By EyeforTravel.com Correspondent, Las VegasIn the wake of suppliers increasingly focusing on ancillary revenues, the airlines need to ensure that they are offering things that consumers truly value.

Published: 02 Oct 2008

By EyeforTravel.com Correspondent, Las Vegas

In the wake of suppliers increasingly focusing on ancillary revenues, the airlines need to ensure that they are offering things that consumers truly value.

Also, offerings need to be introduced in a manner in which there is clarity and traveller's perceived value vs. cost is optimised. There are several leading 3rd party providers that have solutions that airlines can easily introduce, and this provides a rapid time-to-market and access to partners that have already experienced a large part of the learning curve associated with consumer package selling.

From an OTA's perspective, Gregg Schulze, VP Air, The Americas, Expedia says the concept of unbundled pricing is fairly intuitive, as are the products that would be available under such a pricing structure - premium seat assignments, baggage check, on-board meal service and entertainment etc.

"What's more important for the airlines to consider at this stage is how they will ensure these products are easy to understand and to book by the widest possible audience of consumers looking to purchase air travel," said Schulze, in an interview with EyeforTravel.com's Ritesh Gupta.

"For most consumers, booking air travel today is very much about online comparison shopping. As the largest online travel agency in the world, Expedia has more visitors per month than the top airline websites combined. What's more, 62 percent of online air shoppers search on Expedia sites, another 38 percent of which don't visit a supplier direct site at all. The airlines that make it a priority to reach the millions of consumers who shop via the online travel agency channel stand to succeed in meeting the objectives that the unbundled pricing structure is designed to achieve in the first place," added Schulze, speaking in the context of Ancillary Revenue in Travel 2008, being held as part of Travel Distribution Summit North America in Las Vegas.

Schulze also spoke about a la carte pricing, the significance of communicating the value of their a la carte products and much more. Excerpts:

Eyefortravel.com: It is felt that offering 'everything' will dilute the travel provider's brand equity, and ultimately their ability to deliver. It is important to underline that trying to meet a set of diverse customer needs requires considerable investment and expertise that invariably takes years to develop. How do you assess the situation from Expedia's perspective?

Gregg Schulze: To the extent that airlines can clearly and comprehensively communicate the value of their a la carte products, they will foster a willingness among consumers to pay for them.

One surefire way for airlines to maximise their effectiveness in marketing and merchandising their breadth of product is to work hand in hand with their distribution and marketing partners so travellers can compare and book these products across the most prominent booking channels.

Eyefortravel.com: Legacy airlines typically bundle these services into the price of an airline ticket, while LCCs tend to un-bundle the travel experience. The strong trend toward unbundling demonstrates the growing prevalence of a la carte pricing. What's your viewpoint as far as a la carte pricing being on the rise in aviation industry is concerned?

Gregg Schulze: The introduction of a la carte pricing is making the cost of air travel increasingly complex for consumers to evaluate. As travellers come to understand the impact of optional service fees on the total price of air travel, their purchase decisions will be increasingly influenced by the fee structure that delivers the best value for their needs. Many airlines understand that ensuring their products are presented in a comprehensive manner on OTAs increases the likelihood that travellers will purchase them.

Eyefortravel.com: Do you think there is a strong trend towards menu driven pricing?

Gregg Schulze: It remains to be seen what standards will emerge in the way the evolving portfolio of air products are displayed to online travel shoppers. That said, the airlines that work to develop a standard way for travellers to compare and book these products in the most prominent booking channels stand to gain the most from the revised pricing structure. Airlines and travel agencies have a responsibility to enable consumers to compare both the true costs and benefits of various air travel options.

Eyefortravel.com: Expedia allows dynamically generated opaque packaging as well as an XML that allows partners to build a shopping cart. How do you think this puts an OTA like Expedia in an advantageous position or strengthens its ties with suppliers like airline?

Gregg Schulze: As it relates to helping our airline partners reach consumers with their a la carte services, Expedia's approach is to work on a one-to-one basis with our airline partners to ensure all the attributes of their products are marketed to the millions of travel buyers who visit our sites every month. Initially, it will be focused on informing travellers of the options and associated costs, and eventually there will be the ability to fulfill some of the new services online.