A Distribution Prediction

Perhaps if you want to understand some of the practicalities of the airlines planned change over to direct connect you could look at the current hotel booking model and how it does (or does not) work. To me the hotel model is where the airline industry is heading. Let me explain.

Money and strategy matters aside the consolidated ‘one stop shop’ offering provided by the Global Distribution Systems (GDSs) is perfect for customers and intermediaries alike. You do not have to go to numerous different ‘shops’ to buy your airline product. Shops that have different languages, booking methods, rules and reporting. It is all there for you in one common language package with little diversity or complication.

Now hotels are totally different and far more difficult to package. Each location can be independent, owned by a chain, part of a consortium and sometimes a mixture. Each speak a slightly different version of the same language and they very rarely sell their inventory through a GDS because they are too expensive. Instead they do their own thing via many different outlets at many different tariffs. Frankly it is all a bit of a mess if you want a properly managed travel programme, particularly as they use differing technology.

So what is happening with hotels now and how does it compare with the current GDS system? In the main TMCs must have some kind of ‘connection’ (either direct or via third party) with key hotel establishments and chains. Some TMCs have created their own databases to hold inventory and information that then gets linked up to the GDS air booking screen. It ends up all looking like one source but contains numerous connection types that range from online links to manual entry.

The TMC has to create room allocation acquisition and management systems that doubtless include room close-out periods and price variations by customer and intermediary. These need constant adjustment and repopulation to remain current.
Ultimately they end up with their own mini GDS for hotels with numerous information flows coming from a similar number of independent sources.

OK, back to airlines. They are necessarily a selfish bunch. They don’t want to pay for the current excellent consolidated air booking system any more. They just want to sell their seats in a way that gives them more power/control and less cost. They try and dress it up differently by saying it is what the customer wants which of course is laughable if it wasn’t so serious. I wish they would just come out and say the truth which is that they intend to eradicate this cost or pass it elsewhere.

Where might this end up? Some might call it industry evolution but I would call it going backwards. Instead of efficiency and commonality in air travel it will revert back to the hotel model of individual airlines operating at different speeds with different communication methods. They will deal through TMCs who also vary in skill and flexibility. There will be dual pricing and availability depending on which model you book through and which source you use. That is progress?

I am sure the GDS have explored all avenues to find a solution to being considered bad value for money by their airline customers. I have always thought that if they presented and justified their cost more intelligently, reduced prices strategically whilst building in new markets (such as hotels) they might do a lot better for all our sakes Either that or negotiate their wares with corporations/TMCs in a new and different way? After all people will pay if they see a value and surely it is better than the chaotic alternative illustrated by the hotel market?

The smart TMCs have seen this direct connect war coming. In fact you would have had to be blind not to. They have been building what they call ‘super platforms’ and the like in anticipation of it. I predict it is only a matter of time before the mega TMCs connect their ‘pipe’ to the main suppliers in the air and hotel world. In fact it is happening now. What happens then? Are the TMCs going to distribute inventory at no charge? I doubt it. They will most likely become the new GDS of the future but with broader product reach and more control on who the customer uses and at what price.

Perhaps the GDS and airlines need to get there heads together in more harmony or they may end up creating something that compares with Frankenstein’s monster. Built with various industry parts but likely to murder them!

Anonymous Comment:

Brilliant commentary. Mike has REALLY hit upon something important here.

Love the line about airlines wanting more control and less cost, "They try and dress it up differently by saying it is what the customer wants which of course is laughable if it wasn’t so serious. I wish they would just come out and say the truth which is that they intend to eradicate this cost or pass it elsewhere."

Again, brilliant analysis


Anonymous Comment



As ever Mike hits the nail on the head whilst other so called industry experts have a tendancy to hit their thumb with an oversize hammer. What is being described as more than likely to happen within the industry is in fact already work in progress; and perhaps further down the line than many (on all sides of the equation) would care to admit.

A Christmas Distribution Story - Timmy TMC

I wrote this sweet little story last Christmas and it is back 'by popular demmand' while I write the next one about GDSs which will be out in a few days.

Tales of Timmy TMC and his search for value– A Christmas Pantomime and work of utter fiction!

Timmy was sad. He had just returned from Agencies Anonymous and admitted to all of them that he was a TMC. He was looking for help to cure this terrible affliction but all the other sad souls took one look at him and agreed he was clearly past his sell by date and revoked his membership.

