (e.g., hotel, car rental) when my flight schedule changes 7% 21% 27% Question: Please select the top three ways (1 = top choice, 2 = second choice, 3 = third choice) airlines could improve your booking, purchase and pre-flight experience when traveling for business? Base: Business travelers (N=976) Page 10

14 Figure 12: Top 3 Booking Capabilities on Website or App 1st Choice 2nd Choice 3rd Choice Automatically rebook me on alternative flights based on my preferences if my itinerary changes or my flights are late or cancelled 12% 28% 51% Automatically book my airline reservations based on my calendar appointments and preferences 17% 26% 21% Allow me to book optional services such as hotels, cars, restaurant meals or ground transportation 11% 28% 30% Book my airline reservations via voice-enabled personal assistant (e.g., Siri, Google Now) 6% 9% 14% Allow me to shop for and purchase tickets for local events and activities at my destination 4% 11% 25% Question: Please select the top three (1 = top choice, 2 = second choice, 3 = third choice) booking capabilities you would like to see available on your mobile airline web or app over the next 3-4 years. Base: Business travelers (N=976) Page 11

15 Part 2: Technology Driving New Business Practices Managed Travel is a Continuum of Policy Enforcement The managed travel market is often grouped into three categories: tightly managed, moderately managed and lightly managed with respect to policy enforcement. These traditional categories are not distinct segments, but actually represent a full continuum of company profiles (see Figure 13). On one end companies enforce strict travel policies, often limiting expense reimbursement if the traveler violates any aspect of the policy. These are generally larger companies, but smaller firms may have equally strict policies. Tightly managed programs often deploy specific Key Performance Indicators (KPIs) that closely monitor travel policy performance and traveler behavior. At the other end of the continuum are companies that publish travel guidelines and often lack measures to track policy compliance. Specific industry types and overall corporate culture often influence where a company fits on this spectrum. For example, industry sectors that need to abide by strict rules and controls such as the financial services industry are more likely to embrace tightly managed travel policy practices. On the other hand, high tech companies with a strong entrepreneurial spirit may opt more for guidelines rather than strict policy control. The largest segment of companies falls into the moderately managed category. Within this group the level of enforcement may vary based on type of policy violation. There are also differences across regions and countries, where local culture and customs can impact the way corporate policy is enforced. In emerging markets or for smaller corporations, policies tend to gravitate toward the lightly managed end of the continuum. Technology is Driving New User Behaviors and Business Practices When the Internet went mainstream in the mid to late 1990s, a new level of transparency emerged that allowed corporate travelers to shop supplier and online travel agencies against corporate negotiated fares and rates. This created a level of friction in which travelers often questioned the value of managed programs. As a result, the need for ongoing travel education became a constant effort for most corporate travel Figure 13: Managed Travel Continuum of Policy Enforcement Tightly Managed Moderately Managed Lightly Managed Page 12

16 managers who must justify their programs to corporate travelers and senior management, many of whom are often frequent travelers themselves. The introduction of the iphone in June 2007 was a watershed moment for the managed travel industry, though few recognized it at the time and many are still struggling to manage the rapid adoption of smartphones by their corporate travelers. Of equal significance was the introduction of the ipad in 2010, which often augments or replaces the traveler s laptop. The spread and dominance of Google Android phones and tablets has also accelerated mobile smart device adoption worldwide. In the traditional corporate travel environment, compliance is driven by rules enforced by the TMC or embedded in the CBT. In today s app-centric smart device world, compliance is more challenging as the temptation to find and book alternatives has been super-charged by the ability to do this anywhere, anytime, on multiple devices. Clearly, smart devices have given birth to a new kind of corporate traveler, one who is more demanding, looks for instant answers and expects more personalized services. Technology is Adding Complexity to the Managed Travel Ecosystem The goal of a managed travel program is to direct travelers to book using the preferred booking channel. Traditionally that has been the TMC or CBT, and more recently a preferred TMC or company mobile website or app. However, many corporations and TMCs have still not deployed a mobile web or app dedicated to the managed travel program. This preferred channel has been challenged by direct supplier contact, either through the airline call center or based on airline loyalty programs. The web added additional options for searching airfares. This resulted in friction with the preferred booking channel. The growth of smart devices has extended access to OTAs, airline direct, metasearch and social media 24/7, anywhere. The emergence of value-added ancillary airline services also added more optional airline services (see Figure 14). The Impact of Technological Change on the Managed Travel Airline Ecosystem Today Personal mobile technology is driving change worldwide. This includes parts of the world where mobile device ownership has had a leapfrog effect, with smart devices empowering segments of the population that never owned a desktop or laptop PC. As mobile bandwidth increases and devices continue to become more powerful, the sheer amount of information that is accessible via a mobile smart device is staggering. The managed travel sector is struggling to keep up with this rapid change. Lack of Mobile Strategy and BYOD From a corporate travel management perspective, this brave new world of mobile smart device computing is challenging the enterprise. Even the most advanced corporate travel managers struggle with developing a comprehensive mobile strategy. In a Page 13

