BA and other Top Travel Brands set to Expand Retail Operations to Increase Ancillary Revenue
Published: 22 Jan 2009
BA is set to rapidly expand its retail operations by massively increasing ancillary sales through its website by introducing a dynamic packaging facility for consumers. Speaking at a lunch last year to celebrate the launch of OpenSkies, BA chief executive Willie Walsh said the airline had barely “scratched the surface” of the opportunities of ancillary sales.
BA’s revenue from ancillaries was “very low” compared with no-frills rivals’, said Walsh, who aims to change that by allowing a BA package to be bought in a single transaction. BA customers can now book hotels and car hire through its website but only as separate transactions.
“There is an opportunity for us to sell more that we have not even scratched the surface of,” said Walsh. “I don’t think we had sufficient focus on it and we are introducing dynamic packaging on our website which will make it easy for people to book products other than the core flight. We will be able to say here’s a package of flight, hotel and car hire for a single price. It’s not just selling flights.
“We will be more proactive in promoting it rather than waiting for the customer to come and look. We will be out there saying here’s what we can do for you. Here’s a neat little package.” The carrier will use inventory held by BA Holidays, which now offers hotels, car hire, sightseeing trips and transfers, but BA was also likely to talk to other suppliers. “I would not rule anything out,” said Walsh. He denied the move was prompted by low margins on flight sales and said it was a chance to grow revenue in the same was as no-frills airlines.
However, he said BA would not be charging for check in or putting bags in the hold.
“If you look at where the low cost carriers have been very successful, they have doing it in a different way. Their initial focus was car hire and hotels but they have gone much further now. Their definition of ancillary sales is different to ours.”
In a Travel Weekly press release last September, Walsh highlighted ‘web distribution as "the best thing that has happened to the airline business".
Half of BA's UK bookings and 30% worldwide come via ba.com and "80% of customers service their bookings online", said Walsh. "It gives significant additional value through ancillary revenue - we have learned that from the low-cost model."
And it’s not just airlines that are realising the potential to increase ancillary revenue. Cruise, train, online travel agents and hoteliers are all jumping on the bandwagon. With a customer demographic envied by most retail players and ever-increasing traffic volumes, the opportunity to sell more online to travel consumers is here and now for the taking.
Recent research from EyeforTravel has found that the economic turbulence has led to a greater emphasis on increasing ancillary revenue. Regional Director of EyeforTravel, Gina Baillie says ‘Travel companies are only just waking up to the vast opportunity available in the market to boost ancillary revenues. There is a rapidly growing array of ancillary product and service providers offering margins as high as 20%. Whilst care should be taken when mimicking the Low Cost model, ancillary revenues for most travel companies should be significantly higher – recession or no recession’.
Baillie went on to highlight the risks involved in selling partner products. ‘Too many companies simply believe that they can place a partner product on their website and see the money roll in. They do not consider the impact on their brand and consumer base. Those companies such as Allegiant Airlines and easyJet who have implemented a complete end to end strategy are now reaping the rewards’.
Travel companies can find out more about the opportunities and risks of implementing ancillary revenue strategies at EyeforTravel’s Ancillary Revenue & Partnerships in Travel conference taking place in London, 19-20 May. Head of Global Partnerships, Alyson Playford, British Airways will join leading executives from Gulf Air, Aer Lingus, The Trainline, Eurostar, Finnair, Starwood, lastminute.com, Octopus Travel, Transavia, booking.com (Priceline), Icelandair and many more. For more information visit http://events.eyefortravel.com/ancillary-revenue/ or email gina@eyefortravel.com
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