Ai Editorial: 5 issues that can propel ground transportation as an ancillary offering
First published on 29th July, 2016
Ai Editorial: If stakeholders, including airlines, manage to inspire and uplift the customer experience, they can end up monetizing the overall door-to-door journey, writes Ai’s Ritesh Gupta
How can ground transportation become an integral part of the booking flow? Can it lend a new dimension rather than just coming across as a utility offering?
As we highlighted in one of our recent articles, airlines are uniquely positioned to profit from delivering a better user experience that comes from the transport utility. But for this to happen, the magic of content, availability etc. needs to reflect in the way, say the recommendation engine understands my intent (which sort of transportation option suits me), my travel (business or leisure) etc.
So let’s say I am booking a trip to Venice. I am travelling with my family for a holiday. If I intend to travel from Milan to Venice via train, and then to my hotel via Venice water bus or Vaporetto, can I visualise the journey via a 30-second video and book it on airline.com? Of course, there are options such as Gondola ride, too, when we talk of Venice, but that’s where the challenge lies. The main hurdle seems to be going beyond mere car rental to look at various transportation needs, as travellers share itinerary information with airlines.
Consider for a moment that most — if not all — journeys start and end well outside the airport. Only one component of this — the flight — is easily found, planned and bookable online. Then it seems that the logistics for the rest of the journey ultimately falls to the passenger to resolve. Whether it’s for a wedding or a business trip, the “travel math” that comes from trying to piece together the details of every journey — no matter who faces them — ultimately drives the user to either a friend for help, a travel agent or long hours with a search engine.
So if stakeholders, including airlines, manage to inspire and uplift the customer experience, they can end up monetizing the overall door-to-door journey.
As for the size of the ground transport as a travel e-commerce category, Ireland-based Kevin O’Shaughnessy, founder of Indigo.gt, a search and reservation platform for airport-to-city transfers, says, “From our own data, primary research and other publicly-available measures from government agencies, the total estimated spend in ground transport from airport to final destination is $24 billion in Europe, approximately $80 billion worldwide. This is the total spend, whether or not it is captured in mobile, pre-booking or airline-direct transactions. Our figures include regulated taxi, metro, express rail as well as shuttle and limo services."
5 points to consider
For airlines to make the most of ancillary revenue generation opportunity, O’Shaughnessy recommends following points:
· Structured approach: Until very recently, all activity in the airport transport e-commerce focused on white-label shuttle and executive services with some big winners and losers along the way. Today, there’s more choice than ever to airlines in the pre-book and on-demand market, says O’Shaughnessy. “The question for airlines is simply whether they wish to capture this revenue as part of their service offering. With ground as a long-standing topic on the desk of many ancillary revenue managers, the question is no longer “why” or “when”, rather “how” they can be part of it,” pointed out O’Shaughnessy. From passengers’ perspective, this need isn’t new — everybody who lands at an airport will leave, one way or another. While some will connect to another flight, most will need to think about their onward journey — an inevitable necessity. This can be part of the “arrival” story on mobile, or part of the “planning” story as an integral part of the booking engine, just to mention a few. “Airlines should target their ground transport projects in a structured way — while there’s technology and coverage to provide for a simple “transport switch” today, airlines who build transport into their offering in a step-by-step approach will capture more revenue, with less risk, faster.”
· Working with B2B specialists: The blend of air ticket plus car rental is proven, and various stakeholders have reaped benefits by optimizing the traveller’s journey. How can airlines target other ground transport options? O’Shaughnessy says, “Some airlines tell us that air + car is still “small but growing”, but that the value of the commission per-transaction is quite high. Every passenger has a different transport preference, so why gamble on a low-conversion opportunity? All travel retailers need to make a conscious choice between low-volume/ high-commission-value and high-volume/ lower-commission-value. (In some markets, rail trips to/ from the airport are used by as many as 65% of passengers. Where high speed rail links exist, the typical take-up rate is about 35% of all passengers to/from an airport). “Airlines can get up and running quickly with other types of ground transport types by working with ground transport aggregators,” asserted O’Shaughnessy.
