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The travel industry has seen significant shifts in recent years, with an increasing demand for efficient and personalized travel experiences. In response, hundreds of airlines and the International Air Transport Association (IATA) introduced the New Distribution Capability (NDC) as a transformative solution to revolutionize how airlines retail their fares and add-ons.
In this blog post, we will delve into the technical specifics of NDC, explore its impact on the business travel industry, and discuss the key stakeholders that stand to benefit the most from this innovation.
Understanding NDC: An Overview
NDC is a set of technology standards designed to enable airlines and travel partners to exchange information more effectively. It was developed by IATA, which represents approximately 290 airlines, to modernize the existing distribution environment and promote transparency and personalization in the air travel market.
NDC is built on the XML (eXtensible Markup Language) standard, allowing for easier integration and increased flexibility. By adopting NDC, airlines and travel partners can communicate their offers and services directly without relying on outdated, static systems like the Global Distribution Systems (GDS) and dated EDIFACT technology. This modern approach empowers airlines to showcase their products and services more effectively and enables travel agents to access a wealth of information and create bespoke offers for their customers.
All that said, GDSs, the current standard for many TMCs, will still have the option to connect to airlines (and they’re actively working on doing so), but the content they can pull from the new NDC standard will be limited by the technology they operate on today.
How NDC Works: Technical Specifics
NDC operates on three key pillars: Offer, Order, and Servicing Management. These three components form the basis of communication and interaction between airlines and travel partners.
In the offer management process, airlines create and distribute their offers, which include flight availability, pricing, and ancillary services. NDC enables airlines to use dynamic pricing, continuous pricing, and advanced merchandising techniques, such as personalized promotions and branded fares, to differentiate their products and services.
Once a customer selects an offer, the order management process begins. NDC allows for the seamless exchange of information between the customer, travel agent, and airline during booking, payment, and ticketing. It enables airlines to manage and track the customer's order and maintain a consistent view of their preferences, regardless of the distribution channel.
After the order is complete, the servicing management process takes over. This involves managing changes to the booking, such as flight cancellations, rebooking, and ancillary service adjustments. NDC enables airlines and travel partners to collaborate effectively, streamlining the process and improving the overall customer experience.
The Impact of NDC on the Business Travel Industry
NDC's introduction has significant implications for the business travel industry. Some key impacts include the following:
NDC empowers airlines to develop and distribute tailor-made offers, targeting individual traveler preferences and needs. This level of personalization (such as getting custom offer bundles based on your rewards program number) is particularly valuable in the business travel sector, where travelers often have specific requirements related to their corporate travel policies or personal preferences.
The reason personalization is so valuable in the travel industry is the often slim margins airlines earn on fares. Ancillaries allow airlines a unique opportunity to maximize profitability while simultaneously providing a winning experience to their travelers.
NDC enables airlines to communicate their products and services directly to travel agents and other partners, providing greater transparency (such as product descriptions, images, and pricing). This increased transparency can lead to more informed decisions and improved customer satisfaction.
Not only that, but it empowers TMCs to provide better client experiences and data visibility (if their tech supports it, of course).
Replacing the traditional GDS with a modern, flexible XML-based system, NDC streamlines the entire booking process by consolidating communication between airlines, travel agents, and travelers, reducing the need for intermediaries and eliminating a large portion of traditional booking errors.. This efficiency not only benefits airlines and travel agents but also translates to a smoother experience for business travelers.
Once again, the caveat here is that for NDCs benefits to be realized by a travel program, the right steps and technologies need to be implemented. If the GDS is still involved in the NDC connection, there are still limitations, as we mentioned before.
Greater efficiency is highly sought after in the corporate travel industry, so failing to partner with a TMC that is looking to maximize this for its clients will result in subpar performance.
Beneficiaries of NDC
While NDC has the potential to benefit all stakeholders in the air travel ecosystem, certain groups stand to gain the most from its adoption. We took the liberty of going through them item by item to show exactly what benefits apply to which groups.
There is much overlap of benefits here, so we further explain how each applies to each group.
Airlines stand to gain significantly from adopting the New Distribution Capability (NDC). By utilizing this innovative solution, airlines can improve their distribution strategies, increase revenue, and improve customer experiences. Here are some key ways airlines benefit from NDC:
Enhanced Control over Product and Service Offerings
NDC allows airlines to distribute their products and services directly to travel partners, bypassing the limitations of traditional Global Distribution Systems (GDS). This direct communication gives airlines greater control over their inventory and pricing, ensuring that they can present their offerings accurately and attractively to customers, allowing them to generate more revenue.
Rich Content and Personalization
NDC empowers airlines to deliver rich content, including high-quality images, detailed descriptions, and personalized offers, through a standardized XML-based data exchange. This capability allows airlines to differentiate their products and services more effectively, catering to individual customer preferences and needs. Personalized offers can result in higher customer satisfaction (through increased awareness of ancillaries) and increased loyalty.
Dynamic Pricing and Revenue Management
One of the significant advantages of NDC is the ability to implement dynamic pricing strategies. Airlines can adjust their fares in real time based on demand, customer segmentation, and market conditions. This flexibility allows airlines to optimize revenue management and capitalize on opportunities in a highly competitive market.
