The travel industry is booming, passengers are taking to the skies, and you have the opportunity to deliver great experiences and make money as a travel seller. New Distribution Capability (NDC) is also growing in popularity with airlines and you can use it to build and grow a successful business selling flights.
How did travel sellers make money in the past?
Brick-and-mortar travel agencies have been around since the 60s and online travel agencies since the 90s. Airline content distribution changed dramatically in that time, from manual processes and physical copies of flight information to digitised airline Central Reservation Systems (CRSs). These evolved into the well-known Global Distribution Systems (GDSs) built with the EDIFACT technology standard.
As a travel seller from the 60s to early 90s, you’d make most of your money from vendor commissions. Travel was expensive, distribution channels were still fairly limited, and it was difficult for travellers to research their destinations. This meant you had an opportunity to offer your expertise and sell multi-product travel experiences including accommodation, transport, excursions, and insurance. You’d get a percentage or flat-fee commission for each booking from airlines, hotels, and insurance providers.
The rise of the internet in the 90s and early 00s, and the expansion of GDSs to distribute content from hundreds of airlines, lowered the cost of selling flights considerably. This helped lots of new businesses enter the market, however, it was also the end of lucrative airline commissions. Airlines could more easily reach customers and didn’t need to pay costly incentives that were cutting into their profits.
As a travel seller entering the millennium, the ways you made money had to change. Service fees for building itineraries and booking travel made up a larger proportion of revenue. You also had to focus on selling, upselling, or cross-selling non-flight products that still paid commissions like car hire, hotels, and cruises.
In the two decades up to 2019, global internet usage exploded from 400 million to 5 billion users and technology developments transformed industries and online retailing experiences. Global air passenger numbers nearly tripled to four and a half billion passengers presenting lots of opportunities for you as a travel seller. However, the industry hasn’t kept pace with modern technological advances and still relies heavily on the legacy EDIFACT standard from the 80s. This restricts your ability to effectively sell air travel and related products.
How does NDC help travel sellers make money today?
It has been ten years since the International Air Transport Association (IATA) introduced New Distribution Capability (NDC) and promoted it as the foundation for modern retailing. The new XML-based technology standard is designed to improve transparency between airlines and travel sellers and to give both new selling capabilities. It’s also a move away from traditional GDS distribution channels using the EDIFACT standard and charging high fees.
Adoption has been slow and steady for a number of years until, accelerated by pandemic pressure after initial slowdowns due to lockdowns and furloughs, NDC certifications jumped by 25% and all 21 NDC Leaderboard airlines reached their 2020 target of 20% NDC-powered indirect sales. This means you aren’t restricted to choosing between just a few GDSs for airline content as you would’ve been a few years ago. You now have access to new technology providers and, importantly, more airlines with NDC capabilities. Airlines are offering exclusive content to incentivise you to sell their tickets through NDC distribution channels. It’s important to note that content availability differs between airlines based on their business strategies and the maturity of NDC development.
Exclusive content, differentiated content, or NDC content; it’s called different names across the industry but the concept is the same, it’s the airline content you’ll benefit from by using New Distribution Capability (NDC) instead of GDS EDIFACT content distribution channels.
Exclusive NDC content is the key to making money as a travel seller in 2022. You can use ancillaries, rich content, better pricing structures, and transparent data sharing to create better customer experiences with more comprehensive product information and visuals. These will give you higher conversion rates and more bookings of greater value. You can also improve your margins by avoiding GDS fees and making the most of exclusive fares and promotions from airlines.
Save on GDS fees
Global Distribution Systems (GDSs) charge a fee to airlines for bookings made on their platforms and part of this fee can be passed back to you as an incentive to sell through the GDS. Airlines are increasingly charging their own fees to GDSs on EDIFACT bookings to recover costs and encourage them to develop NDC solutions. These fees can be higher than GDS incentives so selling flights through NDC channels is the best way to access the cheapest fares and improve your margins.
You can charge for ancillaries that aren’t necessarily available from all airlines through GDS EDIFACT channels. These can include seats, bags, in-flight entertainment, WiFi, meals, and airport lounge access. For an indication of money-making opportunities from these extras, ancillary revenue can climb to $49 per passenger for traditional airlines and $65 for low-cost carriers. Using new rich content, you can better show off these ancillaries to customers.
Rich content refers to the information and media of product offerings, for example, videos of business class suites, photos of seats with extra legroom, or information about a first class airport lounge. You can access rich content directly from airlines through NDC that isn’t available through traditional GDS channels.
By showing product information and visualising premium upgrades, you help your customers understand the value of offers you’re presenting to them. This will help you improve conversion rates of standalone, upsell, and cross-sell products.
Better pricing structures
NDC also gives you better pricing structures to improve conversion rates, deliver better customer experiences, and generate more revenue from customers. In the past, airlines were restricted to 26 price points – this meant flight prices could jump significantly between fare classes making you lose out on potential customers not willing to pay the higher price. Now airlines can offer continuous pricing with unlimited price points or dynamic pricing customised to individuals or groups based on contextual information.
Transparent data sharing
Using the XML-based NDC standard instead of EDIFACT, you can pass information about your customers to airlines to return personalised offers and product bundles. Customers are used to personalised experiences in other areas of their lives: recommendations for films on Netflix or products on Amazon. Now you can deliver this level of experience for travel, presenting customers with products that matter to them and that they’re most likely to buy.
Last but not least, you can make the most of exclusive fares and promotions offered by airlines that can’t be found through GDSs. Cheaper fares or limited-time discounts give you a chance to capture price-sensitive customers or reward frequent flyers with special rates.
For example, when an airline runs a summer or winter sale with £50 off all flights for a limited time, these might only be available directly on their website or through NDC channels. You can pass these savings directly to customers or use the difference to improve profit margins.
How does Duffel help travel sellers make money?
Dozens of airlines now offer NDC content distribution giving you access to ancillaries, rich content, new pricing structures, personalisation, and exclusive promotions. To stay competitive, deliver great customer experiences, and make money as a travel seller, you need to make the most of these new capabilities and content offerings.
You can connect to dozens of NDC and Direct Connect airlines with one integration with Duffel and get access to all new airlines as they’re added to the Duffel network with no extra work from your team. And to help you get started quickly, we’ve built Duffel Components like Seat Selection, Card Payment, and Additional Baggage that can be dropped into your app, saving you weeks of development time.
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Blog post sources
- Max Roser, Hannah Ritchie and Esteban Ortiz-Ospina (2015) - ‘Internet’. Published online at OurWorldInData.org. Retrieved from: https://ourworldindata.org/internet [Online Resource]
- International Civil Aviation Organization, Civil Aviation Statistics of the World and ICAO staff estimates via World Bank
- US & Canada Airlines Register Larger Ancillary Revenue Share With More Than 37% of Global Total for 2021 – Press Release via IdeaWorks.