· Keep an eye on API revolution: When we talk of content and inventory related to ground transportation, how is the industry gearing up for innovation? Transport is in the middle of an “API revolution” and soon it will be easier than ever for any small team to offer complex rail, flight and taxi content, developing exciting new channels and experiences for travel content on a limited budget. Like all other travel innovation, the key is customer acquisition, conversion, service and loyalty,” explained O’Shaughnessy.
He added that on a global level, a couple of developments stand out - content aggregation (individual transporters from around the world operating under their own brand and sold through Indigo.gt, Cartrawler or Mozio) and growth of multi-market transport apps operated under a third-party brand such as Uber and Blacklane.
From the transport companies themselves:
· Local taxi companies are being aggregated into dozens of platforms
· Rail is slowly opening up to strategic distribution, sometimes blocked by regulation
· Coach companies are exploring new business models and operating models
· Shuttle, executive and van companies remain the most diverse in the business, but new models are being explored by their operators
“The key innovation in ground is technical connectivity: making reservation systems accessible by other partners. Often payments technology stands in the way of an efficient relationship, but this is slowly changing. This has been quite proactive, and largely driven by the ground transport aggregators,” he said.
“In the next three years, it will be easier than ever to access transport content directly from the rail, coach or taxi company directly, however the “back-office” complexity will remain. The good news is that the better platforms for ground transport today provide a certain degree of future-proofing which reduces technical and commercial complexity for their airline partners,” says O’Shaughnessy.
· Payment technology: According to O’Shaughnessy, the key to future ancillary growth in airlines is in payment technology. He says airlines need to think about an “open wallet” approach. Store the cardholder details (carefully — using a third party or in-house solution) and allow the passenger to dip in and out of other commercial opportunity in pre-departure communication, mobile, check-in and even on-board.
“There are other ways of handling payments other than the typical “Twenty Questions checkout” process where cardholder details must be entered every single time, opening the door to the risk of fraud again,” said O’Shaughnessy. “Tokenization technology means that airlines can trigger the request for cardholder data once, then share this at the right time with car hire, in-flight entertainment, hotel and other ancillary providers, all with the users consent and secure, controlled transfer of payment details. This is just one example, and other techniques exist. This more relaxed approach, coupled with a broader-reaching mobile platform, allows more products to be marketed in the always-open airline store front.”It’s important to remember that both Lyft and Uber operate in this “store front” manner. While it appears that they are the merchant of record, in reality, the driver is contractually the merchant; the app is simply facilitating the transaction. The innovation is that Stripe and Braintree are also essentially allowing the driver to be the card processor too. No “Twenty Questions” when you get into your taxi. By behaving more like Uber/ Lyft, an airline can capture more revenue from its mobile storefront on more occasions during the journey for relatively low investment.
· Acting smartly – think of the day of travel and mobile: Of course, the day of travel can trigger certain initiatives from a flyer, including transactions. “In pure operations terms, nobody knows better than airlines where the user is. Few relationships are as trusting as this. There’s no reason a passenger can’t send a tailored push notification to a user’s app on arrival, or suggest a scheduled pick-up while the passenger is waiting at the airport on departure,” said O’Shaughnessy. For instance, Dublin-based MTT have captured some of these day-of-travel elements wonderfully for Easyjet from an experience perspective. “What airlines are missing out on — especially in terms of revenue — is what 60%+ of every landing passenger will do on arrival: use a ground transport product. The airline mobile app’s true revenue opportunity is calling, and there’s no reason why today, that one-button-booking experience can’t be delivered directly by the airline app, without having to pass through the app of a third party.”
Kevin O’Shaughnessy, founder of Indigo, is scheduled to speak at the upcoming Loyalty& Ancillary Revenue Conferences - 3rd Mega Event Asia-Pacific, slated to take place in Kuala Lumpur (23-24 August, 2016).
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Event’s Twitter hashtag: #MegaAPAC
