"The era of multiple car hire suppliers on a single website will become the norm"
Published: 22 Feb 2008
EFT Ancillary Revenue in Travel 2008 Special, Dublin
Car hire companies see airlines as a strategic channel, and airlines are really only starting to understand the value of the rich, qualified customer base they are providing the car hire suppliers, according to Bobby Healy, Chief Technical Officer, CarTrawler.
With that understanding comes a new level of expectation from the airlines, and the days of annual marketing budgets and low expectations of conversion rates will soon disappear, says Healy, a speaker during EyeforTravel's inaugural Ancillary Revenue in Travel 2008 conference in Dublin.
Healy, speaking to EyeforTravel's Ritesh Gupta, said, "When airlines like Ryanair predict a net car hire revenue in 08 of 30M euros, and Easyjet deliver a 5% conversion rate, its fairly easy for other airlines to calculate what they could be deriving from this lucrative form of ancillary revenue."
"You can literally predict a rev value per PB (passenger boarded) that you should expect from this product. The net effect, we believe, is that airlines will be more demanding in their supplier negotiations, and that the era of multiple car hire suppliers on a single website will become the norm," he said.
"Every one of our customers for example, has opted to include all the major car hire brands available rather than picking just one, with the rationale that with more choice to their passengers, conversion and revenue will improve. Our most recent case study with Blue1 of Finland (a Star Alliance carrier) indicates a doubling of revenue when airline switches from single to multiple suppliers. CarTrawler, of course, is a neutral provider and offers every car hire company to the airlines, but we do recommend that the airlines offer as much choice as possible to their passengers in order to avoid loss of conversion due to "the alienation factor" (customers who are loyal to one car hire supplier will not purchase their car hire from the airline if they don't offer that supplier)," he said.
On new trends especially in Europe or comparing the situation with the US, Healy said the US carriers are far less driven by ancillary revenue due to their higher base ticket prices." However we do see a lot of movement in that area now. Witness Delta Airlines partnership with iSeatz.com to get an idea of the shape this is going to take. A third party provider - not unlike ourselves - with expertise in driving airline ancillary revenue manages the supplier interfaces and website integration on behalf of the airline - allowing the airline to focus on the core business while ensuring the ancillary side performs well."
Global cross and package sales on airline websites are expected to be worth around 82 €bn from 2008 to 2012.
On the key drivers for the same from a car rental company perspective, he said, "Well, we firmly believe that there will be a significant shift of bookings toward the airline channels - displacing car hire companies own websites as the primary selling channel. We think that will be the primary factor in the growth, as well as other important factors such as better integration at all selling touch points, and more choice Navitaire has just released its latest booking engine to Ryanair which will allow dynamic cross selling of car hire. Watch how that effects the revenue. So, technology (as usual) is an important driver."
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Kilgore said on 25 Feb 08:
Very interesting comments on the car rental business. One particular statement by Mr. Healy caught my eye. He said that US carriers have a higher base ticket price than European airlines.
Is that still true with the dramatic drop in the value of dollar against the euro? If so, why?
My first thought was that there might be higher taxes and landing fees in the US. But, maybe not.
If everything else is equal, why are air fares lower in Europe compared to the US?
I don't have a comparison study in front of me, but from personal experience I believe that car rental rates in the US are much lower than in Europe.