Over the past few years, airlines have been the primary advocates and activators of the travel industry’s move to merchandising. But now it seems, everyone is getting in on the act, including online travel agencies. And that’s a great thing.
NB This is a viewpoint by Sebastien Gibergues, head of leisure online and travel media for Amadeus IT Group.
Merchandising's growth shows no signs of slowing down. Airlines are already well into the game. Research shows that merchandising efforts represented US$17.49 in incremental revenue per passenger per booking for airlines in 2014.
In 2007, the highest percentage of an airline’s revenue that derived from ancillary fees was 16.2%. That number was up to 38.4% for 2014.
Adoption takes off
Merchandising in the travel industry is fast becoming a mandate for all players in the supply chain. Airlines are implementing, online travel agencies (OTAs) are adopting and travelers are benefiting.
By all measures, you could call 2015 the year of adoption for merchandising.
We’ve seen this evidenced by the implementations of Amadeus’ ancillary services solutions by our airline customers, which increased 60% from 2014 to 2015.
OTAs join in
OTAs have also been ramping up their adoption and roll-out of merchandising initiatives. The number of OTAs selling ancillary services using our solutions continues to grow and is expected to more than double by the end of 2015. OTAs are embracing the retailing model more than ever before, leveraging the critical mass of real, bookable airline merchandising content.
And many OTAs are offering more than just the ability to compare the cheapest fares – they are generating revenue while providing more transparency on the full value of the airline offer. Enriched with the airline’s fare family information, search results are clearer, more complete and boosted by the carrier’s own promotion of their branded fares.
So what’s driving the move to merchandising for OTAS? The answer is online consumers. Travelers value the ability to search for the best deals, identify products and services that are relevant to them and compare offers with full transparency – helping them make faster, more informed purchasing decisions. Merchandising offers an efficient distribution channel for airlines willing to promote their branded products to the global travel market.
The start of something beautiful
But it is only the beginning
As more content from airlines becomes available, we foresee a further evolution of merchandising to achieve the “ultimate online merchandising sales flow”. This represents the combination of all functionalities, enabling OTAs to differentiate and deliver a truly proprietary user experience. This means not only displaying the cheapest possible fares but also offering choice - fare families, baggage, seat selection and others – all in one simple, easy to use booking flow.
And when it comes to merchandising, upselling opportunities are taking center stage. At search or booking time, online shoppers can easily personalize their trip via ancillaries, or simply upgrade to a higher value fare family that better suits their needs.
And the end of the trip planning phase is not the end of merchandising opportunities. Throughout the travel lifecycle – from trip planning to post-travel – providers have ample opportunities to offer a superior customer experience and personalized offers.
According to findings from Amadeus’ Thinking Like A Retailer report, 25% of travelers purchase ancillary services once they arrive at their destination.
It’s a win-win-win
Making the difference
As they increasingly integrate merchandising into their models, OTAs are better able to differentiate their offer, serve their customers and increase their revenue.
OTAs which display airlines’ branded fares and make it easy to see all of the options empower the travellers to make the right decisions. Airlines in turn are extending their partnerships with OTAs, ensuring that travelers have access to the products and services that enhance their travel experience.
The result: travelers enjoy greater transparency along with the freedom to shop where they please, fulfilling their travel needs in one purchase.
So if online travel agencies are starting to generate revenue from selling ancillary services, what’s next? Upselling fare families represents the next big opportunity for online travel retailers to target, influence and monetize end consumers. Research shows that offering fare families can increase the online shopper’s basket by more than 19 Euros.
Retailing, technology and partnerships are coming together to advance the drive to merchandise and shape the future of travel. So if you are an online travel company and not thinking like a retailer, maybe it’s time to think again.
NB This is a viewpoint by Sebastien Gibergues, head of leisure online and travel media for Amadeus IT Group. It appears here as part of Tnooz's sponsored content initiative.
NB2Image by Shutterstock