Tim Gunstone, Managing Director, EyeforTravelWhilst airlines often seem to be losing money, they have always led innovation in the online travel industry. But can they adapt their increasingly complex ancillary focussed booking paths to the fast growing mobile platform? Or will mobile allow other travel companies a bite of the ancillary cherry pie?

Published: 22 Apr 2010

Tim Gunstone, Managing Director, EyeforTravel

Whilst airlines often seem to be losing money, they have always led innovation in the online travel industry. But can they adapt their increasingly complex ancillary focussed booking paths to the fast growing mobile platform? Or will mobile allow other travel companies a bite of the ancillary cherry pie?

It’s hard to make money from flying planes, but certain airlines have done so by consistently leading developments in travel marketing and distribution. As Europe’s most profitable airline, Ryanair is a good case in point. Ever since 1997, when Ryanair’s squeeze on costs drove out travel agent’s commission and led to 90% online bookings (whilst most other airlines were still in single figures), they have not been scared to rock the industry and its established supply chains.

By driving virtually all its customers to book online direct, Ryanair has now evolved into an organisation that seems to make a bit of money from flying their planes and a lot of cash from their dominant online position in the travel buying supply chain.

Looking at Ryanair’s publicly available figures, I estimate this powerful position in the online buying process gives Ryanair additional revenues of around 10 Euros per passenger… that’s 20% of all passenger revenues - and a highly profitable 20% too. In fact, without it the airline would make a loss. Ryanair’s average fare is 40 Euros, against and average passenger cost of 47 Euros.

At our recent conference on Social Media in Travel (www.eyefortravel.com/social-media), Google’s Ted Souder predicted that 50% of web traffic will come from mobile devices in the next 5 years. Having just struggled through a simple Ryanair flight booking I am certain it would be infuriating to book a Ryanair flight on my iPhone. If half web browsing will be via a mobile in 5 years and all your bookings are online, making your booking process mobile friendly will be critical to you business moving forward.

Ryanair is surely mindful of this, and streamlining the booking process for mobile seems a logical step. However, any simplification of this process could reduce Ryanair’s ancillary revenue offerings. With 20% of their revenues coming from non flight products, this is not an option they would be happy to entertain.

A Ryanair App coupled with their dominance in the market and their very effective brand as a low cost provider this could work in the short time. But there is a battle raging for the future of the mobile web. Will it be search driven or will the location benefits of Apps keep them growing. But this is not in Mr O’Leary’s hands - its in Apple’s, Google’s, Blackberry’s and other mobile platform providers. For a company so used to controlling its product this must be a worry.

Google, Blackberry, Facebook, Nokia, lastminute and BA will be debating this very topic this June 18th at our London Summit. For more details go to http://events.eyefortravel.com/tds/index.php/conference/keynote-debates

More ideas about making cash from ancillary products including how to integrate it into mobile bookings will also be debated when Asia X, Continental, Aer Lingus, Accor, TUI, KLM and more share their experiences as part of the Ancillary Revenue and Merchandising Track at the Summit.

The truly exciting opportunity that mobile and location based services are offering to the travel industry is the ability to communicate and sell to the traveller wherever they are. Ryanair.com sells so much as it’s believed to be the cheapest source for the of cheapest travel products. This stops the consumer searching for other non flight travel products elsewhere. If an organisation can get the same level of trust for whatever brand promise it pushes… so the cheapest, the funkiest, or the best, AND delivers branded products or recommendations to the traveller on their travels then a huge amount of revenue could be headed their way. It will take a lot of investment not just in technology but in deal making to deliver the host of new products… but doing deals is what our industry runs on. Exciting times ahead people!

All these topics will be debated and discussed at the Travel Distribution Summit in London this June 17-18. It’s the world’s biggest gathering of online travel executives. The attendees include Facebook, Google, Google Mobile, Spotify, Ebay and representatives of many of the world’s major airlines, tour operators, hotels and travel agencies.

Of course with over 1000 attendees, serious distribution deals take place at the Summit. To find at more go to http://events.eyefortravel.com/tds/