TDS Europe 2009, London - Offering choice and transparency in ancillary strategy

Ancillary revenue has become increasingly important for most travel suppliers as they strive to maximise share of wallet of their customers.

Published: 19 May 2009

Ancillary revenue has become increasingly important for most travel suppliers as they strive to maximise share of wallet of their customers.

It is recognised mere addition of an ancillary product to the existing offering is no longer sufficient. Today successful suppliers need to fully integrate their ancillary partner seamlessly into their website offering customer the ability to add ancillary products either as individual components or fully integrated as a dynamic package.

Still, companies have been far too conservative about their retailing approach, says Bobby Healy, CTO, CarTrawler.

There are a number of considerations and one of them is related to protecting the core product. When it comes to cannibalising core product, one has to assess the best way to introduce new products and services to compliment main sales, not affect them.

“I don’t see that the “core product” suffers when you sell other products alongside it,” said Healy.

Citing an example, he said, “When we published the data for Hawaiian Airlines, we clearly showed that adding the ancillary product alongside the flight had zero effect on conversion for the flight. It’s interesting though that there are some notable cases where airlines refuse to sell products in the booking path. I don’t agree with that, or understand the rationale behind it, but my guess is that it’s related to the nature of the relationship with the ancillary suppliers rather than a conscious decision on the part of the airline. Why for example do Aer Lingus and easyJet offer car hire in the booking flow, but Ryanair don’t ?”

Healy, in an interview with’s Ritesh Gupta, spoke about the current approach of airlines, balancing core product vs. non core product offerings and other issues. Excerpts:

For a supplier, any discussion of ancillary revenue, should also include a realisation of the how the core revenue is being sold. Any supplier can sell ancillary items, but it shouldn’t without an overall retailing strategy. How do you think travel suppliers are today approaching their ancillary revenue strategy?

We at CarTrawler have a particular focus on selling car rental through airlines, we observe that only in the last 18-24 months or so have airlines started to give the (non-air) ancillary part of their business the serious attention it deserves.

Typically, airlines have received a “marketing payment” from one of the major car rental brands in exchange for exclusivity and this model has served well as it required no real attention from the airline businesses. To be honest, airlines had enough on their plates without needing to become something they never were - retailers or car hire experts.

Now, however, the major airlines (and most of the medium to small ones) have realised the value in the huge number of visitors to their sites, and understand that in order to convert those visitors into revenue, they need to change their approach to both how they offer other products and what products they offer. I like to boil it down as follows: If 81% of consumers state that price is their most important consideration when they rent a car, then why would I, as an airline, only offer those consumers a single brand? Why would I immediately alienate such a huge amount of my passengers, and ignore what the retailing giants have discovered a very long time ago - that choice and transparency are key requirements in doing business in a more and more price sensitive world. So, put simply the "strategy" at the moment, is to actually take a good hard look at what can be sold effectively, and then to source the best possible content to meet that demand. Up until now, that hasn't really been the case.

How do you think one can effectively balance core product vs. non core product offerings?

Nothing should be taken for granted. Airlines should view themselves as retailers - that's means they should be looking at what companies like Amazon are doing rather than what other airlines are doing. They should be thinking as a retailer rather than as an airline and they should be hiring retail people for that - not airline people.

A retail person would never base his strategy on what products he is good at supplying and making himself. He would base it on what his customer base looks like, and what he could sell them. Then, he would build a great supply chain to deliver that product in the most efficient way possible. Using retailing terms, I like to think that CarTrawler are that supply chain and tech companies such as Datalex, SITA and so on are the logistics guys.

How do you think travel websites are making impulse shopping easy and inspiring consumers with a range of travel options?

We call that dynamic cross sell. Make it easy for the customer to 1) evaluate the offer, and 2) accept the offer. We do that by providing a strong neutral display that lets the consumer know they are not getting hit by the economics of a "cosy deal", and we make it only one extra click to include the product in the basket. You'd be amazed at the effort required on some giant airline websites to hire a car. There is no benefit to the consumer to go back to that airline website in the case of a postponed purchase.

It is quite often said that links all over the website is not a good idea. But Ryanair’s site is probably the most cluttered site one can ever come across. How do you assess the situation?

I'd lean on the conservative side here. Don't take Ryanair as an example of great retailing either - they're a great example of a great advertising medium. That's what their ancillary partners are paying for - advertising space that they themselves have to retail through. I'd come back again to my earlier point - we shouldn't be looking for examples of great retailing in the travel industry - we should be looking a the likes of Amazon, iTunes etc. and see what real retailers do with eyeballs.

Regarding usage of airline website, an executive mentioned that consumers should be `Hit' at the right time in decision making to cross sell, make the sale while you have them as they won't come back. How to attain these right times right from the moment a consumer comes to your site? Should you start selling add-ons from home page?

The "won't come back" part of this is important. Actually there is no single place to "hit" the consumer - we prefer to call it "touch" by the way. Typical lead in time for a flight booking is 44 days. Typical lead time for a car rental is 19 days. Where is the consumer for those other 25 days ? That's where you lose them - so if you are taking your online retailing seriously you'll be perfecting how you touch your customer during those 25 days and you wont be overly worried about what you're doing on your home page, or the size of your call to action buttons. You'll also want to make sure that whoever you are using for your supply, is not competing with you to take those customers directly. As for add-ons, I'd say yes. From experience we see upwards of 30% of ancillary sales being generated on the home page. I don't see that as cannibalising the core product. There is no core product.

How do you think companies should approach this dilemma - If you choose to promote your partner´s products what happens if you end up competing in Google with your partner´s own direct site?

I think it's a mistake to choose a partner that is going to compete with you in this way. If you have an exclusive relationship with a partner, there should be no way the partner will ever take a booking from your customers directly. If I were an airline, I'd be asking for guarantees in that regard. Relating to Google, I'm not seeing much PPC or SEO activity from airlines around their ancillary product. This is all handled by their suppliers directly and I don't see that changing.

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