In the modern retailing environment, consumers expect a personalized experience throughout the buying process. They want a seamless, efficient shopping experience, with retailers tailoring products to their individual needs or preferences while offering the best deals.
So too with travel, different distribution models are required than even a decade ago to satisfy the modern consumer. With approximately 33 percent of the world’s population below age 20, and almost 60 percent below age 40, the travelers of today – and tomorrow – want comfort, ease of use, and reduced clutter.
However, airlines that employ traditional distribution strategies are limited not only in what they sell, but in how they sell it. For them, introducing new offerings or pricing models can be time- and resource-intensive. PNRs, tickets, and EMDs rooted in traditional technologies are not easily changed and often cannot compete with leaders in modern retailing.
Artificial Intelligence (AI) and the optimal use of data and analytics is revolutionizing the way travel companies connect with their customers. A study published by McKinsey & Company estimated that half a trillion dollars of value can be unlocked by deploying advanced AI and machine learning in various parts of the travel industry – up to $7 in additional value per passenger by the end of this decade – from the sale of ancillaries, optimizing payment and aggregation costs, changing internal processes like pricing and utilizing data, and from new partnerships such as intermodal transportation.
“These technologies are available today. Airlines already can support the modern offer-order and retailing environments and integrate them into their current commerce solutions.”
AI Connects Everything
The availability of data – and the ability to analyze and make sense of that data – underpins every commercial decision. The sheer volume of data that airlines depend on each day is increasingly difficult to manage without automation. Machine learning-based AI enables analysts and leaders to contextualize data and make smarter, more confident commercial decisions based on science.
Machine learning considers each piece of data against every other piece of data to provide the perfect offer to each customer at each interaction. AI can then help airlines better predict future trends and behaviors to make more informed decisions about product, marketing, and sales, continuing the cycle.
This Offer and Order distribution model is now an expectation for consumers.
What is Offer and Order?
Offer and Order management systems are the basis of modern, customer-centric airline retailing. They enable airlines to provide tailored, intelligent offers for each shopping request and translate successful offers into orders as a single source of retailing truth. The airline is in control of the entire construction of the order, both product and price, allowing them to create, distribute, and fulfill any offer through any channel at any time.
Offer management solutions are already being used for airlines’ direct and NDC channels to tailor offers based mostly on rules. More recently, airlines are transitioning PNRs and tickets to orders and order items. Virtually all major full service carriers are at the forefront of this transition to ONE Order.
One Order Revolution
One Order – an industry-led initiative to simplify airline reservation delivery, accounting, and settlement – combines multiple records into a single retail- and customer-focused order, facilitating efficiency and communication between airline systems, airline partners, and other partners.
The vision is to simplify the traveler shopping and travel experience. For example, a traveler can shop for train, hotel, and car rentals together with the flight booking, all under a single order number retailed by the airline or its partner. That order number seamlessly communicates between different partners, facilitates reservation changes, or auto-adjusts all order items in case of disruptions. At the same time, the single order is used for settlement between all parties.
Building an Offer
The Offer Management System is a single source of truth for all offers generated by the airline. Upon receipt of a request, all applicable products are gathered and adjusted based on customer segmentation. The system requests a continuous price for the offer, as well as ancillaries and prebuilt bundles from the RM system and adjusts that price based on the terms and conditions in the product catalog.
The system adds any existing customer or buyer entitlement – free checked bags, seat upgrades, corporate agreements, etc. – and product personalization, if applicable, based on machine learning-enabled customer segmentation from historical shopping and booking data. When personal information is absent, it uses origin, destination, length of stay, time before booking and more. The price is adjusted for taxes and fees, validated, and sent back to the appropriate channel. This process happens repeatedly for every request, every time.
Transitioning to Offer and Order
While new entrants into the industry can embark on the Offer and Order journey from day one, most airlines using traditional PSS must operate under the restrictions of PNRs, tickets, EMDs, and bookings classes. Information exchange with traditional sales channels and partners will be important to support the transition to a retail model. The OMS should communicate with the current PSS, revenue accounting, DCS, and other solutions in the airline ecosystem.
At the same time, modern Offer and Order management solutions must enable airlines to distribute their content to any sales channel, including the traditional channels, and enable airline partnering using ATPCO, GDS, and traditional settlement methods.
Adopting an Offer and Order management system means adopting an empirical approach. Start with a small transition team and choose a partner that can work with legacy systems. Pilot first with A/B testing and analyze the results, including customer experience and satisfaction, revenue uplift, sales conversions, and more. Then, scale over time.
The transition to modern retailing with Offer and Order management has already begun, and it is crucial that airlines and vendors work closely together. Airlines must work with partners who embrace technological advancements that allow for more automation, while vendors must understand that each airline is different and each transition needs to be tailored for the partner. Together, the two can build one of the most important evolutions the industry has seen and execute on the One Order strategy, improving the experience for each traveler.
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