Amtrav CEO Jeff Klee sheds light on New Distribution Capability (NDC), a transformative schema that's changing the way we travel. NDC is reshaping the landscape of airfares, third-party technology, and personalization in unexpected ways. We also talk about Southwest's unique (and longstanding) stance on third-party sales, and how NDC elevates the importance of price assurance tools in hotel distribution.
https://www.amtrav.com/
https://www.linkedin.com/company/amtrav/
Amtrav CEO Jeff Klee sheds light on New Distribution Capability (NDC), a transformative schema that's changing the way we travel. NDC is reshaping the landscape of airfares, third-party technology, and personalization in unexpected ways. We also talk about Southwest's unique (and longstanding) stance on third-party sales, and how NDC elevates the importance of price assurance tools in hotel distribution.
https://www.amtrav.com/
https://www.linkedin.com/company/amtrav/
Hi everybody, it's no Show. This is Matt Brown, joined as always by my co-host, jeff Borman. Amtrav CEO Jeff Klee developed and sold his first video game at the age of 13. In college, he and a buddy got a crash course in the intricacies of the airline business while planning their own backpacking trip and later decided to use that know-how to help others save money on airfares. It was first known as 1-800-CHEAP-AIR. We know it well, founded out of a University of Michigan dorm room in 1989 and soon after, cheapaircom was born, then later Amtrav, which serves almost 400,000 travelers annually. What can I say about Jeff? He loves his wife, he loves his two kids, he loves his golden retriever, he loves the LA Dodgers. He is essentially our Captain America of travel and he is coming to save us from paying too much to fly. Jeff Klee, welcome to no Show.
Jeff Klee:Thank you and thanks for that trip through time. I gotta say that video game when I was 13 was not impressive. Trust me, if you could see it now, you would not want me on your show.
Matt Brown:You should just tell people it was Defender. Oh yeah, I made Cupert when I was a kid. First off, you are CEO of Amtrav. What is Amtrav?
Jeff Klee:Yeah, amtrav, we are a business travel solution where we're going all in one solution, meaning you get both the technology and the service behind it. We serve two masters the travelers. We give them a real consumer grade experience, since that's a word that everyone in the industry likes to use. It's really easy to use to book your travel, to organize your trips. But at the company level we provide all sorts of features like visibility and savings and control that companies care about. We try to strike that balance where we can make both the CFO happy, but also the road order.
Matt Brown:Amtrav is also intimately familiar with the hottest acronym in travel NDC NDC enabled solutions. People in travel tech know what it is, at least they think they do. It stands for new distribution capability, in your words. For people who've never heard of it, what is it exactly and in what way is it changing how we travel?
Jeff Klee:Yeah, I mean in technical terms it's really just a schema. It's a way airlines communicate with third parties. The legacy way is called edifact, which has been around since forever. The airline will send data in a fixed field. I'm going to oversimplify this, but just to make it clear what I'm talking about. Let's say they might send 20 characters back and the first four the flight number, and then the fifth through sixth are the airline code, then the prices, like position seven through 10. It's really rigid, really fixed.
Jeff Klee:The industry has been kind of squeezing everything they can out of edifact for all these years. As airline sales have become more complicated. Ndc tries to give you a richer way to communicate that's not as fixed, that's a lot more open. It's XML, which is also extremely old, but not quite as old as edifact. But it allows more flexibility If an airline wants to offer a bundle where there's Wi-Fi included in this, or we've got, instead of just one low fare, we've got seven different fare brands. Having that more free flowing structure makes it much easier to communicate those offers and that information to travel sellers.
Jeff Klee:I think NDC also how airlines sometimes conflated with airlines use the term modern retailing and just how can we make the experience better for travelers and see more, have more choices, have richer descriptive content like images of planes and being able to add on a bag or Wi-Fi or a lounge pass, whatever it is.
Jeff Klee:An airline wants to sell All of those things. It's almost impossible to do those through legacy and effect. That's why you have a real problem right now where at least a problem for people like me and companies that use corporate travel services, where sometimes there's a content gap or what you see on the airline sites or the supplier sites is a lot richer, there's a lot more options to choose from than you get on your third-party booking tool. That puts the traveler and the company at odds, because the company wants those things the savings, the policy, the control, the visibility. The traveler just wants a really easy experience and they want to see all their options and be able to compare. Nbc is kind of our I've called it like the last best hope to get the best of both worlds where we can in a third-party environment where a traveler can comparison shop across multiple airlines but get all the richness that they would get if they're going to an airline direct site.
Jeff Borman:Is the intent then, from the airline, the supplier side, to monetize more of those downstream ancillary items? You mentioned bag fees and being able to select your seat. Is the point of NBC to monetize that in third-party environments?
Jeff Klee:That's absolutely one of the points.
