Online travel agencies (OTAs) and meta-search engines (MSEs) have had an enormous impact on the travel industry in recent years (big names include Google Travel, Expedia, Skyscanner and Kayak). These search and price comparison sites help consumers browse for the best deals on flights, hotels and other travel experiences and are hugely popular, especially among millenials.
However, for airlines and other travel industry players, these companies are a mixed blessing. While they certainly bring some benefits, they can also negatively affect airlines’ profit margins too - and some carriers have fought back against them.
So, is it worth airlines fighting back against these firms? We weigh up the pros and cons of competing against them and look at how the IATA NDC might change the game entirely.
For and against OTAs and MSEs
OTAs and MSEs give airline customers a transparent way of booking flights. Because they let users compare prices, passengers can find the cheapest tickets for their preferred dates, and using these services is often the first place many travellers go to seek out tickets. OTAs like Expedia reportedly account for one in five flight bookings. What’s more, in 2016, only one-third of airline tickets were bought directly through an airline’s website.
At first glance, this surely only seems like a bad thing for airlines. But, there are advantages too:
Drawbacks of OTAs and MSEs for airlines
Benefits of OTAs and MSEs for airlines
While these drawbacks can be off-putting, airlines do also derive significant benefits from allowing their flights to appear on these websites:
While it’s understandable that airlines view OTAs and MSEs with suspicion, they do clearly bring some benefits too. So, should airlines try and compete with them or not?
Should airlines compete with OTAs and MSEs?
If an airline’s website was to compete with the Kayak’s and Momondo’s of this world, they would need to do the following:
As we’ve seen, there are certain areas where airlines can seriously compete with OTAs and MSEs. However, it’s in the area of marketing and promotion that many will struggle and could make competing a struggle for any airline which doesn’t have deep pockets for promotion. But, this may start to change in the coming years with the growing adoption of the IATA NDC.
How the IATA NDC may change the game
The IATA NDC (New Distribution Capability) could be a game changer here. The initiative was launched in 2016 and has been steadily gaining ground ever since. Fundamentally, the IATA NDC aims to smooth the sharing of information, ticket and ancillary sales right across the industry.
So, for example, like airlines, OTAs and MSEs sign up to the IATA NDC, they will begin sharing information more effectively. The idea is that, in future, a customer using Kayak to buy an AirFrance flight, for instance, will be able to not only purchase the ticket but will also be able to purchase all of AirFrance’s personalized ancillary products and services from within Kayak’s interface too.
In many ways, this would offer the ‘best of both worlds’, allowing airlines, OTAs and MSEs to benefit from the growing demand for travel. However, as we noted last year, IATA NDC implementation cannot be partial and players across the industry need to get entirely on board - otherwise, the initiative will struggle to benefit anyone.
The IATA NDC may - or may not - be the answer
The growth in OTAs and MSEs in recent years has presented both an opportunity and a loss for airlines. And, trying to compete directly with these platforms also introduce a wide range of challenges for airlines that naturally want to increase profit margins. So, perhaps the most ideal solution would be for the IATA NDC to be fully implemented - this would be the closest to a ‘win-win’.
Nevertheless, some airlines may still be opposed to sharing any profit with middlemen, and the IATA NDC will only be beneficial once a critical mass of travel industry players decides to sign up. Until that happens, airlines will continue to ask whether they should or shouldn’t compete with online travel agencies and search engines.