After nearly two years of harsh restrictions, international travel is finally rebounding.
As of early October, for example, fully vaccinated passengers in the U.K. have the freedom to travel to over 50 "non-red list" countries without taking a pre-departure PCR on return to the U.K., including Europe. From November 8, the U.S. lifted the ban on European arrivals, allowing fully vaccinated passengers to visit.
Whilst some limitations remain in place, this move to making international travel easier represents the start of the industry getting back on its feet.
Airlines are finally feeling empowered to recoup the revenues that they lost during the pandemic. But some challenges still remain and a fundamental shift in the way airlines leverage technology is required.
The problem of third-party sites
Recent research from PROS found that the majority of travelers prefer to book through third-party sites, with 53% of passengers choosing this method to book airline seats, and 62% putting this down to the either real or perceived competitive prices of these sites.
This puts airlines at a major disadvantage: third-party sites give customers only a very limited glimpse into a suite of airline products.
Airlines lose the ability to offer lucrative ancillary services, ranging from in-flight add-ons and car rental offers to stopover trip options, and often have their least expensive seat option the only product on offer. With third-party sites also reducing the airlines’ capability to merchandize effectively, they are limited in the extent to which they can generate important incremental revenues.
This is part of the wider problem that when not selling through direct sites, airlines lose the ability to provide the complete customer journey, offering customers exactly what they need from beginning to end; of which ancillary services are one element.
As customers begin to make international travel plans, airlines must act fast to take advantage of this opportunity to engage with and convert these travelers into customers through unique opportunities.
The solution is two-fold: firstly, airlines need to enhance their direct site offering with a personalized retail experience, in order to tempt travelers back from third-party sites or online travel agencies. But they cannot stop there.
The longer-term solution to recurring revenue opportunities doesn’t wholly lie in changing where travelers are purchasing tickets. It lies with airlines leveraging AI and Intelligent Retailing in order to offer the lucrative ancillary services via third-party sites too.
AI and intelligent retailing: perfect partners
AI allows airlines to take a personalized and specialized approach to customers, as part of a wider strategy of retailing, which is all about delivering a retail experience which is data-driven, holistic and seamless.
Increasingly, customers expect the same user experience from airlines that they receive from e-Commerce retailers, where they are offered personalized deals and given a concierge level of service throughout all steps of the journey. In order to keep customers satisfied, airlines will need to adopt this retailing mindset.
AI is crucial to airlines offering this level of personalisation. The technology can gather data from user experience and enrich it with intelligent, optimized insights, providing recommendations around what ancillary services and offers to provide to which customer at what time.
Benefitting airlines in incremental revenues, customers also highly value the personalisation and customisation involved in specific ancillary services personally targeted to them.
As airlines compete to win customers eager to travel again, AI-powered personalisation will be critical in engaging and delighting travelers. Using technologies that help the end-buyer is more helpful than piling on more technologies which do not produce tangible benefits for the customer.
Part of the retailing experience which will become commonplace amongst airlines is the ‘end of the aisle’ display. Like in a brick and mortar store when you’re greeted with attractive displays before the tills, airlines must invest in the visual elements of a website to enhance the total shopping experience.
Modern distribution
The second challenge airlines must overcome is that once they provide personalized offers, the current systems in place do not allow these to be carried across to third-party services.
OTAs and third-party sites draw airline products from the global distribution systems, which significantly limits the potential to offer ancillaries, as well as costing airlines more money to sell via this channel.
In order to unlock the full potential of AI and adopt a modern retailing strategy which can be transferred to third-party sites as well, airlines must update legacy systems.
Many of the booking engines used by airlines are built on the foundations of legacy passenger service system platforms. These systems are based on distribution principles from the 1960s which focus on filed fares and have retailing constraints: they limit airlines’ ability to differentiate products and react to changes or crises in a flexible and agile manner. The PSS is no longer able to deliver what airlines demand of it.
Airlines must shift from this system towards a more retail friendly model which utilizes modern Order & Offer management platforms along with NDC (New Distribution Capability), enabling airlines to use a single platform to sell to customers both directly and through OTAs.
Tech partners that are independent of PSS or GDS systems are more likely to be able to offer airlines a next-generation retailing platform that offers freedom to distribute products without constraints and to meet customer needs.
The shift from the legacy PSS platforms to Order & Offer management in an NDC environment can take many years. Rather than being able to switch from the PSS to a new system all at once, airlines must kickstart a strategy to replace parts of the PSS with those in these new systems that are more effective at retailing.
Piece by piece, the PSS will dissolve over time. Given this, airlines cannot afford to wait to act, and must have a plan in place from today.
Looking forward
The current international travel situation is a turning point for airlines. How they respond to the opportunity will differentiate airlines stuck in the past from those which modernize and keep pace with customer expectations.
Employing a personalized approach which draws from modern retailing will as a result give airlines the resilient revenue streams required to withstand future disruptions.
The pandemic has proven that crises can appear seemingly overnight, and airlines must adapt their systems and selling strategies to the modern, e-Commerce-oriented world, in order to constantly adapt to changing market and customer scenarios going forwards.
Luckily for airlines, AI and Intelligent Retailing offer the most agile and comprehensive foundation to achieve such outcomes. However, only if airlines act today.