Jeff Klee:Airlines I mean Delta is very public about this, but all the airlines will say this and they're leaving a lot of money on the table because in their direct channels, on their websites, they sell and customers attach a lot more of those things than when they booked through a third-party, simply because those are offered. Some people kind of ascribe some sinister motive for the airlines of this, but it's really a win-win because if I'm a traveler, if I can get an extra legroom seat for 50 bucks. I may not want it, but I want to know the options there. If that's an option, I want to see it and then let me decide if I want that. I don't want to be precluded from buying that just because my booking tool doesn't have access to it.
Jeff Borman:So thinking in customer segmentation and this might be a bit of hotel think in segments. But how does NDC impact different kinds of customers differently? So you have a retail leisure buyer who could be loyal to the airline or a specific airline. You could have a retail customer traveling for a leisure who is not loyal to an airline. You have business loyal to a program but they booked through a TMC for business. Or a business traveler not loyal, no TMC. You've got all these different combinations of purpose and channel. Does NDC impact those differently?
Jeff Klee:For leisure travelers who just want the lowest fare. There are lots of airlines worldwide who don't offer their lowest fares, like the basic economy fares, in non-NDC channels. I mean, almost all European airlines are at that point.
Jeff Klee:However, if we just talk about that, we're really missing the bigger picture. Because some of the NDC haters will say, oh, this is just about basic economy and corporate travelers don't care about that anyway. That's absolutely not true. Yes, the basic economy fares are excluded from non-NDC channels, but so are lots of other fares, including the lowest first-class fare. So it runs the gamut from economy all the way up to premium, what I hope to deliver.
Jeff Klee:The reason we've embraced NDC and we want to get that best to both worlds, where we can give you all of those options with all of the richness that you would get on supplier side, but to do it in a comparison shopping environment where you can be comparing multiple airlines at once. You can mix and match. If United has a more convenient flight going out but American has a more convenient flight coming back, you can book them both in one place on one itinerary, from one website. So the promise of NDC is to get you at that level where you're not sacrificing anything by booking to a third party and in fact, you're getting the benefit of having all of the suppliers in one place.
Jeff Borman:This has some pretty serious impacts. Right Way more hassle. Well, let me ask you the question instead of telling you. Really I'm not sure. Are there serious impacts in terms of what this means for customers? The pricing thing I think we've kind of covered that You're not gonna get that most basic, most entry-level price. You probably then do have a richer set of add-ons and clarity with content. That sounds good. But I've heard some rumblings that changes in reservations made through a non-direct channel, ndc, forces those changes to go back to the supplier far more cumbersome and a lot more data issue going back and forth across platform stuff. Is there truth in that? Or is that just coming from voices in left field that hate NDC?
Jeff Klee:It's a lot of that and it depends on how I mean.
Jeff Klee:The problem with legacy corporate travel solutions is that they use a lot of different third parties and they like those third party systems even though they're old, and they wanna keep using them in the way they've always used them, and their lack of willingness to rethink their processes and flows is really limiting what they can offer. But by that I mean specifically if you're trying to deliver an NDC solution and you're using a GES, a global distribution company, to access the content, and then you have there are these what are called mid-office like quality control systems in the middle that there are a bunch of players in that space. Most of them are using technology that's 20 years old. And then the legacy TMCs have these back office accounting systems that also, in order to get your reporting right and your duty of care right, all have all of these. There's this ecosystem that has existed forever, it has not modernized, it is very rigid, it is very old and dated and it doesn't support new things. So if you the airline NDC APIs, if you connect, directly to an airline like WeDo.
Jeff Klee:Yes, you can service and change tickets, and in fact it's way better than if you were to do that through kind of these old systems with which have serious limitations around changes. But if you're trying to kind of shoehorn I mean, what a lot of travel management companies are saying is, like sure, we want NDC, but we don't want to change a thing in terms of how we get NDC or how our processes work. And if that's your attitude, yeah, you're gonna find a lot of trouble or a lot of heartache. That's gonna really end up bowing up to your travelers. That that's not. The whole point of NDC is to give us an opportunity to finally rethink the way we do some of these and I mean this industry some of the processes and workflow are literally from the 90s. I mean, I've been doing this since 1989. There are things that have not changed a bit since then and it's so past time for someone to really shape things up. And NDC is, I think, kind of the kick in the ass that the industry needs badly.
Jeff Borman:Yeah, coming from much more of the hotel side in my life the way OTAs and brand suppliers so let's call it Expedia and Marriott just because they're the big boys in the US, right? One of the critical things between those is not just the passing of a reservation from the OTA to the brand reservation system, but the data, of course. Data is the new oil, right? If you have customer insights, you can do almost unlimited things with it in your marketing and your customer acquisition strategies, and so a lot of things that don't get passed from an OTA booking to a hotel reservation system is rich customer data. Is there a play that goes in NDC's development and launch along those lines?
