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It is odd to think of Southwest as not being serious about business travel. After all, contrary to popular belief, it’s business travel that has always been Southwest’s bread and butter. Those frequent first flights in the Texas Triangle (Dallas-Houston-San Antonio) weren’t going to succeed on the then-anemic leisure travel demand. It was the business traveler looking for a deal (and free liquor) that brought success.
That original model has held for decades. That may sound good, but the problem is that Southwest has often stuck to its guns and refused to adapt quickly enough over time, if at all, to new realities. That has kept Southwest in a proverbial box that I and others would argue it could have busted out of with different priorities.
Though selling to business travelers has always been at the core of the business, selling to managed travel accounts has not. “Managed travel” in a nutshell is when a company uses a travel agency to handle its corporate travel policies, bookings, and reporting. These agencies have long preferred to handle bookings through the Global Distribution Systems (GDSs) which make it easy to compile everything in one system. That makes reporting and compliance much easier to manage.
Southwest, as most people know, has long held firm to its desire to sell everything direct. That’s fine for unmanaged travel, but it’s a real pain for people who manage travel. Tools have been built to overcome this issue, but it’s still not enough.
Southwest has timidly dipped its toes into the GDS waters, but the effort has been generally useless for those companies where price matters. For example, if I look up a flight from Los Angeles to Nashville in a couple days, I get this on Southwest.com:
But when I look in Sabre, that Wanna Get Away fare is non-existent. The lowest fare is the Anytime $592 fare. It’s not that all Wanna Get Away fares are excluded, but it’s hard to know when a lower fare will pop up. In other words, it’s impossible to rely upon the GDS today, so that defeats the purpose of participating in the GDS.
Even when booking in the GDS, Southwest doesn’t have full participation. Agents can’t see flight availability, and ticketing is handled in a roundabout way that’s different than with nearly every other airline. Southwest segments also can’t be put into the same reservation as other airline segments.
For its best customers, Southwest has created “direct connect” options which feed more fare content into large agent systems. But for smaller customers, agents have to rely on SWABIZ, the old booking system for corporates that recently got a refresh but still lacks basic functionality like the ability to book multi-city flights.
Southwest has long believed that it just didn’t need to play ball. It had become big, and it dominated in many mid-size markets. It could sell direct and still do just as well as if it sold through third parties. Selling through third parties costs money, so why bother? Well, to the surprise of very few outside Southwest, there are very good reasons.
Participating in the GDS makes the airline instantly more visible to corporates. That’s particularly helpful considering the airline has spread into more big markets where it doesn’t have a large share. (Remember Newark?) In those markets, agencies are less likely to go to Southwest.com (let alone SWABIZ).
But even in markets where it dominates, Southwest could still likely benefit from participating in the GDSs more fully. Costs to do so have come down, and the revenue benefits have proven to be large for legacy carriers. Southwest may not have an identical model as those airlines, but it’s long been clear there was benefit to be had.
So it was with great relief when I saw Southwest announce it was finally going to play the game properly. Along with a re-branding from Southwest Corporate Travel to Southwest Business, the airline will now fully participate in Galileo and Amadeus GDSs. Now, this doesn’t help me since I use Sabre, but I have to imagine that will follow eventually. This doesn’t sound like a strategic issue but rather an economic one.
This means agencies can search for and book Southwest in their GDSs just as they do other airlines… when this goes live in the back half of 2020. It will make multi-city bookings possible along with changes and cancellations. It makes Southwest far more attractive to those people actually responsible for booking a ton of travel.
What’s not clear is whether this will actually be full participation or not. On the website, Southwest says it will offer “Access to our everyday low Southwest fares through your channel of choice.” That mention of “everyday” makes me a little nervous. Not all sale fares will be included? It’s hard to know for sure. If it’s not all fares, then that’s frustrating. For consumers, I should also note that this doesn’t mean Southwest will participate in online travel agents like Priceline or Expedia. That isn’t part of the plan. The scope is narrow, but the benefits will add up.
Southwest says that for the back half of 2020 when this launches, it should contribute $10 to $20 million directly to the bottom line. That’s a drop in the bucket, but it’s also probably underestimating the true impact. I’m guessing that this math is what convinced Southwest it didn’t need to pursue this sooner.
It’s a relief to see Southwest finally come around to the reality that GDS participation is a good thing. Agents will be happy, and it should also make it easier for Southwest to expand into markets where it doesn’t have a dominant presence. Finally.
August 19, 2019 at 01:45PM Source: https://crankyflier.com