Artificial intelligence and the future of travel retailing

The post-COVID aviation industry is a veritable “Wild, Wild West.” The recent past is no longer helpful in forecasting demand and informing pricing strategies, given the historical impact of the pandemic and the reliance of forecasting models on past performance. The current scenario of pent-up travel demand pitted against pandemic-impacted seat supply is likewise anomalous. In addition, researchers estimate that over 90 new airlines have emerged globally across various service categories, including low-cost, long-haul, ultra-low-cost and reasonably priced premium. As a result, airlines must rethink how they compete for previously loyal travelers. A close review of their technology toolkit provides some answers.

AI and the offers and orders movement

Artificial intelligence (AI) and machine learning (ML) are on the short list of technologies that can help airlines, lodging suppliers and online travel agencies improve their performance and win back customers. AI (the ability of computers to simulate human thinking) and ML (the ability of computers to continuously adapt to data) align with a larger industry movement toward highly flexible technologies that offer intelligence, choice and ease of use.

AI and ML support the offer and order model, which simplifies airline reservation, delivery and accounting systems. Offers and orders aims to replace limited visibility into traveler preferences – and the challenges of selling and servicing personalized offers and managing complex partnership agreements – with the ability to create, fulfill and service more personalized and higher margin content. AI and ML enable real-time data flows to help optimize conversion, reduce costs and forge new partnerships that improve customer choice.

Where airlines are investing their AI/ML resources

While the potential of AI and ML is virtually limitless, airlines have begun to home in on their value across multiple retailing use cases, including dynamic pricing, personalized offer generation and display tailoring. Recently, Air Serbia partnered with software and technology provider Sabre, using its Retail Intelligence products to generate relevant offers by analyzing the airline’s real-time shopping and revenue management data combined with marketplace insights.

“Creating products that better meet the expectations of travelers and help improve profitability for airlines at the same time is more important than ever,” says Bhaskara Rao Guntreddy, vice president of product for offer optimization at Sabre.

AI and ML are also supercharging airlines’ ability to test specific scenarios, like what happens when an airline adjusts ticket prices up or down for a particular seat on a specific route. Using intelligent technology, the airline can infer patterns about who shops and purchases tickets at various price points across multiple channels and apply those learnings and hypotheses in real time. AI and ML also allow airlines to experiment continuously at scale, identifying opportunities across various markets and maximizing revenue potential. As with any experimentation framework, pricing is only one of many variables to test. AI and ML can assess and improve servicing, fulfillment and many other scenarios.

The potential uptick in conversion and scalable, data-based insight only represents a fraction of the benefits of AI and ML to travel providers. Continuous experimentation and real-time feedback give airlines a much more intelligent way to operate a business. The insights that AI and ML deliver - learnings humans could never analyze at scale as quickly or efficiently - enable airline employees to focus on activities that require a “human” touch. They let airlines customize offerings to a specific passenger through small, consistent discoveries that are immediately provable and enable a risk-averse, mission-critical industry to become comfortable with a new kind of decision science.

The value of technology partnerships

Partnerships with travel technology companies help bring innovation to life faster and at scale for travel retailers. For example, airlines with various levels of data-science sophistication can leverage an AI/ML toolkit as their business needs dictate. Acquiring AI capabilities through a travel-technology firm also helps travel providers address some of the challenges and requirements of implementing AI and ML. Examples include testing new AI algorithms in a limited environment with clear KPIs, evaluating the quality of data needed for AI testing and assessing AI bias. Travel-technology partnerships also help employees, customers and regulators understand the benefits of AI and the importance of choosing the right AI and ML platform.

Sabre's AI and ML solution uses Google Cloud, leveraging the technology leader's computing power, reliability, security and advanced capabilities. Google’s Vertex AI, for example, provides fully managed ML tools for any use case. For example, when an airline wants to run an experiment on whether loyal customers would be more willing to upgrade their cabins if offered a specific incentive, Sabre can run the test using an existing platform, practices and optimized infrastructure.

Dealing with the pain and pleasure of travel

The future of artificial intelligence and machine learning in travel retailing is bright. Better targeting and engagement with customers will manifest in enhanced pre-travel experiences, that could include destination, route and travel date recommendations, alerts for preferred destinations, price predictions for desired itineraries and virtual travel planning assistants. Day-of-travel enhancements could include loyalty-based seat upgrade offers, optimized user experiences on airline websites and apps, flight rebooking due to delays or cancellations and streamlined check-in, boarding, customs and security checks via facial recognition and biometrics. From a post-travel customer experience perspective, potential enhancements could include outreach to customers who have experienced travel disruptions, assistance with claims, refunds for lost items, special offers on frequently traveled routes and rewards program problem resolution.

AI-enabled chatbots will be able to provide customers with increasingly sophisticated levels of service and alleviate much of the pain travelers feel today. While the travel industry has used robotic processes for years - for instance, by checking for lower fares or better seats - intelligent bots will go beyond chatbots that emulate human conversation to bots that act independently on behalf of travelers, performing such tasks as planning, booking and managing entire trips using autonomous agents . More AI-enabled robots may also be on the horizon to assist travelers with in-airport services, such as flight boarding, seat changes and rebooking missed flights.

What’s happening now is only the tip of the iceberg. The application of AI and ML is the first proof point for an industry charting new territory. Nevertheless, leadership, broader industry momentum and strong technology partnerships are giving airlines and other travel providers the choice, intelligence and ease to retail like leaders across other verticals and remain competitive in a volatile and complex world.