November 2017, Amsterdam
Ancillary centre stage as interest in tours & activities accelerate
Co-branded partnerships like the one between KLM and GetYourGuide are a sign of the times
From artificial intelligence to automated baggage handling and in-airport beacons, the Dutch airline KLM is no stranger to innovation.
It even has a dedicated ‘journeys of innovation’ page where it invites start-ups, and even established companies, to get in touch that can “help us improve”.
This commitment to innovation is what attracted GetYourGuide to choose KLM as its most recent airline partner.
“KLM is at the forefront of what we consider to be the second phase of ancillary revenue,” says GetYourGuide COO Tao Tao, who launched the company eight years ago.
Typically ancillary has been all about baggage and seat upsell, but more and more airlines are investing in the next phase of value-added services.
However, while driving ancillary revenue it is becoming increasingly important, there remains room for growth. As a report from the London School of Economics on broadband connectivity aboard airlines highlights, ancillary revenue is still in its infancy.
Typically ancillary has been all about baggage and seat upsell, but more and more airlines are investing in the next phase of value-added services
According to the report, today 3.8 billion passengers fly annually but only 25% of planes offer some form of broadband on board, and that is often of poor quality with patchy coverage, slow speeds and low data limits. The LSE, however, argues that “by 2035, it is likely that inflight connectivity will be ubiquitous across the world” with broadband-enabled revenue for airlines reaching an estimated $30bn. Overall, continues the report, a total market of $130 billion of additional revenues will be created, not just for airlines but also content providers, hotel and car suppliers, advertisers and more.
Noting this opportunity Tao Tao says: “Airlines have a huge captive audience before and during the flight but not while their customers are in-destination. So it makes a lot of sense for us to partner with airlines to bring memorable in-destination experiences to their customers”.
Co-branded partnerships like this – and there are others like the one between Air France and Ceetiz – can drive incremental revenue for both companies. They could even help customers associate positive travel experiences with the airline.
GetYourGuide, which will be speaking on a panel in Amsterdam about the benefits of such digital partnerships, already works with other travel brands like Emirates, easyJet and Accor Hotels as their premier tours and attractions partner.
According to Tao Tao, however, what is unique about the KLM partnership is the technology innovation behind the integration.
“We’ve integrated our inventory so that KLM customers can book our tours and activities directly on a wide range of digital channels: KLM’s website, app, in-flight portal, CRM emails and even its Facebook Messenger channel,” he says.
According to a recent EyeforTravel report – The Changing Face of Tours and Activities – this is a market currently worth at $200bn a year and companies operating in this space are experiencing rapid growth. Indeed, there has been a raft of announcements in recent weeks, which prove there is everything to play for.
Earlier this month WithLocals, a peer-to-peer market place for ‘personalised’ travel experiences announced that it has raised funding to the tune of $4.2 to fuel its global expansion. Meanwhile, the Italian firm Musement has acquired travel content platform Triposo to bring together over 12 million travellers across both platforms.And VizEat, the European food experience platform has said it will acquire US counterpart EatWith.
If that isn’t enough, Airbnb is also raising its game with its Trips product.
The majority of tours and attractions providers still exist mostly or entirely offline
Tao Tao acknowledges that the segment remains ”a wide-open opportunity, so competition for business is fierce”. He also points out that the industry “has a long way to go in its digitisation efforts, with the majority of tours and attractions providers still existing mostly or entirely offline”.
GetYourGuide is on a mission to digitise and standardise this segment of the tourism industry, both in partnerships with brands like KLM and through its own direct bookings.
Given that tours and activities are the fastest growing tourism segment, there’s obvious value in this. According to Tao Tao this is what drives close partnerships with suppliers, many of which are regional businesses filling specialised demand. “We want to help them recognise and realise the value of providing a digital-friendly customer experience (including QR codes). Increasingly, we’re seeing our suppliers discover that this value can’t be ignored,” he says.