17 Figure 14: Managed Travel Airline Ecosystem Web, Mobile and Value Added Ancillaries TMC Travel Agent Web App Managed Business Traveler CBT Web App Airline OTA & Metasearch Web App Airline Direct Airline Agent Web App recent Carlson Wagonlit global survey on top travel priorities for 2014, only 38% of travel managers with global responsibility ranked mobile as a high priority. Specific regions had even lower mobile strategy priorities, such as EMEA with 21% of travel managers stating that mobile was a strategic priority for This effort has been significantly complicated by the corporate trends that allow travelers to Bring Your Own Device (BYOD). In a BYOD environment, corporate travel managers lack visibility into mobile travel app usage. Some companies dictate what apps are allowed on mobile devices, while many do not (see Figure 15). Open Booking The concept of Open Booking has been a hot topic over the last two years. The premise of Open Booking, also referred to as Managed Travel 2.0., is simple: Companies set targets for trips, and allow travelers complete freedom to book through any channel based on meeting or beating the benchmark. Managed travelers are then incentivized to find lower rates and must share their itineraries with the company in order to support corporate duty of care requirements. Various tools have emerged to capture out-ofchannel bookings made directly with suppliers. Because Open Booking technology can capture out-of-channel bookings into the managed program, it benefits all enterprises, even those that don t want to implement an Open Booking policy. 1 CWT Reveals Top Travel Priorities for 2014, Carlson Wagonlit Travel press release (January 30, 2014). Page 14

18 Figure 15: The Impact of Technology and Disruptive Trends on the Managed Travel Airline Ecosytem TMC Travel Agent Web App Managed Business Traveler CBT NEW ENTRANTS Web App Airline OTA & Metasearch Web App OPEN BOOKINGS Airline Direct Airline Agent Web App MOBILE DEVICES + NEW COMMUNICATION PROTOCOL Impact of New Entrants Travel innovation is often driven by startups that provide innovative approaches to travel planning and purchasing. As more companies provide Application Programming Interfaces (APIs) to their travel applications and platforms, new entrants will continue to emerge, disrupting the way managed business travel is booked and experienced. This was evident in a 2013 Hackathon held by British Airways on flight 9120, which flew from San Francisco to London overnight, filled with 130 members of the tech community and a select number of BA frequent travelers. 2 Similar hackathons (though not in the air) by American Airlines, Sabre and industry media outlets such as Tnooz are constantly pushing the industry to tap the entrepreneur to improve the technology behind travel. New entrants such as Rocketrip, a venture-funded new booking platform that uses employee incentives to drive compliance, and TripScanner, a browser-based, Open Booking enterprise tool targeted at small and midsize businesses, are two examples of new entrants disrupting the managed travel ecosystem today. 2 Zoe Fox, The Hottest Spot for Hackathons? 30,000 Feet in the Air, Mashable (June 13, 2013). Page 15