It had all started so very well for Timmy those years ago when his two benevolent uncles, Colin Commission and Oscar Override, used to send him cheques for doing very little. However recently, having used him for their horrible data mining purposes, they walked out leaving him a penniless orphan. Then even stranger things started to happen as his few pals started disappearing, changing their names and, worst of all, reverting to cannibalism and eating each other up. The stress of it all got to little Timmy and he started wondering if there would be a future role for him in this wacky and homicidal travel supply chain. He was sure he was useful but a little bit sketchy on the detail.

But Timmy was made of stronger stuff and knew, with a little sage advice from his supply chain colleagues, he would discover his value. “I know” he thought. “I will go and see my dear old benefactor Client Hardup”. “Sorry Timmy” said Hardup whilst absently massaging his EBIT, “but I have lost all my profits. I gave them to a nice man from the Fat Cat Investment Bank and he said they had been magiced away by millions of little elves wanting to feed their sub prime mortgages. However he also said that he was prepared to travel the length and breadth of Las Vegas to get it back if Timmy could donate a ticket”. “Sorry” said Timmy “I don’t get free tickets and upgrades any more. In fact the last ones were those First class round the world tickets which went to Mrs Hardup when she coincidently won your office grand draw”.

Hardup was sorry for Timmy. He remembered the days when Timmy used to give him good service, rebate cheques and upgrades. “Go and see my two sisters Pammy Procurement and Charmaine Cheaper-Thanyu” he said. “They may think of something valuable for you to do, although don’t hold your breath as I have just cut their travel allowance again.

Now these two girls hated each other something ugly. Charmaine thought she could do and get things better than Pammy. Pammy thought Charmaine was an undisciplined tart hawking herself around the web without any thought of the infections she could catch like cancellation flu and card chargeitus. The only thing they had in common was they both thought they could do anything better than Timmy who, to them, was an unnecessary downward pull on their sagging assets. They had enough budget stretch marks between the already.

Poor old Timmy. Little sustainable income and not the sharpest pencil in the commercial box. He trudged back to his lonely BTC and implanted himself in front of his PC. He aimlessly rubbed his mouse even though his fairy god mother had warned him his eyesight would be impaired when POOF! Out from the PC sprang the GDS Genie. “I will grant you one wish” she cried. “oh Genie” he wailed “You have told everyone that you know everything so please tell me what I need to do to find my value and make Pammie and Charmaine respect me like they used to when I bribed them.
“Blooming Heck” said Genie, “that’s a tricky question. How should I know? I have enough problems of my own dealing with that terrible ogre Amerimonster from IATAland. He wants me to get my sectors off for next to nothing. And then there is that green monster Olearymouth. He has been clambering down his beanstalk lately threatening you, me, in fact everyone he claps eyes on. So don’t bother me with your pathetic questions! And leave that mouse alone.”

Timmy was shocked and saddened. He had tried his colleagues, his clients, suppliers and even a fellow intermediary without a sniff of finding his value. Off he wandered into the pre Christmas recessionary gloom. Even his Blackberry had stopped talking to him and his Mobile phone, instead of saying “how are you” when switched on now said “Book Direct” instead. It was almost enough to make Timmy give up and become a consultant like everyone else.

Just as all seemed lost a jolly faced lumbering giant in a Santa outfit scooped Timmy up, clutched him warmly to his chest and squeezed him tenderly by the throat. “Giant Major Airline Timmy wheezed”. “Never fear Timmy” boomed Major. “You can trust me and I will look after you just sign this binding agreement and all your troubles will be over - well at least for a month or two”. “But that is what you said last time” said Timmy, “before you started smacking me about”. “Now, now” said Major “let’s forget about the past”. “That is also what you said last time” replied Timmy.
“NOW SEE HERE” boomed the Major with an inscrutable look on his face, Have you got any other options?

“Oh Major” said Timmy, “it is so good to be home. I’m hungry. Got any commission?!”

And they all lived happily every after – Or did they?

Why small is becoming big in Business Travel.

In many of the key driver markets like the UK the desire by TMCs to move back into the SME market has grown and grown without any sign of let-up. A strange phenomenon one might think considering they have spent the last few years actively trying to get them off their books. There must be a good reason for this re-think and of course there is. It’s because of that good old trio economy, technology and supplier strategy. As a result there is never a better time to be a small customer in business travel.

You see the big organisations have lost the allure they used to have. They now become harder to win and are on longer contracts. They demand more and pay less and the suppliers have done their deals direct with them which make the TMC more marginalised than ever. At the same time the TMCs have caught up with each other to the point that a competitive edge to swing an account gets smaller. So, in the main, TMCs get to keep what they have got (especially with the advent of globalisation) and, if they actually lose something big it hurts real badly. It is often more expensive to lose an account than the benefit you get if you keep it, if that makes sense, which is another reason why little moves!

