Why is air travel such a commodity? After all, it’s often one of the most durable memories of a trip.
It’s not uncommon to hear a friend tell you about their awful flight experience before finishing with: "...and, oh yeah, Aruba was great!"
It is the rare product that is such a defining and memorable experience for so many people, yet purchased almost entirely based on price.
We ourselves are to blame for the state of air travel because of this purchasing behavior (See an earlier article I wrote on this: How we buy plane tickets and why it’s ruining air travel). We refuse to reward airlines by paying more for things like good service, nicer planes, quieter terminals, or shorter lines.
The traveling public is notorious for ignoring all those things when making their purchasing decision, but then feeling indignant and wronged when the service inevitably fails to meet expectations.
Of course there are good reasons of this phenomenon.
1. Air travel is a perishable product
It’s getting from Point A to Point B, over as soon as we leave the airport.
No matter how much we complain, it’s still hard to shell out an additional $50 or $100 for something that’s temporary.
2. There is major inconsistency of service
There are just too many variables: Weather, load factors, airports, code-shares, regional carriers, plane type, mechanical issues, employee culture, number of elites, number of babies, etc.
Even airlines that pride themselves on a uniform product (e.g. JetBlue, Virgin America, and Southwest in the US, Ryanair and EasyJet in Europe) still cannot prevent massively divergent experiences day to day.
A great flight on Spirit is still better than an awful flight on United, and it’s impossible to know which you’re going to get.
3. Purchasing experience is disassociated with the travel experience
It is this last one that is most ripe for fixing in a meaningful way and, perhaps once and for all, taking a stab at de-commoditizing air travel.
How? By using direct distribution to differentiate the product during the search process.
Thinking ahead
Imagine how different our industry would be if we purchased all airfares walk-up? If you weren’t feeling well one day, you might opt for an upgrade.
If you were running late, you’d happily pay for priority security. If you had two bags, it might change how you feel about baggage fees or overhead bin storage.
But none of that matters since we purchase tickets weeks, if not months, in advance.
Meaningful differentiation is lost since no matter how pretty-looking different airline websites are (if we go to different airline websites at all!), it is impossible to really appreciate any product differences months before, from the comfort of our homes or offices (or anywhere on our smartphones), as opposed to the airport where the travel is imminent.
Direct Connect offers some hope by differentiating the shopping experience and tying more tangible product enhancements to the purchasing decision.
By being able to connect directly with consumers at OTAs or metasearch engines via an API (or directly via the carrier web-site), airlines can in theory provide a customized experience.
They can change pricing, amenities, and features depending on who you are and what kind of trip you’re looking for.
While price is still a primary concern, it might allow airlines to throw in other “value” items that shift the decision away from pure price to a value trade-off. The more consumers actively make those choices, the more they can link the purchasing experience to the flying experience.
One example of this happening today without airline participation is InsideTrip, a metasearch site which quantifies the "quality" of a flight based on 12 criteria. Unfortunately, OTAs have not made any moves to incorporate this sort of data.
To date, the only significant advance in the space is trying to incorporate bag fees into the search, but that is no different than showing taxes – it’s part of the rush to the bottom on cost.
Even Hipmunk’s Agony measure (which I love), is mostly a translation of layovers and travel-time. A great feature to help quickly sort through flight options, but hardly a meaningful step towards de-commoditizing airfare (the new wifi indicator is perhaps an even more important feature to this end).
In all fairness, Hipmunk and others don’t have much to work with and an apparent lack of major traction has cast doubt on the value of adding such features in flight search.
In order to make this work, airlines themselves have to provide real differentiation, and direct distribution could be the enabling technology.
At the CASMA (Computerized Airlines Sales & Marketing Association) conference, Scott Gillespie gave a talk (here) about the promise of direct distribution in de-commoditizing air and how the industry needs to do a better job of explaining the value proposition.
I agree, and would add airlines need to start actually providing the technology, not just talking about it. As we’ve seen with ancillary products offered only so far on airline websites, direct distribution will first and foremost allow airlines to play with revenue generation.
This alone will not alone help de-commoditize the industry, it will at best make the decision process more confusing for consumers therefore obscuring the true cost. After all, airlines are improving the bottom line by adding new revenue sources, not by improving the product offering enough to boost loyalty and yield on the seat.
That only further reinforces the notion that you should only choose based on price, it simply increases the number of things to be evaluated. Perhaps a step in the right direction, these features still do not change the underlying purchasing behavior.
In the end, we rely on the airlines to create meaningfully differentiated product offerings AND offer them in such a way that it might actually influence our purchasing decision.
The former is very hard, but most airlines are working at this and the steady pace of innovation here provides some hope. The latter? That’s where direct distribution comes in.
Until then, even the best OTAs and metasearch engines are just putting on a show, grasping at straws to make other things matter aside from price.
The good news, at least, is that incentives here are aligned. After all, there’s no better way to de-commoditize a metasearch site or OTA than by trying to show differentiation in the product it’s selling.
The bad news, of course, is that direct distribution also comes with a business model shift that OTAs and GDS are resisting.
Sooner or later we’ll see this innovation, just not nearly fast enough for us travelers or the airlines who need a way out of the downward spiral on price and cost.