26 Sep 2017

Flight metasearch – hard landing into a new business model

This is a viewpoint from Philippe Der Arslanian, CEO, Answair.

Metasearchers are facing a real problem.

Google, Kayak, Skyscanner and many others are spending a lot in attracting travellers looking for tickets, but most often let them go anonymously once they’ve selected a flight.

Although their branding is impeccable, they don’t actually own their customers. The transaction is completed by the supplier or the agency instead, who are the ones collecting precious traveler data. In these times of promising personalization efforts, customer-driven Big Data and future evolutions in A.I., that’s a big loss for metasearchers.

But it’s also difficult to change this state of affairs. Airlines are still suppliers, and meta players need to make sure to keep them happy. It’s a precarious equilibrium to maintain.

Flight metasearchers have competed and distinguished themselves by investing huge amounts in innovative user experiences and gaining incredible insights on faring trends (e.g. “farecasting” when prices will go up or down). It’s therefore no surprise that they attract visitors and help them compare so effectively (especially when it comes to Millenials).

But, as a traveler, would you keep enjoying the best experience when – from your mobile app – you have to slightly wait before soft-landing? As an airline, would deeplinking always be up-to-date with good conversion levels and optimized upselling capabilities?

The current metasearch model, which simply pushes travelers to another site after shopping seems simply unsustainable. Four major forces are pushing it out of the uneasy equilibrium it had built.

A swift mobile experience is now non-negotiable

Once the trip is selected, the landing page of the fulfiller is usually far from optimized. The shopping-booking transition can potentially be slow, cumbersome, inconsistent, and sometimes even result in price discrepancies.

Typical attributes such as price, choice and brand will always play a major part in customer selection, but with mobile becoming so dominant, speed and simplicity are also growing into key decision factors.

The extra time and complexity needed for additional site handover or graceful landing (including potential price validation) is simply not compatible with new mobile behaviors.

There is a hidden opportunity here however: if time optimization is done correctly, it will also grant meta players the ability to place some personalized merchandising, despite an ever-constrained mobile real-estate.

Skyscanner finally demonstrates clear business benefits

Skyscanner recently claimed drastic conversion boosts of 20% and 50% with its new Direct Booking business model, on web and mobile respectively.

This experiment is breaking the traditional model by not only demonstrating conversion benefits to airlines but also promoting their ancillaries.

Most metasearchers have already been subtly hinting at the need to consider a new business model in order to solve this challenging equation between customer ownership and supplier friendship, and Skyscanner is now leading the herd. Steve Hafner (Kayak CEO and co-founder) has stated that although they are not yet ready to make that (OTA) move “that’s something we keep taking a look at.”

Meanwhile, Google VP Engineering, Oliver Heckmann said that Google has no plans to become an OTA but facilitates some partner-branded bookings with carriers such as Lufthansa and Virgin America – while also trying not to alienate their big advertisers e.g. Expedia and Priceline (which spent an overall $3.5B in online ads in 2016).

NDC (New Distribution Capability) opens up new opportunities

NDC is a game-changer. Some carriers such as British Airways and Finnair are leading the pack with the opening of their NDC API to metasearchers. This means Skyscanner and Kayak can now maintain a booking experience within their app and seamlessly under the supplier’s brand.

This approach would lead to an almost indistinguishable experience from native apps (including ancillary teasers), and would also protect investments from a development standpoint thanks to standard NDC verbs such as AirShopping, OrderCreate, or SeatAvailability requests.

Eventually, NDC should also allow some players to also discard the very old “quick search” (mainly asking for city-pairs and dates) and introduce advanced search screens, ones that truly compare all options upfront, including attributes such as extra luggage, refundability, and upgrades.

China proves it works

With its mobile-first/only approach, China is miles ahead and an excellent benchmark for worldwide actors. They’re so influential that they’ve begun to look West.

It’s no surprise that Chinese OTA giant Ctrip snapped up Skyscanner, one of the top global metasearchers, in a bid to – as Ctrip CEO Jane Jie Sun put it – to motivate new business models in which Ctrip would help manage the fulfillment of a new Skyscanner with booking capabilities.

The biggest Chinese “metasearch” are also one step ahead of the game i.e. Qunar is already a metabooker, proving that seamlessly and quickly extending search into a fully-managed booking experience is the right business-model move.

With these four drivers in mind, one thing becomes pretty clear: the online landscape is changing, and airlines and metasearchers alike need to adapt and “prepare for landing.” They will need to open up selectively with NDC to increase reach without impacting conversion and yield in other channels.

More importantly, if airlines are to keep relevant in a Metabooking Age, they will also have to innovate and differentiate with an end-to-end experience e.g. day of travel with post booking ancillaries, data-driven personalization on all mobile touchpoints, advanced servicing with changing options on-the-go, and relevant loyalty offerings for both frequent and infrequent travelers e.g. paying for upgrades in miles.

Make no mistake however: suppliers will still own their inventory and their customers, but gains will increasingly be shared among all relevant players.

As Rogier Van Enk, Finnair VP Distribution, insightfully said in March 2017:

“We will need to continue to test and experiment where and how the digital ecosystem of our intermediary partners meets our own digital ecosystem and how these two play together to provide a great experience for our mutual customers.”

Let’s put it more simply. The metasearch space is changing, and whether the meta players and airlines look at nailing their landing into an enhanced business model, or crashing right through it, will depend on only one thing: how fast they accept and adjust to this new state of affairs.

This is a viewpoint by Philippe Der Arslanian, CEO Answair. The views expressed are the views and opinions of the author and do not reflect or represent the views of his employer, tnooz, its writers or partners.

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