why airlines need to embrace ‘era of complete retailing’
by Enterprise Ireland JANUARY 27, 2020
“Entering the era of complete retailing is the next frontier for travel retailers, where they are dynamically creating and selling relevant, personalized, appealing offers to travelers. Cloud and machine learning technologies that deliver data driven responsive technologies will be core to this,” says Atmosphere Research’s Henry Harteveldt.
In most cases, the attraction of e-commerce to consumers is the promise of purchasing exactly what you want with ease. But that’s not the case for at least half of airline passengers, according to a research by global travel consultancy Atmosphere Research Group.
About 50 percent of travelers in the U.S, UK, Germany, Spain, and China say they “spend more time than they want to” using digital channels to plan and book flights, according to the report, Maximizing Revenue across the Traveler’s Journey, which was commissioned by Enterprise Ireland, the Irish Government’s trade and innovation agency which also serves as a travel tech investor.
While all industries are treading increasingly delicately around the challenging balance of consumers’ privacy concerns and expectations for predictive services, it’s clear there will never be a “one-size fits all” solution. However, the report makes clear that consumers’ privacy fears are reduced when a company can offer utility as a value exchange.
As the report notes, 70 percent of survey respondents say that they would like to receive personalized offers from travel sellers. And 75 percent note that they are comfortable sharing personal data “if it will help them save money or have better journeys.”
However, despite this, just 20 percent say they receive offers that reflect their interests, travel behaviors, or life stage.
In other words, airline brands and related vendors are far from achieving digital success and claiming the mantle of being the “Amazon of travel.”
“The travel technology world is thriving, but poor digital experiences weaken the joy of travel and weaken the potential profitability of travel retailers,” says Atmosphere Research’s Henry Harteveldt, the report’s author. “Entering the era of complete retailing is the next frontier for travel retailers, where they are dynamically creating and selling relevant, personalized, appealing offers to travelers. Cloud and machine learning technologies that deliver data driven responsive technologies will be core to this.”
The report defines “complete retailing” as the ability for a travel seller to dynamically create, price, publish, and sell relevant, personalized, appealing offers, whether as a proactive “push” or a response to a traveler’s request, and to manage the order’s creation, purchase, payment, and fulfillment across any channel and platform.
“Groundbreaking travel tech companies are already delivering new generations of nimble and responsive technologies that are helping travel sellers to maximize sales opportunities spanning every travelers’ journey and enter the era of complete retailing,” Harteveldt added in a statement.
Silos Separate Revenue Management From Sales
In addition to promoting Ireland’s history of advancing travel growth strategies, a notion we’ve written about previously, the report highlights a number of individual companies pointing the industry in the right direction.
“The travel industry’s demand for market-proven innovative solutions that support the complete retailing agenda is high and are increasingly looking to Ireland’s strong cluster of travel technology companies for the solutions,” says Maire P. Walsh, SVP Digital Technologies, Enterprise Ireland USA. “Reflecting this demand, Enterprise Ireland’s portfolio of travel tech companies had combined international sales of close to €0.5 billion ($550 million) in 2018.”
For example, Dublin-based omnichannel analytics and personalization platform Boxever has been providing its data, AI and machine learning services to airlines such as Emirates, Ryanair, and Volaris. The tech company’s overarching goal involves turning Big Data into actionable, smart data, with a specific focus on improving conversion rates and average order value.
“Among the challenges that airlines face as they enter the era of Complete Retailing is the need to better understand merchandising and retailing,” Harteveldt writes in the report. “Too often, airlines think about ‘merchandising’ without ‘retailing,’ and equate ‘selling’ with ‘retailing.’ Think of it this way: Your product is the bait, merchandising (price and offer) is the hook, and retailing (when and how the offer is presented) are the conditions that get the fish to bite. Confounding an airline’s ability to succeed are organizational siloes and collaboration gaps between what should be logically inter-related teams, namely revenue management and groups such as digital commerce, ancillary management, and marketing.”
In the report’s look at Boxever, Harteveldt noted that the company has studied its past attempts to solve what has proven to be one of the primary obstacles that prevents airlines from crafting a seamless, personalized, and valued customer experience: the persistence of silos between key departments.
Specifically, Boxever has homed in on the fact that revenue management teams are often separated from the groups responsible for selling. So Boxever has sought to position itself as a catalyst for tighter collaboration between revenue management and sales teams to encourage better, more efficient decision-making. One of the issues in achieving a clear personalization strategy is that key stakeholders at an airline need to be kept on the same page.
Demonstrating A Clear Value Exchange
Secondly, even though many airlines remain ambivalent about adopting IATA’s New Distribution Capabilities (NDC) standards, Boxover CEO David O’Flanagan views the program as a technology solution that makes facilitates what he calls “offer targeting” which “gives airlines the potential to better recognize and reward desired behavior.”
“NDC will become a powerful tool to help airlines control their products,” O’Flanagan says in the report. “It’s definitely the way forward.”
Naturally, in order to make personalization work, airlines need to require – not just incentivize – travelers to log-in to carriers’ digital channels, something O’Flanagan says most airlines don’t do. And the only way to convince fliers to do so is to demonstrate “tangible value beyond the home page.”
In defining what such a value proposition might look like, O’Flanagan suggests that airlines offer the best prices and most compelling bundles only to logged-in travelers.
“The customer gets a valued benefit of savings while the business gets data it can use,” Harteveldt states. “Amazon and Booking Group both successfully do this. Both firms require customers to log in to see their orders or reservations, manage their accounts, and more. Amazon offers discretionary discounts to logged-in users, while Booking offers ‘secret deals.’ Both firms’ customers log- in, because they know there are pertinent benefits to doing so.”
The report finds that 23 percent of airlines (and just 17 percent of hotels) say they “adequately invest in innovation for their ancillary product strategies.”
In another example, CarTrawler has carved out new areas for airlines’ to expand ancillary revenue. CarTrawler’s platform allows airlines to offer their customers car rental, private airport transfers, and on-demand ride hailing services at more than 50,000 locations in 174 countries.
Apparently it works. Inside of CarTrawler’s first year working with SWISS and Vueling, each airline saw its car rental conversion increase by 151 percent and 298 percent, respectively.
Here’s how CarTrawler’s data can drive personalized car rental strategies at the right airports, while avoiding wasting finite marketing at the “wrong” ones: As CarTrawler Executive Director Bobby Healy tells Harteveldt, the company’s data “knows no one rents a car at London Heathrow Airport.” At the same time, CarTrawler’s data finds that 40 percent of travelers do rent cars when landing at Miami International Airport.
Armed with that information, CarTrawler can partner with an airline and connect a carrier’s passenger to a taxi or other private drivers at Heathrow, while at Miami its technology can point a consumers to a car hire along with other options, such as on- demand ride hailing.
“The selection a traveler sees,” says Healy, “isn’t random.”