Brian Lewis, Chief Technology Officer at Datalex and a highly experienced technology leader with extensive domain knowledge, speaks about the most prominent trends in the travel technology industry in 2023.
- Real Tech Modularity = Real-Time Opportunity
Technical modularity within a sovereign ecosystem will become increasingly important to airlines heading into 2023. To date, airlines have been burdened by legacy systems that perpetuate outdated processes that have been in place for decades. Research from Datalex conducted with over 150 airline executives in late 2022 (the detailed research report will be launched this month) reveals that this is very much front-of-mind for airlines with an overwhelming 9 in 10 (92%) airline executives believing that their underlying PSS system is significantly or somewhat hampering the simplification of order management and ease of booking. The absence of any true real-time element is preventing airlines from becoming the truly modern retailers they want to be.
Modular technology is the most important steppingstone that airlines can take to move towards a unified offers and orders state that will better equip airlines to adopt a ‘retail mindset’. Datalex’s Order Management System (OMS) is an example of real modularity which underpins all airline channels and enables true omnichannel retailing in real time. A modular ecosystem, that is not restricted by archaic processes, means that airlines can be more in control of their own technology, their own retailing and their own ‘distribution destiny.’
- Mind the gap - stark perception differences between airlines and their customers
Unwittingly, perhaps one of the factors that contributed to the travel industry’s delay in catching up to other e-commerce sites, is the oxymoron of those who ‘know too much.’ The travel industry is full of experts and industry stalwarts who know the business inside out, and because of this there hasn’t been much input on learnings from other industries, giving credibility to the saying that 'knowledge = inertia'.
Our Digital Airline and Airline Retail Priorities report for 2023 highlights the gap that exists for travellers and the corresponding lack of urgency that airline executives have. Just 1 in 9 (11%) of 10,000 end-travellers surveyed believe airlines are ahead of other e-commerce websites like Fashion, Amazon etc. in terms of modern online retail, suggesting they do not view airlines as particularly innovative. However, on the other side of the coin, almost a quarter (24%) of airline executives believe they are ahead of other e-commerce websites, 17% believe that they are at least on-par, and just 16% think they are behind. These finds indicate that airline executives are hugely underestimating the reality of the perception gap that exists between airlines and their customers.
- Dynamic AI - AI will permeate across the industry
AI is set to permeate far and wide across the travel industry in 2023, both from a technology adoption perspective and culturally within airline organisations as well. This shift however is not only about the ability to dynamically bundle and price beyond static fare filings, it is also about using AI/ML to deploy intelligent caching.
This intelligent caching capability is especially important to address volume issues for example. IATA predicts that the NDC look-to-book ratio could reach as high as 10,000 to 1. The strength of NDC and direct sales is undoubtedly in the ability to dynamically price and yield manage. It’s clear however that with the amount of traffic predicted, systems will struggle to return real-time pricing at scale. A dynamic cache powered by AI has the power to circumvent volume concerns and deliver the optimal price at scale.Such a dynamic cache can oversee volatility of pricing, patterns of demand, seasonal fluctuations, socioeconomic factors, pent up demand, and other features to return the most appropriate price. If IATA is correct in its booking estimates, the use of “dynamic AI” will become paramount in creating a responsive and dynamic cache that can enable airlines to capitalise on the revenue opportunities available in the indirect channel.
On the cultural adoption side, it's clear that 2023 will bring with it more acceptance of AI-powered pricing within airline organisations and the power of AI to enhance revenue management as opposed to replacing it.The flexibility and a la carte nature of AI-powered pricing allows revenue management professionals to put all their time and energy into pricing the markets that matter the most while AI prices the rest. This drives greater human output and a more symbiotic relationship between the technology and the revenue management team.
- Payment innovation and the emergence of DeFi
Payment innovation is set to be a significant player in 2023. Decentralised finance (DeFi) is an emerging innovation that challenges the centralised banking systems as they are known today and focuses on eliminating the fees that banks and other financial institutions apply for using their services and promotes the use of peer-to-peer transactions.
Taking a simplistic view of any commercial transaction, the moment at which you want to remove friction, is the point of exchange of value. The instant that someone is going to pay for goods or services should be the most painless point of an interaction. This is the goal of all ecommerce sites: one-click payment, swipe to complete, confirm with your fingerprint etc. To facilitate this level of convenience, organisations must collect and store data about their customers. DeFi allows individuals to complete transactions securely without disclosure to a third party.
With 90% of payments in aviation coming from card payments, it’s clear that this is the most dominant and reliable form of payment in the industry at the moment, but our own research with travellersdemonstrates that alternative methods are gaining traction. This shift reiterates the overarching theme of technology and how technological innovations are so intrinsic to advancement in payment solutions. Airlines must recognise the opportunity so that they can increase the payment value chain by making it more convenient, reducing costs associated with traditional payment methods and increasing revenue with alternative forms of payment.
- The Trusted Data Economy
2023 will also see a possible pivot point for the Trusted Data Economy. The Trusted Data Economy has its roots in Self Sovereign Identity and self-dentification credentials which calls on the benefits from a decentralised identity foundation. The ability for an individual to confirm who they are based on self-dentification credentials - where they have travelled, how they got there and where they stayed – without relying on a third party for confirmation - is tied to SSI and the work being undertaken by groups such as DIF.
Cross-functional loyalty will be an essential part of the data and payment landscape. The acceptance of Data Objects such as Verifiable Credentials allows for everything from cross-vertical loyalty programs to truly frictionless travel. The prerequisite for cross-functional loyalty usage use of tried and trusted data with a trusted data ecosystem. Industry-wide loyalty will be the next horizon of true seamless customer experiences.
All of these trends are part of the conversation: but some more than others will start to form the context and framing of how we think about technology and travel in 2023 and beyond.
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