19 XML The underlying communication platform for travel is also changing. The Electronic Data Interchange for Administration, Commerce and Transport (EDIFACT) is an international electronic interface standard (EDI) developed under the United Nations back in This protocol was designed to allow the easy interchange of information across disparate systems. In February 1998, the World Wide Web Consortium (W3C) published its first version of an Extensible Markup Language XML (1.0.). Dr. Charles Goldfarb, an IBM researcher who was personally involved with the invention of XML, claims it to be the holy grail of computing, solving the problem of universal data interchange between dissimilar systems. 4 XML has changed the way information is exchanged between systems. By definition, XML is extensible, which means it can be expanded to increase the amount of information exchanged between systems. Some of the communication in the travel ecosystem has been converted to XML, but EDIFACT communication has remained the primary protocol for the majority of airline communication. A new airline XML standard is being introduced that allows for greater product differentiation, customized offers and efficient servicing of customer preferences, responding to the very heart of the disruptive change driven by managed traveler expectations. Part 3: Managed Business Travel In 2020 Greater Personalization In 2020, managed travelers will experience greater automation that reduces trip friction, will have access to more transparent information and will receive personalized services for all aspects of the trip. Emerging Technology Will Cause Further Transformation With the dominance of smartphones and tablets in the hands of managed travelers and the transformational nature of these devices, air shopping and purchasing will continue to move to mobile by New personalized services will be facilitated by intelligent assistants and will be available on a variety of wearable technology. Personalized Services By 2020, the managed travel ecosystem will seamlessly integrate traveler service preferences with expanded airline services to meet ever evolving managed traveler expectations. New communication protocols and the ability to track and measure customer preferences throughout the journey will be imbedded into the process. Big Data will be used to better match services with the preferences of travelers, anticipating their needs. Wearable Technology Wearable technologies will augment services provided by current mobile smart devices. These include smart watches and glasses that provide an easier hands-free computing environment. By 2020, the adoption and impact of wearable technologies will likely provide an added level of efficiency to the managed travel experience with increased 3 United Nations Economic Commission for Europe 4 Tim Anderson, Introducing XML, (January 2004). Page 16

20 use of augmented reality (AR), delivering real-time travel advice and offers to the managed traveler. Wearable technologies will be in wide use by airline service personnel, enabling the delivery of more personalized services. Intelligent Assistants Today, intelligent assistants such Siri, Google Now and Cortana have limited ability to substantially support travelers. By 2020, intelligent assistants will be able to handle more complex tasks. Specific intelligent assistants for travel (i.e., intelligent travel assistants or ITAs) will be introduced that will automatically update itineraries during disruptions and recommend services to travelers en route. This technology will help meet the 2020 managed traveler s expectations for more automated services. Disruptive Business Practices Will Impact Airline Purchasing Practices Open Booking and the Capture of Information from all Channels Open Booking will gain momentum, but will likely only be adopted by certain types of companies whose corporate culture supports this approach. The exact size of the Open Booking segment is hard to predict, as generational shifts may alter corporate culture and thus drive more acceptance of the Managed Travel 2.0 approach. The ability to capture out-of-channel bookings will be widespread by 2020, enabling travel managers to look at all their travelers reservations and apply policies to any outof-channel bookings. This means that whether companies completely embrace Open Booking or simply use the tools to capture out-of-channel bookings, managed travel in 2020 will capture all reservations from all channels. The Airline as a Retailer Airline merchandising technology will enable specific a la carte or bundled ancillary offers that match customer preferences. Some airlines will use the merchandising platforms to dynamically bundle ancillary services based on the value of the passenger and the overall corporate client relationship. In addition to today s focus on seats, boarding and Wi-Fi, some creative ancillaries are emerging, including pre-purchase of online meals, flexibility in ticket rules (e.g., ability to change at a reduced fee) and customized in-flight entertainment delivered on personal mobile devices. The airlines are hard at work creating a la carte and bundled ancillary offers involving merchandise, complementary travel services (e.g., hotel, ground transportation) and even branded apparel. Corporate negotiated ancillary bundles will likely become part of an overall airline negotiation strategy. By 2020, airlines will be able to provide a unique set of services for each reservation request, and a tailored response based on customer insights. Corporate relationships and discounts will likely still be in place for large companies, but by 2020, unique airline-controlled offers will be part of the ecosystem as well. This shift in the way the airline offer is created will be enabled by widespread adoption of the New Distribution Capability (NDC), an XML data exchange standard, facilitated by IATA. Page 17

