Pricing in travel has always been based on the principle of re-creation of results. This affects airlines and other travel products such as hotels, cars and tours.
The notion of re-creation of results is fundamentally a bad idea, but one that works. Why would you let anyone else be responsible for pricing of your product?
But that is indeed how travel works. Air fares in the US, for example, are filed with ATPCO and control rests with the state of availability.
The approved parties that can create offers are then charged with taking the mind-numbing complexity of possible fare combinations to create an offer aligned to the availability. It’s silly but it works.
The airlines police it by setting penalties if you get it wrong - known as the infamous ADM (agent debit memo). But airlines, of course, do not penalize themselves if they get it wrong.
This process masks a multitude of sins. If the rules are consistent and comprehensive, why would anyone get the pricing wrong? Or are there numerous possible right answers?
Actually this is the case. There are many correct answers because the definition of “right” fares are a little loose. Different players have different versions of the truth. These can range from the incomplete interpretation of the rules to simply bad rules and structures that allow the flexibility.
In my day job, my team and I have how assessed different fare stores present their results where fares have been created and stored ready to be served on demand.
These fare stores are from the legacy GDSs and from newer players such as ITA Software and Everbread. Then there are the providers of the fares: ATPCO and SITA.
The former does no pricing, only fare filing and redistribution, so I guess you can say that it is never wrong. The latter does them both with mixed results.
SITA is brave enough to do the job, but they, like every other player on the planet, sometimes gets the fares wrong. It seems the only answer to get a correct fare is to get it from the airline’s websites or over the phone. And, yes, these these methods are often wrong as well.
So there is no absolute “real”. Most of the time these fares are only slightly off. But in some significant cases they can be out by hundreds of NUCs (neutral units of currency). Some GDSs just do not have the ability to manage all the rules that airlines put out there. Others choose to ignore inconvenient rules.
I can point to at least one legacy GDS who – wholesale – ignores a very important rule. But this is one of the reasons why certain airlines are getting tired of seeing their products incorrectly priced and offered.
However this is a double-edged sword. If an airline, say a US domestic carrier, insisted that every single request came directly to them and a result was returned uniquely each time.
Well, it would be pretty hard to handle that volume of requests. Not impossible, just difficult and requiring a lot of soft and hardware to get anything like reasonable performance in under 20 seconds.
If you are a simple point-to-point carrier such as Spirit, with smaller volumes and only a single channel of sales, then this is not a problem. But take a very complex carrier such as Delta and that task is exponentially more complex given the complexity of its product (and that of its partners) and the plethora of different channels it operates in.
This is a problem, and one that is not going away. Part of the bun fight between the legacy GDSs and their participant airlines is that the GDSs have arguably not developed solutions to address this issue.
For the first time we are seeing an airline (American Airlines) and a GDS (Travelport) argue about the peripheral issues, but a big part of the issue is the quality of the results that the airline is not happy with, in addition to the way the GDS is presenting its product either due to being incomplete or inaccurate, or both.
This is clearly not in the way the product owner wants it done.
At a private session during the PhocusWright conference, I made the case that the battle between search and personalization (see Part Three) is looming battle of epic proportions.
So far this is a safe bet. Search, as provided by the OTAs and airline websites, has been used to accommodate the inadequacies of the core GDS platform in presenting reasonable results in a real time manner.
This is indicative of the extent of the problem and how it will dominate us for a long time.
NB: Part Two reviews how the issue affects the hospitality sector.