New revenue streams for Airlines: how 3rd Party Ancillaries and Destination Content are gaining ground
Growing your booking value in the airline industry involves increasing the revenue coming from ancillaries. Airlines have been exploring different ways to do this. Fly with an airline today and you’ll find additional items you can purchase; from luggage, seat selection and car rental before flying, to additional extras during the flight like food and duty-free products. These ancillaries imply a wide range of the total revenue from an airline. According to Medium, from up to 47% in the best performer LCC for example Spirit, to a very good 14% in the case of United Airlines. which it is encouraging, but still there are relevant revenue opportunities in local activities and destination content. The travel industry, and especially online travel agencies, have shown an increased interest in this sector because it is in fact, a multi-billion-dollar business. TripAdvisor, Ctrip and Booking Holdings have all partnered or acquired tours and activities technology providers during the last year. Expedia also announced in its annual report that it is focusing now in growing its local activities business. In 2017 it reported that Expedia sold over 500 million in tours and activities revenue from their Local Expert brand.
Third party ancillaries are, without a doubt, an excellent opportunity for airlines; however, before making any moves, companies should focus on developing a strong strategy taking into consideration destination marketing and customer experience.
implement a destination content strategy
With customers acting more like Millennials and becoming less loyal to travel brands, airlines need to reinvent their offer to provide more value for the trip. Customers’ interests go beyond being transported from point A to B. Carriers are more likely to influence travellers by introducing a message that involves the experiences available at the destination. Therefore, the idea of ancillaries shouldn’t be dissociated with airlines’ primary product; in fact, it should be seen as a crucial and attractive piece of the whole cake. But when focusing on experiences, the offers need to be entirely innovative. That’s because travellers are tired of the typical tours and activities; they want to experience something new.
Imagine that an airline knows that John is going on a business trip again. He usually books his flight, attends his meetings, and even when he has some extra time to enjoy the city, he has no idea if there is anything interesting to do, so he goes to the hotel and flies back home the next day. This time, imagine John receiving an email or a push notification from the Airline App with a message saying: “John, discover what is happening in London during your stay” or “John, enjoy a drink in one of the best rooftop bars in London” While browsing the offers, he finds that near his hotel there is a live jazz concert (he loves jazz), so John finally books a ticket and enjoy the concert. What a different experience!
If the airline offers the flight and includes some personalised suggestions such as a hotel based on the customer profile, a unique tour and activity, a cosy restaurant, and some events going on during the travel dates, that will probably make customers remember the brand and consider repeating the purchase on the next trip. A great strategy to improve customer engagement and brand loyalty, while generating more income.
Another idea is to use content for marketing and retargeting campaigns. Customers are willing to embark on unusual experiences if it matches the day of their trip. Airlines can take advantage of the destination content to drive traffic to specific destinations and routes, or to encourage users who are undecided to finally book through a flight promotion and the excuse of an event that matches the previous flight search. Content helps captivate the customers, and it can be compelling when combined with the overall strategy.
Besides, giving travellers the opportunity to be rewarded can be a great strategy when trying to convert. Frequent flyer campaigns often result in customers repeating a purchase. However, airlines do need to overcome some complications when trying to go for the tours and activities market. Airlines have got a great opportunity because of two reasons: 1) They have direct contact with their customers through their APP, and 2) They know where the customers are, and when they are coming back. According to a Phocuswright report published in 2017, while spending on tours, activities, attractions and events accounted for 10% of global travel revenue, more than 80% of those bookings were still being made offline, and more than 90% of the bookings were made two days or less before the trip. With this in mind, it is logical to make an automated proposal to each traveller, with ideas on what to do at the destination. To add real value the proposal has to be very wide, including all the potential interests of the end user (restaurants, places to visit, tours, etc).
Destination content technology providers are gaining ground, helping airlines solve the need of customers to have one single reference site to plan their trip and book experiences. These providers often offer an all-in-one solution integrated in the Airline’s digital channels and touchpoints, including not only the usual travel guide but also up-to-date events and bookable content from different 3rd parties and airline’s partners.
Ease of use, real value for your customers and a lean integration are a must. Look for the best in the market and take the decision, you will not regret it.
By Íñigo Valenzuela. Smartvel