So what is left out there that is flexible, relatively easy to handle yet very valuable cumulatively especially to suppliers. The answer of course is the SME who demand a good deal but does not carry all those bespoke costs of a large client. If you win one then great, but if you lose then it doesn’t hurt much. TMCs can use all those fancy gizmos created for (and funded by) the major clients to provide added value for peanuts to SMEs. The SME also can be a great deal easier to handle in both operational and financial terms and TMCs resources can be flexed to move this business to the optimum point in their structure. Another consideration is that, in a growing market, the big TMC is beginning to realise that today’s SME is tomorrow’s mega client. Finally, TMCs still need suppliers and suppliers want the SME market but cannot afford to go after them so a consolidation point via an agent is very attractive.

So what is a SME supposed to do? Well, if I was them I would shop around. I would be less interested in the transaction fee I was being charged and more impressed in what supplier savings and efficiencies I would get. I would go to the big TMCs and ask what extra value they can give by sharing out some of those big client products benefits. I would then ensure that I would get agreed levels of service continuity and not have my team poached every time there is a staff shortage with a bigger client.

So simplicity, flexibility and small are all beautiful……for now.
The large corporations? If I was them I would sit on my ego and work out how to make myself more attractive and important again.

Global Travel Programmes – Delivering?

It has been quite a few years now since the advent of globalisation, or should I say attempted globalisation, became the trend. TMCs amalgamated, acquired and re-launched just so they could offer a solution that crossed all geographical boundaries.
Maybe now is the time to asses whether the global travel programme strategy delivered what it should have and if all the stakeholders got what they wanted or perhaps, in some cases, feared. It is a huge subject which won’t be fully covered by my few paragraphs but I really do think it worth some scrutiny and debate as many companies are still considering taking this route.

Was it worth telling so many overseas offices to leave their existing suppliers and TMCs for the much expected global good of the company? Did those companies really gain global benefits and what price did it cost in terms of disruption, relationships and country budgets? Frankly, was it worth the hassle and, if so, can that worth be truly quantified to everyone’s satisfaction. Is there a case for scrapping the concept or is the dream of global control, buying power and service worth continuing with? Here are my initial observations both for and against.

I would argue that from a straightforward procurement perspective the case for globalisation is very weak. This is simply because, like many corporations almost all airline suppliers do not operate the same way and are almost quaintly traditional in their thinking. If you squeeze airlines they will admit that each country has their own cost centre and even head offices have to ‘sell’ a global deal to them. In almost all cases individual global locations can veto deals on the basis that it will create low fare precedents for insufficient regional benefits. Why should my country give a silly deal that will hurt my pricing strategy and bottom line even if it does benefit offices in another continent? This will only be solved by cross subsidisation or immoveable directives.

Interestingly enough TMCs have responded to the challenge much better and have found differing internal ways to solve the problem. They too have a different range of challenges particularly in the areas of common fees, fares, services and product ranges. Different markets have varying capabilities of GDS, M.I, market sophistication and standards and to expect the same services to be available in London as in Laos is simply unlikely and possibly unwelcome.

From a corporate perspective I think there is the same age-old issue between buying a commodity and a diverse service. This one really has to get cracked and I can count those that have succeeded on one hand, with a finger or two to spare. Everyone needs to agree the expected benefits, communicate them and benchmark results. Easier said than done as corporate head offices spending most time looking at what should be the compelling concept rather than the nitty gritty deliverability and cost both financial and practical.

In summary, if it is all about negotiating power I have severe doubts. If it is about measurement of what everyone is doing then O.K. but it may not be popular. If it is about provision of global support at times of crisis like war or volcanic ash then it is worth its weight in gold. Finally, if it is positioning for a future time when suppliers buy into the programme and global subsidiaries do what they are told (for whatever reason) then go for it now.

p.s. I define a global programme as one which covers a corporation in all their operating countries. This is entirely different to a Strategic programme which only covers two/three of an organisation’s main or driver markets. If you look at most companies you will find 80% plus of their travel comes from these two or three areas. I wonder sometimes why some find a need to spend time on the hugely fragmented 20%.

Strategic deals work well, especially between UISA/Europe and I have seen sizeable gains made by savvy organisations. Most airlines can cope with giving deals where there are good new business prospects at both ends of a route.

Volcanic Ash 2 and aftermath.

