UATP Distribution 2012 - panel highlights
At UATP’s Distribution 2012 in Madrid, I moderated two timely panels for our industry. The first covered Ancillary Revenue. The second panel covered the role of travel agencies and how they are responding to the pressure from airlines on distribution costs.
The Ancillary debate went into a couple of very interesting areas. The first centered on how payments play a critical part in ancillary sales, because airlines have decided to retail various non-ticket items without taking into account that getting paid for them cost-effectively is challenging globally. The discussion included everything from onboard sales, with Richard Cushing from GuestLogix explaining some of the solutions they have deployed to facilitate onboard payments, to how eNett with its virtual credit cards is helping airlines generate additional revenues. The second area of this discussion, articulated by Montie Brewer, the former Air Canada CEO who led that airline to increase ancillary sales, was that that the industry needs to move away from a tactical focus on ancillaries and see the bigger picture of commoditisation. This view stuck a note with several airlines in the room, who joined the debate, stressing that they were aiming to have their product tailored to the needs of their customers and trying to move away from commoditisation.
The second panel covered the role of travel agencies and how they are responding to the pressure from airlines on distribution costs. Both ARC and IATA BSP gave excellent insights into how agency volume is continuing to grow. Despite direct distribution, there remains a crucial role for travel agencies given that they still account for around 50% of airline sales. Innovation was a key theme of this panel, stressed by David LeCompte, CEO of Short’s Travel Management, he was echoed by Michel Durrieu from CWT who said that we had to get back to looking at things through the customers’ eyes. Innovations discussed ranged from enabling travellers to file their expenses using smartphones to better handling with technology the inevitable mass travel disruptions, such as the recent ash clouds and weather.
Both panels raised a number of key issues that the industry needs to tackle, such as working in partnership with distribution channels, including travel agencies, and focusing on customers to avoid commoditisation and the race-to-the-bottom in terms of airfares. Clearly these are issues that are going to be debated and discussed for some time to come, including at Airlines Information's Mega Event & Airline Merchandising Conference to take place in San Diego in November. It's now open for registration at www.FFP-AMC.com
Generating more airline revenues from new points-of-sale
Profitable revenue growth is the lifeblood of any business. At the recent Ai Networking Cocktail event held with Edgar, Dunn & Company in Sydney, Martin Collings from MasterCard talked about a very innovative approach to growing revenues by creating new points-of-sale, where none existed before.
Hoyts, a premium chain of cinemas in Australia, is trialling in conjunction with MasterCard, a smartphone app that enables you to order food and drink from your seat and have it delivered to you during the film (full details here). To facilitate this service, Hoyts has installed NFC tags and QR codes in the armrests of the theatres' seats. This creates a whole new point-of-sale location and sales opportunity where none existed previously, and allows staff to clearly identify the seat where the order was initiated. Now, with a few clever but simple bits of technology, you can easily order and pay for these items on your mobile phone, thereby generating a revenue stream that was untapped, while also creating a better customer experience.
To be able to take advantage of such new sales opportunities, not only do you need to apply a bit of lateral thinking, but you also need to understand your existing business. Then, you can spot gaps in which to create new points-of-sale opportunities. Edgar, Dunn & Company, which is a specialist payment consultancy, has worked with several airline clients to understand the spending patterns of their co-branded credit cards holders. Their specialist approach to this data analysis has generated numerous insights into different customer segments within the co-brand credit card base. Couple that with new technology such as MasterCard’s QkR, then the applications for airlines and travel companies to create new point-of-sale opportunities are only limited by the imagination of airline marketers. One airline application might be to deliver food and drinks to people within lounges. Many airlines offer food and drink for a charge within their lounges and the QkR app would make it easier for customers to order and pay for them.
Creating new payment-related revenue opportunities is something that we’ll be exploring more in depth at our upcoming events in 2012. You can checkout our events schedule - including the Airline & Travel Payments Summit 2012 and the Airline & Travel Payments Summit Latin America - here: www.AirlineInformation.org/events
Michael Smith, Managing Partner, Airline Information
Payment surcharging – ancillary revenue or cost saving?
In preparing for the Airline and Travel Payment Summit in Toronto on the 12/13th of October 2011, one of the themes that keeps emerging is payment surcharging. In the UK, where I am based, this practice very advanced, but it's also one which the regulators are also looking at closely.
Although Ryanair is registered in Ireland, it does a lot of business in the UK and it's at the forefront of surcharging here. However, they are not alone. You might be surprised to learn that Lufthansa and American Airlines are also surcharging on their own UK websites for credit card payments.
Here is a chart of airlines charging credit card surcharges in the UK market:
The new airline GDS costs
Airlines are driving their sales from GDS and travel agencies to direct distribution via their own websites. By using e-commerce, airlines save millions in distribution costs, but often then face unforeseen payment and fraud costs. Many airlines are even seeing payment & fraud costs surpass GDS costs as their largest "controllable" expense- made more critical by the current high fuel prices, since decreasing payment & fraud costs contributes directly to an airline's bottom-line.
However, getting paid online more cost-effectively is an area where some smart airlines are making inroads. These airlines are saving huge money by implementing comprehensive global payment strategies that include taking such simple steps as converting more sales by making their checkout pages simpler.