Jeff Klee:Yes, I think it's fair to say that the airlines want more access to data and one of the objectives of NDC is to be able to support personalized offers. So you can send in NDC unlike in Edifact when you're shopping for affairs you can send a frequent flyer number, a loyalty number, and the airline, theoretically, could tailor and operate. I know, jeff, this is you shopping, so I'm going to give you this offer based on what I know you like or what I think will be attracted to you. So you can also create offers based on the company that I work for. So we can pass a corporate ID.
Jeff Klee:Now, the corporate ID, in fairness, you are able to pass those in Edifact too, but the difference is in NDC the airline has a much greater ability to offer bundles and ancillary. So in the Edifact world, yeah, I could say, okay, you work for IBM, you get 10% off. Now, in an NDC world, you can say you work for IBM, you get a free Wi-Fi, you get an extra legroom seat for free, and so on. So it's much. Their capabilities are much richer.
Matt Brown:That's a nice segue into looking forward over the next 10 years. What do you think the biggest existential question the travel industry will face in that time?
Jeff Klee:Well, I mean, this is a little bit of a cop out, but I don't think the travel industry has an existential question. I think the travel industry is going to keep growing and growing and growing. I mean, I know there's all this talk about sustainability. We've got to travel less, and you know that I'm not trying to downplay that issue. But we will solve that issue the way we solve every real problem, with a technological solution. We will not solve that issue by forcing behavioral changes. People are not going to travel less. People are thirsty for travel. That will continue to increase, as it always has. So there will be more travel, not less travel.
Jeff Klee:If I look at my space in the travel industry, I think there is an existential threat for sure, and that is third party selling Like will we and I'm not saying just Amtrak, but all of us who are essentially intermediaries can we find ways to provide enough value to both sides of the equation, both the airlines and the hotels and also the companies and travelers, to create a sustainable model? And I think, if I'm completely honest, we provide a lot of value to travelers and companies. We and I'm saying collectively again, not just Amtrak we have not provided enough value to the supplier side, and that's why you have airlines like American and others openly questioning how important third party distribution even is. So I think this is something that I'm really focused on is how can we work better and pay more attention to the other side of the equation so that there is a sustainable model going forward, because otherwise, I mean, you could imagine a world where everyone just has to go direct to suppliers for everything they buy.
Jeff Klee:I don't know if it's a good world for travelers and it's certainly not a good world for companies. But if airlines or hotels decided, hey, screw it, we're going to just make everyone come direct, they would do it. People are going to stop traveling because of this. So that's the existential threat to my segment of the industry, but I mean as far as like an existential threat to travel. There's no existential threat to travel.
Jeff Borman:You give that example. And yet, right there, I think the third largest, maybe fourth largest carrier is Southwest and they're the classic, only example in all of travel that I can think of that took that stance. It says everybody books direct period. How do they? What's their take on NBC?
Jeff Klee:Well, that's not quite true, In fact. I mean, we have a great relationship with Southwest and in fact I would say Southwest has and we connect directly with them. We don't use the GDS. They have the best, most functional API that someone like us can connect to.
Jeff Klee:And now what they don't do is allow third party sales in the consumer markets. You won't see them on Expedia, but they're actually a great corporate partner, not just to TMCs like us, but also to corporations. They've done a really good job reaching out to companies, so we've got nothing but great things to say about Southwest and how they go about distribution.
Jeff Borman:I admire how, through all economic times, they've been through it all right. Southwest started in the 70s. They have seen it all and they've stuck their strategy. Whether it works or not I'm not equipped to say, but I love that they have drawn a line in the sand and said this is where we are, this is where we're going to stay. I mean, you know what's great about Southwest.
Jeff Klee:So they have. They're one of a few airlines who all their fares are one way fair If you want to go, you know I'm in LA, if I want to go LA to Vegas, and it's, you know, $100 going and it's $120 coming back and my fair is $220, which makes it really easy when you're shopping on a website to pick I want this flight going, this flight coming back. That sounds obvious, but the legacy carriers, they don't price that way Like the round trip price. The price of your round trip depends on, like, what are you combining this outbound flight with? And I can't even I don't have enough words to say how much complexity that adds and how much like processing power it adds. And I mean, instead of doing, like you know, 200 calculations, you're doing literally 200,000 to figure out how to.
Jeff Klee:I mean the airlines American, united, delta in order to price their own website, they're contracting with Google. They go out and Google. They say Google, figure out this price because it's too complicated. We don't have the computing power to figure it out when someone does a search on, you know, one of their dot com sites. So you know, southwest has none of that and it makes it really simple. It's really easy to change. You know you're changing a $50 ticket. You have a $50 credit. It's that simple. So I credit to them. They do what they do very well.