Who can you really believe?
Maybe we will find out but it could go two ways:
1/ This was one mother of an overreaction. but hang on a moment. Maybe it is better to err on the side of safety and life preservation? Quite so .....to a point and the point is were the decision makers qualidied in knowledge and consultation to make that decision? Because if they were not they were (and still will be) causing huge damage to people, companies and the economy. Did the authorities talk first with airlines, plane manufactures, scientists and all relevant parties before taking such drastic and catyclismic action. If they did then fine. If they did not they are hugely culpable for the massive damage done.
2/ If it was not overriaction how could the airlines not support the action taken? Did they put economic survival ahead of safety? Were they prepared to take riskis with passenger lives? Bearing in mind they would have killed people including staff, lost their equipment and irreplaceablly damaged their reputation I think not.

I am not particularly interested in a witch hunt but I am incredibly interested in making sure decisions like this are made better in future. Maybe that will be the only good coming out of all this.

The Aftermath

So, if the air lanes stay open what happens now?
Sadly it will be quite a time before the schedules get back to normal and people are where they should be. The airlines will continue to be in pain for even longer as some future flights will come back half empty as the expected holidaymakers were prevented from going out in the first place. Also I would not be surprised if some firms might continue flying less if they discover those contingency video conference calls worked rather well. Some airlines and hotels may also suffer (or otherwise) when travellers evaluate how they performed through this crisis i.e. did they help stranded passengers and did they meet their financial and moral commitments in this respect.
Time will tell.

Airline marriages? Call for Jerry Springer.

Well we seem to be heading towards merger-land again if reports, papers and gossip are correct. It seems a bit like springtime when you get the posturing male birds strutting around whilst the shy females look coy and occasionally defensive before they are finally !!!!!! – Well, you know. Then afterwards? You might wonder who actually got taken advantage of.

For instance a possible coupling between United and US Air would be a marriage not so much made in heaven but more likely the other place and I suggest that a strong ’prenup’agreement is put in place. Just think of what kind of offspring they would produce. Something like the banjo playing kid in the old Deliverance film I expect. At least just as smaller stunted and inbred I suspect.

If you want to see a bit of what happens in fast forward look at the quite recent post honeymoon period between Mr Lufthansa and Mrs BMI. According to today’s UK Times newspaper they may have already begun the Brad and Angelina phase along with drastic reductions in the family budget and relatives being shown the door. Are they both happy and will they be soul-mates for life? I am not sure now Mrs BMI is being told a large chunk of her dowry is going to disappear.

I used to think mergers were a great thing. It meant the strong got stronger and the weak were culled but then I started to wonder what benefits (or otherwise) the travelling customer and their employers would receive. If you look at those airlines who choose to ‘live in sin’ by joining alliances I would wager not much. I have not seen any significant financial improvement for customers in fact I have observed the opposite. OK flight services are linked more seamlessly but choice goes down, monopolies go up and contract negotiations become harder. These partnerships are more one of convenience than a desire to do good for their passengers.

Clearly airline mergers will become more frequent as time progresses and barriers disappear. They have become more common because of the new competition airlines are now facing combined with customer behaviour. The more prices are driven down and the more full service airlines fail to sell their benefits in the value add war with no frills carriers the more closures and mergers will take place. The more this happens then the less choice will be out there with less competitive routes and less keen pricing.

I think this kind of ‘progress’ is inevitable and I am not wholly sure I would want to try and stop it anyway. Goodness knows this industry needs to change and this just might be one of the catalysts. What I do think is, rather like the blushing bride we need to go into this with our eyes open and our legs crossed….well at least until after the ceremony!

Into the Unknown

What do I know about blogging? Pass me a postage stamp someone and I will write it all down on the back of it and have room to spare.

Business Travel? Well that is a different matter.
At least I hope so as I have been devoted to that particular industry in one shape or form for over forty years. During that time I have worked for airlines and agencies starting in the filing unit and ending up as Managing Director for HRG UK, the country's biggest travel management company.

So did I learn anything during that time and is it still worth passing on? Do I have any stories that are funny, absurd or maybe even educational. Am I a bitter and twisted old git?! Well dear reader (if you are out there) you will shortly find out as my objectives for setting up this site are:

To comment on issues of the day.
To speak out in a way that was constrained in the past when I had shareholders to consider.
To tell some travel life stories that are in part informative, hopefully amusing and almost entirely true.
To try and answer any reasonable questions where I think I can inform and add value.

So lets see how I get on. I am my worst critic so if I fail I will disapear as quickly back into the ether as I emerged out of it.