NDC focuses on content, but economics may be the deal-breaker

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The NDC (New Distribution Capabilities) standard, released by IATA, is a well-discussed topic in the airline industry. This XML based standard essentially fragmented airline distribution into a wider sector, with more booking engines allowing different functionalities and various types of content.

Arguably, the GDSs could have also provided these themselves to travel agencies – but, for now, airlines exhibit more control over a wider sector concerning the point of sales.

The point of (dis-)content

IATA, different aggregators, and the airlines are focusing on personalization of data and content to the end user by providing more accurate and data-driven offers. Content is differentiated and updated – based on specific market (and end user’s) preferences.

The said content is intended for distribution through travel agencies. However, is it enough for travel agencies to simply have more content on their point of sale while simultaneously getting commissions for using the GDSs? Not all of them agree.

Namely, content is one variable in the overall market equation. Although having a highly personalized content is appealing for reaching the end user, there is also a broader commercial picture for this strategy. While leading airlines are setting up more attractive pricing on NDC channels, the commercial aspect is still an interplay between three parties: booking channels, travel agencies, and end user.

Naturally, the next problem of travel agencies will be understanding the economics behind the booking engines offered to them.

This means that, besides content differentiation across the channels, travel agencies need to compare the commissions and incentives across different NDC channels, GDSs, and aggregators.

Walking into a labyrinth of options

With all this in mind – the next step, and challenge, for distribution in the airline industry are the actual offers to travel agencies.

There’s no question that the agencies have the expertise in selling airline products and, as such, are irreplaceable. However, while most of the airline products and services are ultimately similar, the agencies already have too many options at hand to weigh and execute. The increase in available options demands either more resources for proper consideration or – an optimized approach.

Clarity in quantity

Diffusion of distribution channels into a wider sector has led to an ever-increasing focus on end user, which is in turn disrupting content and subsequent offers. For successful implementation of such an approach, travel agencies need to consider not just the updated content, but also the economics behind the newly formed booking platforms.

Taking into account the amount of related data, there is a necessity for clear overview of offers and well-defined, easy-to-access metrics. Such overview will play a crucial role in adapting to the new environment and choosing the most beneficial business model.

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