Matt Brown:You're edging towards one of our favorite topics of the year. What are your views on a travel's favorite subject of 2023? One of the favorite subjects? Skip lagging.
Jeff Klee:It's fun to read about Skip Lagin. I'm sympathetic to both sides. I completely understand the airlines point of view that they're not. If you're buying a ticket from wherever LA to New York and you stop in Charlotte, they're selling that as an LA New York light and that's based on the market for LA New York tickets.
Jeff Borman:But if you're a customer.
Jeff Klee:You're told well, you bought an LA to Charlotte and to Charlotte to New York flight, but you're not allowed to not use the Charlotte to New York flight. You're never going to get that. I can try to explain this for seven hours or so, but I will never convince them that it makes sense to tell them that they can't not throw away that ticket. I mean, it's a cat and mouse game. I think we don't encourage it or facilitate it. We value our relationships with the airlines. I don't know that I would want to build a business around it, but as a traveler, it's really hard to tell travelers that they can't.
Jeff Borman:I have a question on price assurance while we're in that area. Now I've heard and tell me if it's true or not that NDC bookings are not going to be considered on price assurance tools. As the hotel distribution guy, I find this brilliant if it's accurate. Suppliers of any kind want full control over the pricing and inventory and you rely, as a supplier doing your pricing, on having better market knowledge than your customers do. I know when I'm going to fill and when I need to offer a discount. The retail parallel. If I know, there's a 25 percent sale on BMW next weekend that's going to suppress BMW sales at the dealership this weekend. Having that information is critical to the supplier. Does NDC impact this properly? Does it take the trip? Bams and the hoppers who base their consumer promise on uncovering that knowledge? Don't book now. Book in 10 days or we will automatically continue to reshop for you and if it's lower, we'll just rebook it. Do third-party sites that operate on that promise have a future in an NDC world?
Jeff Klee:Well, there's an issue there that has done anything with NDC and that is that, and specifically airlines. I haven't heard as much about it on the hotel side, but airlines don't like you to reshop period, whether it's NDC or Edifac, and an American has specifically prohibited it this year. I know other airlines are also considering taking a similar approach, so I suspect that that won't be something that you're allowed to do, whether it's through NDC or Edifac. I mean, technically, you could do it through it. You could reshop through NDC just like you could through Edifac. There's no technical reason. But there is one important difference between Edifac and NDC and that is that in an Edifac world and this is why I like NDC so much in an Edifac world it's up to basically the travel agency, or usually with help from a GDS, to figure out what to charge.
Jeff Klee:The airlines don't quote a price per se for a specific itinerary. They give them tools. They say here are all the fares that we're filing, that you get like thousands of published fares, and here are rules around these fares that you would use to figure out what to actually charge. And here's our availability, which is like a complicated mess of like booking codes. And they say so you figure out what to charge and if you get it wrong we'll send you a debit memo for the difference. And that's the way the world has always worked. And when it comes to changing a ticket, we TMCs again sometimes with help from a GDS have to go through that process. Well, it says here that you're allowed to change and like. The rules of changes are like 10 pages long, like nobody reads the whole thing, and if you get it wrong you get a debit memo.
Jeff Klee:In an NDC world, the offers, whether it's a change or an initial purchase, come from the airline. The airline says here's an itinerary, here's the price, do you want it or not? Again, it seems so obvious but that's never the way the industry has worked. But I mean where I'm going with that tie to the reshopping. That means that theoretically, you as an intermediary have less access to data. You don't have necessarily the building blocks, the tariffs and the availability that you could use in your models to try to predict what's going to happen to airfares next week or a month from now. There, theoretically could be an impact that way. But I think, more importantly, the airlines just don't like it anyway, so they're probably not going to allow it for much longer.
Matt Brown:It's time for the mystery question. Jeff, if you do find time to relax when you're on a flight, how do you relax best? Are you a movie guy? Are you a book guy? Game guy? Do you just sleep the entire time? What is your secret to peaceful air travel?
Jeff Klee:Well, first of all, the advent of in-flight Wi-Fi completely ruined that for me. Forever. Flying used to be like I used to love flying, because it was the only relaxing time where I was completely disconnected. Now it's like the opposite, but then the whole flight is the internet's going out there. The internet's too slow, and so it becomes even more stressful If I'm lucky enough to be on a flight where the Wi-Fi is not working or it doesn't have Wi-Fi. After the first half hour of stressing about the fact that I'm on a Wi-Fi, I think to answer your question for sure. What I love to do on a plane is watch movies that I've already seen before, so I can be like kind of watching it, kind of sleeping. I mean, I'll watch wedding crashes on planes like probably 8,000 times, so a movie like that that I don't have to completely pay attention to is perfectly relaxing.
Matt Brown:This has been fantastic, Jeff. Thank you so much for taking time.
Jeff Klee:Oh sure, no problem. Thanks for having me.