Ai Editorial: Packages aren’t just another ancillary product

First Published, 9^th March 2016

Ai Editorial: Airlines tend to see packages as just another ancillary opportunity rather than focusing on packages as a different route to market, with a massive long tail advertising opportunity, writes Ai’s Ritesh Gupta

The travel industry is keenly looking at offering a consistent, personalised experience throughout the purchase funnel. But is personalisation an easy proposition as far as leisure holidays or dynamic packaging are concerned?

It’s not that easy or straightforward when compared with booking a seat on an aircraft, says West Sussex, U. K.-based Steve Endacott.

There were a couple of reasons that made me interact with Endacott, a travel and digital non-exec director and entrepreneur, who is currently associated with several organisations, including Teletext Holidays, Holiday Taxis and CWT Digital:

• The first one - the industry is talking about “micro-moments” featuring in our digital activity. To be more precise, it’s about understanding our intent in real-time when we use a PC or a mobile device etc. And at that point of time, how to show an ad or recommend content/ offers that can entice us to click or complete a transaction. So, to what extent the industry can pre-empt the intent of an online user who is looking for a package, for example, a family holiday.

• The second aspect is exploring how the industry is looking at improving the conversion rate, as well as stepping up the average order value or better margin.

A tough nut to crack

Importantly, Endacott points out that the conversion rate for a product, such as airline seat could be 6-7%, whereas as for packages this can come down to less than 1%.

“Personalisation in packaging is very difficult because customer’s requirements vary so much depending on whom they are travelling with and for what reason,” states Endacott.

“Also unlike airline seats, which are often bought several times a year, holidays are bought normally only once or twice a year. Hence, it’s vital to listen to customer buying signal and to react by personalising the booking flow. For example, we change the booking flow to “un-weight” Wi-Fi and two-bedroom apartment filters, once customers tell us they have two kids. Kids see access to social media as a unilateral right.  Secondly, shopping for a package is a prolonged procedure (in terms of the number of times a user visits a site). So showing all previous searches is vital to conversion optimisation,” says Endacott, referring to the significance of website personalisation.

Also, re-marketing, be it via display ads or email, are key tools in the leisure sector as once you have a customer lead it needs to be chased to completion to maximise conversion.

But tapping the customer early in the booking funnel isn’t that easy. One can state that the business of packages continues to be search-driven, with destination information directing the results. So yes, when a potential booker searches or shows any intent, it is important to react in a targeted way via ads linking to specific landing pages. Such pages are pre-populated with content that reflects exactly what they have asked the search engine for, with often only dates and party type information needing to be added in order to check availability. The richer the content, the higher the conversion from these pages.

Packages – not another ancillary product

As for airlines’ approach towards packages, Endacott asserts that there is a need to change the mindset.

“Packages can’t be considered as another ancillary product. There is a different route to market (in case of packaged holidays),” said Endacott, non-executive chairman of web development and digital agency CWT Digital, a part of the Zen3 Group. The company currently operates the easyJet Holidays platform. Endacott created the first Jet2holidays site.

Airlines tend to see packages, as just another ancillary opportunity rather than focusing on packages as a different route to market, with a massive long tail advertising opportunity, delivered by individual hotel and destination advertising campaigns.

Packaging also opens up the world of lower prices due to opaque pricing. Many airlines are happy to discount seats to match discounted hotel beds, as long as their competitor cannot see and react to this form of discounting of distressed routes. Packaging provides this opportunity, plus the ability to recover these discounts via the sale of high margin ancillaries, such as transfers. Within the booking journey for a package, airlines know not just the customers’ arrival time but also their end destination, which enables them to provide a one-click to book transfer quote. This boosts transfer uptake from 15% to 85% on a high margin ancillary, claims Endacott.

Technology has made steady progress over recent years, now allowing visitors to dynamically package flight and hotel accommodation, as well as other essential trip components, such as seats, bags, transfers, insurance, and car-hire, with the core flight and hotel elements remaining opaque in pricing. To boost speed, Zen3 caches airline prices and availability on a 15-minute rotation and has complex algorithms to absorb any pricing differences, preventing price movements.

The group can offer an aggregate feed of 22 bed banks to provide both range of hotel offering and more importantly, competitive pressure via multiple bed bank supply per hotel. This, when combined with pre-caching of airline route networks to offer exactly what product is available, can pave the way for conversion maximisation, according to Endacott.

Making diligent moves

Endacott claims it is essential to drive passenger volumes in to a narrower range of hotels to maximise yield. “Customers want Amazon-type recommendations about what other customers are buying within a destination, which when combined with clear user review rating from recognised brands like “Tripadvisor,” give customer guidance as to the best value for money holidays. This quickly concentrates booking volumes with 25-40% of bookings going into “recommended” holidays. This in turn allows a virtuous circle to be created, where better rates via direct contracting of these properties creates lower prices, driving higher volumes. This tends to be the stage two evolution airline driven sites like Jet2 holidays or Easyjet, setting them apart and driving competitive advantage,” explained Endacott.

Airlines also have a natural advantage in holiday spaces, as they tend to be recognised brands offering the reassurance of dealing direct, when customers may be concerned about geo-political disruption and who will bring them home in an emergency.

Although airlines may like the option of a massive range of stock, Zen3 also recommend that this range is tailored to the airlines particular customer base via the use of Zen3’s “Brochure” tools. These tools allow product ranges to be narrowed down by destination, minimum user review score, star-rating, board basis etc. However, the key to success remains the intelligent selection of “recommended” hotels via big data analysis of users search and booking trends, mentioned Endacott. “The popularity of a property counts. But equally important is the overall quality score. There is a need to have meaningful reviews, and yes, the authenticity of reviews on TripAdvisor can be debated, yet one needs to feature TripAdvisor in the decision-making process,” shared Endacott.

All of this contributes to the slickest and quickest route to the customer finding the “right” hotel for their holiday requirements at the lowest possible price, whilst filling aircraft seats and driving higher yields via increased transfer, car hire and insurance sales.

It is definitely not easy to work out profiles of customers and use them to drive packages sales, in the same way it is done for a product like flights. Yes, LCCs can contribute a lot more in terms of data when they have relatively stronger loyalty programs in place. But, at this juncture, personalising the booking flow when a visitor is in the middle of a session is more important than trying to guess what they want before the visit.

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