21 Part 4: Conclusions Predicting the future based on today s technology can be challenging. Major change is often facilitated by innovations which in turn create disruptive business models. For example, Uber would not be possible without the smartphone. Understanding how technology will fuel disruptive models is the key to understanding managed travel in From the traveler s point of view, the message is clear: Managed business travelers want personalized services that reduce travel friction and match their preferences. They expect automation to seamlessly handle itinerary changes. In six years we may see moderate change in managed business practices, or a new era that looks dramatically different than it does today. What will dictate the level of change is how the emerging ecosystem embraces new technology, understands traveler behavior and meets expectations. For tightly managed business travel, new tools will likely emerge to create even greater control over the traveler through their mobile device. The question is: How big is the tightly managed segment? Our research indicates that the tightly managed business segment is no more than 15-20% of the market. This leaves 80% of the market vulnerable to disruptive trends and technology (see Figure 16): Figure 16: Managed Travel Airline Purchasing Disruptors 2020 Personalized Messages Dynamic Offers & Bundles Tightly Managed Moderately Managed Lightly Managed Generational Shifts Open Booking Page 18

22 0 Generation Shifts Millennials moving into senior management positions will likely bring their self-service, instant gratification expectations to their roles, influencing the entire corporation to be more proactive in providing personalized travel services. 0 Open Booking Managed Travel 2.0 will likely take hold with some moderately and, certainly, lightly managed companies. As tools to capture out-of-channel bookings improve, and as TMCs evolve to support fragmented itineraries, Open Booking will likely be mainstream for a portion of the market. 0 Personalized Messages By 2020, personalized messages will be driven by Big Data analytics. The fear of being bombarded with unwanted requests is real, but if the offers are truly personalized, managed business travelers will recognize their benefit and thus embrace the process. 0 Dynamic Offers and Bundling The airlines are implementing systems to drive personalization to all travelers in the form of dynamic offers and unique bundles. The Role of NDC as an Enabler of Transformation Often the role of technology in disruption is misunderstood. Apple s ipod did not disrupt the music industry. MP3 players already existed. It was itunes, the business strategy that was the true disruptor. Smart devices are impacting every industry, but the business models around the technology are truly transformative. Travel is prone to disruptive business models, enabled by mobile smart devices by the very nature of the mobility of its customers. But just as with ipod versus itunes, it will be the business models created from new technology that likely will drive greater change for the managed travel industry. The underlying technology enabler for travel distribution transformation is NDC, which at its heart is simply an XML standard. Given that XML is already used by all players in the ecosystem, the emerging business models will likely be the catalyst of change. The NDC Standard will enable the travel industry to transform the way air products are retailed. The goal is to allow a greater and richer amount of information to flow from the airlines throughout the entire ecosystem. NDC will provide airlines with the capability to dynamically create customized products and services, regardless of the channel through which the reservation is being made. The airline s role in payments may change for those who choose book direct via an Open Booking policy, where airlines will accept and process payment, directly rather than through a TMC or corporate charge card. By 2020, this will likely be via mobile payment services, making this a seamless experience. Page 19

23 When new business models are created, there is always a fear that existing relationships and roles may be altered, impacting the current stakeholders. There is a valuable and separate role for each ecosystem player in a 2020 managed travel world enabled by NDC. Change is inevitable, and it is ultimately the responsibility of the stakeholder to adapt. In 2020, whether you are a TMC, technology provider or corporate travel manager, you must add value to customers, partners and suppliers. The managed traveler is ultimately pushing this change for more personalized offers and services. To meet this challenge, all parties should cooperate in utilizing information and providing services that best reduce friction for the managed traveler, while helping the corporation manage its overall travel expenses. Page 20