Jay Sorensen says "airline CEOs embrace bag fees like nothing he's ever seen." And, guess what? Fee-love is in the air for the hotel industry, too, he says.
Sorensen, the president of IdeaWorks Company, which plays Cupid to airlines' ancillary-revenue aspirations, argues that airline fees will become pervasive -- hotel fees will follow suit.
Sorensen speculated about the future of airline and hotel fees May 5 during a keynote, "Airline and Hotel Fees -- Good, Wicked or Misunderstood," at PhoCusWright's Travdex trade show in Atlanta.
Hint: He thinks many of the fees are good. And Sorensen particularly likes Alaska Airline's bag fees, which come with a delivery-time guarantee.
On the hotel side, Sorensen points to the success of Travelodge UK, which saw revenue increase 19% in 2008 as the brand unbundled fees for formerly free services such as early check-in (as soon as noon instead of 3 p.m.) and late checkout (as late as 2 p.m. instead of noon) for £10 each.
Sorensen believes a la carte pricing, which he concedes will be controversial for hotels, may enable upscale brands to differentiate themselves.
For example, the Four Seasons Hotel New York charges $10 per day for in-room Internet and a $15 initial fee for its business center while these services come at no extra charge for the Holiday Inn Express in Times Square.
And, Hilton's Embassy Suites and DoubleTree brands enable booked guests to pre-order everything from a 12-ounce Heineken ($5.75) to a mini-refrigerator and microwave ($20 per day each).
In this wild new world of fees 24/7, Sorensen offers ways for hotels to find their "own revenue bliss."
- "Tell your a la carte story frequently and clearly" to emphasize the benefits for guests and employees;
- Reach out to customers with sales pitches during the booking process, at confirmation, pre-arrival and at check-in.
- Provide pre-order discounts for services such as early check-in and amenities, including mini-refrigerators.
- "Help consumers accept change" by offering bonus-point promotions.
Whether consumers are convinced to accept these changes in the form of more fees over the long term, remains to be seen.
Regarding airline fees, Sorensen says ancillary services have enabled airlines to raise substantial new revenue given the difficulties they face when they attempt to raise fares.
Asked whether global distribution systems (GDSs) and other intermediaries will be able to catch up to the airlines in selling the carriers' ancillary services, Sorensen says it will be "very difficult."
Some distributors are anticipating getting some momentum when Electronic Miscellaneous Documents (EMDs) become available for settlement purposes toward the end of this year.
Sorensen noted that ancillary services originated to some extent with carriers such as Ryanair, which doesn't distribute through GDSs and cares little about making these services available through distribution channels other than its own.
He says intermediaries may be able to catch up with the airlines for a time, but "the bar will constantly be going higher."
As they say about life, and fees, love don't come easy.