Amadeus’ distribution chief Holger Taubmann speaks to WIT about “loyalty machines”, Lufthansa’s Direct Connect strategy, RyanAir’s Amazonian ambitions, Accor Marketplace’s aspirations and swimming with the big sharks.
For all the talk about direct distribution, and suppliers wanting to go direct, truth is, there is more disintermediation going on than ever before.
Holger Taubmann: Stick to loyalty machines. (Image credit: Amadeus)
Holger Taubmann, senior vice president of distribution for Amadeus IT, said, “All the talk about more and more disintermediation in the US is not true. Direct airline has stopped.
“In Europe, the rise of low cost airlines has led to disintermediation but in the new world, 70% of airline direct business is disintermediated because they go through search.”
He explained, “Fifty percent of global distribution is direct – that’s three billion pax – but the way they end up on an airline website is 70% disintermediated. And with customer acquisition costs becoming more and more expensive, suddenly the traditional way of intermediation is becoming more interesting.”
He said that traditional travel agents, which form Amadeus’ core customer base, are like a loyalty machine. “New segments are very expensive to acquire and they are not very loyal. Working with travel agents, you have a lower cost of acquisition.
“So, to me, physical travel agents have become even more important than before.”
Why then is Lufthansa pursuing a direct connect strategy and potentially jeopardising its “loyalty machine”? Taubmann said, “Lufthansa is facing a real competitive threat. They have to reinvent themselves. We can’t criticise them, they have to manage costs. It’s a bold step though to say, I want to become a retailer and have one-on-one relationships with my customers.
“Do they have the capacity to be a retailer? That’s the interesting question. You need leading edge technology and you are entering the world of giants – I hope Lufthansa understands what they are getting into.
“It’s not an easy game to become an online retailer, it takes a lot of learning to get there. Getting the technology right is one thing – but you need a business model and people – and it’s a marathon.”
RyanAir too has declared its intention of becoming the Amazon of travel. Said Taubmann, “They already have a large piece of direct business and so they are not endangering such a huge part of their business but they are moving from a quiet river into the open sea – and there are big sharks out there.”
Having said that, he understood that “people have to try new business models, you can’t accept these guys in front of you.”
Ditto with Accor Hotels which is developing Accor Marketplace to feature non-Accor hotels. Said Taubmann, “You have to ask yourself, am I doing it in a bold enough way? The consumer is smart – you can’t just have your inventory and one or two other hotels.
Physical travel agents have become even more important than ever before, as travellers need expertise constantly. (Image credit: kzenon/iStock)
“People want an efficient comparative display of true neutral offerings. The consumer is absolutely not ready to compromise on their freedom to choose.”
For traditional travel agents to compete in this new world, technology is not the key, he said. “Airlines want to be technologists, technologists want to be retailers, traditional agents want to be online – the key is to focus and create loyal customers.
“Travellers are constantly in need of expertise. For example, in Germany, there is a specialised travel agent on Madrid and he can tell you things you can’t find easily on the Internet.
“Online gives you access to global demand but it’s costly. Some of our more successful customers have a small share of online business, they want to touch the customer. The one who is winning knows what the customer wants, and responds to that.”
Like its travel agent customers, Amadeus is also transforming. While its core distribution business is still growing – bookings were up 10% in the first six months of the year despite the “many areas of mixed bag of news – the entire company has grown due to its expansion into other lines of businesses, such as airline IT and airport IT.
“We have been very successful in airline and airport IT and we have a clear diversification strategy driven by innovation, both organic and by acquisitions.
“We have been able to leverage our core competence of traditional distribution. We have made mistakes, sure, but we have had to learn the hard way and had to focus on one-on-one relationships. Yes, we are undergoing digital transformation but we also recognise we have very loyal customers.”
• Featured image credit (shark attack): Jrcasas/iStock