Ancillary Sales and Upselling Opportunities
NDC enables airlines to showcase and sell ancillary products and services, such as seat upgrades, in-flight meals, and extra baggage allowances, more effectively. The improved transparency and accessibility of these offerings can lead to increased upselling and cross-selling opportunities, driving additional revenue streams for airlines.
By reducing reliance on traditional GDS and enabling direct connections with travel partners, NDC can lead to cost savings for airlines. NDC can lower distribution costs by minimizing booking fees and commissions associated with GDS.
Improved Customer Data and Insights
NDC facilitates the seamless exchange of customer data between airlines and travel partners, providing valuable insights into customer preferences, booking patterns, and behaviors. This information can help airlines refine their marketing strategies, tailor their offerings, and enhance the customer experience.
2. Travel Management Companies (TMCs)
TMCs benefit in similar ways that airlines do, just on a different side of the coin. Let's now take a look at how TMCs benefit most from implementing and adopting NDC early on.
Access to Rich Content and Enhanced Offerings:
NDC allows TMCs to access more detailed information about airlines' products and services. With high-quality images, comprehensive descriptions, and personalized offers, TMCs can better understand and compare available options, leading to improved customer service and more informed decision-making.
Personalized Travel Solutions:
With NDC's standardized data exchange, TMCs can access customer-specific information and preferences, enabling them to create personalized travel solutions tailored to individual needs. By offering customized itineraries and services, TMCs can enhance traveler satisfaction and build stronger relationships with their clients.
Streamlined Booking Processes:
NDC simplifies the booking process by providing direct access to airlines' inventory and pricing. This streamlined approach reduces the need for manual intervention and allows TMCs to book flights, accommodations, and ancillary services more efficiently, saving time and resources.
Access to Exclusive Offers and Promotions:
By adopting NDC, TMCs can access exclusive offers and promotions from airlines, which may not be available through traditional distribution channels. This access to unique deals can provide additional value to clients and increase customer loyalty.
3. Corporate Travel Managers
Travel managers also pick up some easy wins by working with a partner that has NDC fully enabled.
Improved Transparency and Cost Management:
NDC offers greater transparency in pricing, allowing travel managers to access real-time fare information, including all fees and taxes. This transparency enables better cost management, as travel managers can more accurately estimate and control travel expenses.
Enhanced Data Analysis and Reporting:
NDC's data exchange capabilities enable travel managers to collect and analyze valuable customer data more effectively. This information can be used to optimize travel policies, identify cost-saving opportunities, and monitor traveler behavior, ultimately leading to better decision-making and improved travel program performance.
By embracing NDC, travel managers can differentiate themselves from competitors who continue to rely on traditional distribution channels. Offering NDC-enabled services demonstrates a commitment to innovation, customer-centricity, and industry best practices, which can attract new clients and strengthen existing relationships.
4. Business Travelers
We can't ignore the actual traveler in all of this either.
Access to Rich Content and Detailed Information
NDC provides business travelers with access to rich content, such as high-quality images, comprehensive descriptions of airline products and services, and detailed information about in-flight amenities. This enhanced information enables travelers to make more informed decisions when selecting flights, seats, and ancillary services in the corporate booking tool, resulting in a better travel experience tailored to their preferences.
Personalized Offers and Services
NDC's standardized data exchange allows airlines and travel partners to access and utilize traveler-specific information, such as frequent flyer status, travel history, and preferences. This data enables the creation of personalized offers and services, allowing business travelers to enjoy customized travel experiences that cater to their individual needs.
Streamlined Booking Experience
With NDC, business travelers can benefit from a more streamlined and efficient booking process. Direct connections between airlines and travel partners enable faster and more accurate booking, reducing the likelihood of errors and ensuring a smoother travel experience, closer to the one provided by shopping direct.
Enhanced Transparency in Pricing
NDC offers improved transparency in pricing by providing real-time fare information, including all fees, taxes, and additional charges. This increased transparency allows business travelers to understand better and manage their travel expenses, helping them make cost-effective decisions.
Access to Exclusive Offers and Promotions
By adopting NDC, airlines can provide exclusive offers and promotions that may not be available through traditional distribution channels. Business travelers can enjoy these unique deals, enjoying additional savings and value-added services.
Improved Travel Management and Policy Compliance
The data insights provided by NDC can help organizations and their travel managers optimize travel policies, monitor traveler behavior, and identify cost-saving opportunities. Business travelers can benefit from more effective travel management, ensuring compliance with company policies and maximizing the value of their travel budgets.
Greater Flexibility and Control
NDC allows business travelers greater flexibility and control over their travel experience. With direct access to airlines' inventory and pricing, travelers can easily modify their bookings, add ancillary services, or upgrade their seats in the corporate travel tool, resulting in a more seamless and convenient travel experience.
NDC represents a significant step forward in the evolution of air travel distribution. By offering a modern, flexible, and transparent approach to communication between airlines and travel partners, NDC has the potential to transform the business travel industry for the better.
As stakeholders continue to adopt NDC, the industry can expect a more personalized, efficient, and transparent travel experience. Airlines, TMCs, corporate travel managers, business travelers, and technology providers all stand to benefit from this groundbreaking innovation, which promises to redefine the way air travel products and services are distributed and consumed.
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