Travel research firm PhoCusWright took stock of airline ancillary services and branded fares, concluded that an already complex product will get even more complex -- and indicated the losers could be travel agencies and global distribution systems.
"Suppliers will continue to add complexity that encourages consumers to bypass other points-of-sale and GDSs," writes senior technology analyst Bob Offutt and corporate market analyst Susan Steinbrink in PhoCusWright's Ancillary Services Report.
Pointing to U.S. Dept. of Transportation figures showing that U.S. airlines took in $7.8 billion in ancillary services revenue in 2009, the report notes: "It will be difficult to put this genie back into the bottle."
The writers note that although "the technology and code" will soon be ready to handle airline ancillary services transmitted through ATPCO to the GDSs and their travel agency subscribers, it still is far from clear whether all airlines -- or how many airlines, actually -- will agree to do so.
"Despite GDS readiness, airlines are in a financial quandary: Either stay within the ATPCO-prescribed ancillary elements and the current GDS-dominated distribution model, or enjoy flexibility and individuality with unique marketing offerings that may not be distributed using conventional channels," the PhoCusWright report states. "Over time, airlines will probably opt for a strategy that is a hybrid of the two."
For all of the talk about increased transparency that may come with distributing ancillary content through ATPCO and the GDSs, the consumer online-travel shopping experience undoubtedly will get much more complex, the study states.
Here are some of the reasons cited:
- There already are more than 100 a la carte options in the works, which will be available under a variety of fee conditions, and the ability of carriers, travel agencies, GDSs and consumers to bundle them will be very uneven.
- Travelers will have much greater choices in shopping based on numerous attributes and preferences, and this will make the research process much more tedious.
- Although today it's primarily the airlines which are engaged in merchandising ancillary services with targeted offers, both GDS profiling systems and travel management companies' proprietary technology will enable them to become merchandisers, as well.
- A lack of standard display grids and little agreement as to whether pricing should -- or shouldn't -- include fees, will complexity to the shopping process for ancillary services.
The PhoCusWright study cites several technology hurdles that ancillary services providers and those charged with implementation need to clear.
Among them, Electronic Miscellaneous Documents, while they will provide a fulfillment and settlement mechanism for carriers' a la carte services, EMDs can't handle personalized offers or bundling, the study states.
In addition, major technology resources need to be allocated to ensure that existing point of sale systems would be able to "handle customized service offerings based on corporate contracts, traveler status, and other critieria," the report says.
The PhoCusWright study characterizes airlines' introduction of ancillary services as "a bold move" in a time of financial duress.
"While it was necessary given economic, industry and carrier profitability concerns, its introduction was premature; workflow processes had yet to be adapted, automated and standardized across the channel to support ancillary services," Offutt and Steinbrink write.
If ancillary services and branded fares are to be rolled out across a variety of channels, then each player must "turn it up a notch," the study says.
The authors argue that points of sale displays need to be simplified, corporations should develop new methods to measure the impact of ancillary services on managed-travel programs, and TMCs must invest in business intelligence tools to track and analyze ancillary sales.
"GDSs should provide the foundation -- regardless of the complexity of the content -- for an efficient shopping experience and associated booking and follow-up services," the study says.
Which sort of begs the question.
The GDSs can go ahead and attempt to build that foundation, but as the distribution game rolls on, a lot depends on whether the airlines, as they add to the complexity, choose to put ancillary services into the GDS channel at full throttle.
The study notes that airlines likely will take a hybrid approach to direct versus GDS distribution of ancillary services, and will add so many wrinkles to ancillary services that consumers will be encouraged to bypass anything other than the carriers' own channels.
Full disclosure: I work with PhoCusWright as a research analyst.