As customers grow more comfortable booking directly with airlines, are third-party distributors such as travel management companies doomed to become a vestige of a bygone era?
Jeff Klee doesn't think so. The CEO of AmTrav acknowledges the challenge posed by direct booking — not to mention online travel agencies and travel agents directly linked to airlines' new distribution capability (NDC) channels.
“We have a growing problem, where travelers, especially younger travelers, don’t like to book through (TMCs),” he said during the keynote address at the 16th annual The Beat Live event in New York City Tuesday. “If we can’t fix this problem, then we are irrelevant going forward.”
But Klee, who has been outspoken on business travel innovation, believes third-party air distribution can be saved.
“Airlines are collectively reaching the decision that ‘We are done with the status quo,’” Klee said, later adding, “We’re standing on the cliff, but we’ve got a small window where we can fix things.”
Opinions vary on third-party air distribution’s future
Klee wasn't alone. Paul Abbott, CEO of American Express Global Business Travel, also sees room for more than just direct distribution - particularly in the world of business travel, where he sees many suppliers doubling down on their relationships and partnerships with Amex GBT.
“There’s always going to be direct distribution,” Abbott said during a separate session at The Beat Live. “The smart suppliers will also recognize that it may not be the most cost-effective way to get to certain segments.”
Of course, Abbott and Klee come from intermediaries. On the other side, American Airlines estimates by year end 80% of its bookings will come direct or via NDC. With an emphasis on prioritizing “the person sitting in the seat,” Scott Laurence, senior vice president of partnership strategy at American, said the airline's strategy has to remain nimble to focus on customers' evolving needs.
TMCs need major work to better their future with airlines
Klee believes what’s good for airlines is what’s good for TMCs is what’s good for companies and travelers. And he is looking ahead on how to keep third-party distributors relevant. During his session, he opened up about what factors he sees as part of the solution for TMCs.
It will mean big changes, the likes of which Klee said haven’t been taken on in some time.
“I’ve been doing this since 1989 and during that time things have changed for the travelers — they’ve got online booking tools now, they’ve got e-tickets. But under the hood, fundamentally, we’ve digitized a lot of manual processes, but we haven’t really tackled the plumbing,” he said.
Airlines are collectively reaching the decision that ‘we are done with the status quo,’... We’re standing on the cliff but we’ve got a small window where we can fix things.
Jeff Klee - AmTrav
Part of moving forward means TMCs “letting go,” Klee said.
“TMCs have done an unbelievable job harnessing every ounce of capability off of really old technology,” he explained. “But what got us here won't get us to where we need to go. We really need to almost start over with our tech stacks with really open minds.”
It goes to the point of flipping the commercial model, he said, referencing airlines butting heads and interactions with global distribution systems among others. “It's just not sustainable to have a distribution system with that much friction going on forever.”
TMCs also need to rethink what it means to be a partner to airlines, Klee said.
“If you think about things that TMCs want from airlines, airlines have pretty much been bending over backwards to deliver these things,” he said. “But historically, what about the things that airlines want from TMCs?”
TMCs have the ability to help with loyalty program enrollment, credit card applications and more - they just need to be willing to do it, Klee said. TMCs need to make the partnerships worth it for the airlines.
The relationship between TMCs and airlines, of course, is a two-way street. Klee also advised that airlines throw TMCs a lifeline. Why? Because corporate travel can be a pain. And TMCs have the ability to reduce that end-to-end hassle. That’s worth paying for, by Klee’s estimation.
“For those of us who want to engage - I think this is a really exciting time to rebuild and rethink all of the antiquated stuff and complexity in our industry,” Klee said. “It’s not going to be easy, and it’s not going to be without risk. … If we succeed I think we can make third-party distribution much more sustainable and stable.”
Abbott also joined The Phocuswright Conference where he spoke about Amex GBT recent results as well as its strategy going forward. Watch the full Center Stage session with Phocuswright's Charuta Fadnis below:
On Top of the (Business Travel) World! American Express Global Business Travel CEO Paul Abbott - Phocuswright Conference 2023