Is a new revolution about to break?

By Tim Gunstone, Managing Director, EyeforTravelIn the last 10 years travel business models have changed beyond recognition. The most successful travel companies have a low basic package rate and manage to survive and thrive simply by up-selling additional items and third party products like insurance, speedy boarding or upgraded rooms.

Published: 22 Feb 2011

By Tim Gunstone, Managing Director, EyeforTravel

In the last 10 years travel business models have changed beyond recognition. The most successful travel companies have a low basic package rate and manage to survive and thrive simply by up-selling additional items and third party products like insurance, speedy boarding or upgraded rooms.

This model has been built by exploiting booking patterns in the online travel buying cycle. The dark art of pushing “point of sale” products has been vital for the industry’s growth and prosperity. To be blunt, the practice is not based on customer service but the extraction of as much cash out of the consumer as possible. However, there are indications that the travel industry needs to rewrite the ancillary revenue strategies book. For 2011 and beyond, it’s actually on trip (as opposed to pre-trip) ancillary sales that are seeing the biggest growth right now. That is to say, how do you utilize the customer to spend whilst they are actually in the air, in the hotel room, or in the car they’ve just hired? This trend raises 2 simple but vital remarks:

  1. The growth of mobile browsing has meant that a change is inevitable: but:
  2. It is incredibly difficult to simplify ancillary for a mobile device

Inevitably, huge growth rates in mobile browsing will mean that in the next few years more and more of your customers will learn to book via mobile devices. Complicated booking processes which work wonderfully online at the point of sale will simply not work on a 3 x 2.5 inch screen and will instantly lose you custom as they peel off to an “easier to use” competitor. If you don’t believe us, try and buy a Ryanair flight on your smart phone right now- it will drive you insane! One way around this issue may be through the developing world of Apps, but there are still obvious size and space limitations. Since the app vs. mobile booking page argument is still in debate, it would be a very risky strategy indeed to rely purely on the apps model at this stage.

With all the talk about customer centricity at the forefront of all our business mechanisms, it is undoubtedly time for the industry to start positioning services whenever and wherever the customer wants them. This strategy will ensure they spend money and you benefit. It is less a dark art than an intense analysis of customer databases, customer behaviour and timing all communications effectively. We don’t know how it will happen yet but our research suggests that the future for ancillary is on-trip, and even post-trip sales.

Whenever there is a sea change in customer and industry behaviour some companies grow, some shrink, as is the nature of business. The company that intends to grow through on-trip ancillary sales will be the one that understands and smooths out these issues:

1. This process is being hindered in Europe by stupid roaming costs. We’re teetering on legislation to curb catastrophic internet roaming. Keep your eye on European law on this prevalent topic in order to step ahead of your competitors

2. Understand how to reach your customer from every angle on-trip: SMS, In-flight/in-room entertainment, mobile apps and much more, how can you reach them without being invasive?

3. Can up-selling and cross-selling impact customer loyalty and brand integrity? Yes! Discover how to stop this happening and you’ll be a step ahead of the rest

4. Payment through mobile needs to be established as secure by consumers and the industry before we can move forward wholeheartedly

5. Gather a complete understanding of how mobile search will evolve with maps, live prices and location capabilities, before you embark on a total ancillary strategy

6. Last but not least- perhaps most importantly- REINVENT, REINVENT, REINVENT. Ancillary was the industry’s baby in 2008, and change is on the horizon. The big players will adjust their strategies to incorporate mobile booking and the on-trip upsell more efficiently. To be a part of the club, you simply have to be ahead of the curve with innovation in this sphere.

All these issues are going to be debated at the Travel Distribution Summit this 10-11 May in London. With over 1000 attendees, and 7 conference tracks, it’s the world’s biggest meeting place for the travel distribution and online travel industry. This year the following organisation will be commenting or speaking about mobile and ancillary at the Travel Distribution Summit. Check out the agendas at www.eyefortravel.com/tds:

  • Accor Hotels
  • bmibaby
  • British Airways
  • Citizen M Hotels
  • comScore, Inc.
  • Ebay UK
  • Ebookers
  • Farelogix
  • Foursquare
  • Google
  • Gowalla
  • Hostelworld
  • Lastminute.com
  • Mobilizy GmbH
  • MIS Corinthia Hotels
  • Ryanair
  • SIXT
  • Sound Of Data
  • Spanair,/li>
  • TUI UK
  • Thetrainline.com
  • Nokia
  • TUI Travel
  • TripAdvisor
  • Virgin Atlantic
  • Yelp

 
 
 

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