Should Airlines Move from Being an Air Transport Service Provider to Managing a Travel Marketplace?

Should Airlines Move

Just as a customer is booking a flight on your website, he gets an SMS. 

It is from your competitor, informing your potential passenger that he can save a ton of money by clicking on the link before it expires in 10 minutes. 

Without a moment of hesitation, your customer will click away, which means you have lost him forever. Your customer finishes his booking with another airline, confident that he has saved money, and proceeds to look for other services he may need during his trip. Depending on the trip your customer is taking, the ancillaries could be anything from hotels to cars to buses to food.

Is it possible to retain the customer with a discount and earn extra revenue by selling a bunch of relevant ancillaries? 

What if there was a way to even delight customers who come looking for information on flights by offering them exciting and affordable travel packages along with the flight? 

The good news is that it is perfectly possible.

The solution?

Transitioning from an air transport service provider to a travel marketplace.  

Why being an air transport service provider is insufficient

 Historically, all an airline has done is provide customers with flights and make money off ticket sales. The extra income was mainly generated through the sales of business class tickets, food, and other services that only extended to the period when the passenger was flying.  

Largely, this has led to dwindling returns for airlines.  

Some of the key reasons include intense competition, fluctuating fuel prices, and the seasonal nature of the business. With the COVID-19 pandemic raging all over the world, the ensuing lockdowns have further crippled the airline industry, leading to major losses. IATA estimates that in 2020 alone, the industry faced losses to the tune of $84 Billion.   

Given this scenario, there is enough reason for the airline sector to adopt newer strategies for optimizing revenue, such as shifting towards a travel marketplace model that is becoming increasingly popular.   

Pioneers of the ancillary sales landscape

Although this is happening slowly, there can be no doubt that airlines are teaming up with technology companies to develop their travel marketplaces that have become key drivers of their revenue.  

Ryanair, a Europe-based low-cost carrier, has been able to completely change its fortunes by embracing the concept of becoming a travel marketplace. Notably, in the period between 2016 and 2019, seat sale revenue increased by 15 % while ancillary revenue shot up by 86%. Owing to this, it would be fair to say that Ryanair’s growth and profitability have been powered by the sale of ancillaries. 

Ancillaries, in general, are thought to be extra charges applied to in-flight beverage and food, baggage, priority boarding, and airport check-ins, but Ryanair has managed to do so much more. 

Here are just a few of the ways the airline and other players in the industry make extra money by being a platform for various vendors. 

  • Car hires
  • Hotel reservations 
  • Bus and Rail tickets 
  • Covid testing and support
  • Travel medical consultation
  • Travel health insurance

Frankly, this is just the tip of the iceberg.

Airlines can do a lot more to tap into the endless pool of travelers who are looking for flexible travel packages and attractive pricing options. 

Now that you see how much potential the concept of an online travel marketplace has, let us explore it in more detail with an emphasis on the must-have features and the consequent benefits.  

So, what is a travel marketplace?

In the airline sector, it refers to a place where companies offering travel-related services, such as hotels, cars, etc. can connect directly with customers. They can offer these services individually or as packages. In turn, the customers can compare all the offers and customize their trip to their liking.

What makes a good travel marketplace?

To be useful as a means of boosting revenue, travel marketplaces need to have the following features.  

  • Manage bookings for flights, hotels, and other services included in the package. 
  • Manage personalized pilgrimage packages for different markets 
  • Provide customers with exceptional support via a self-service portal 
  • Manage multiple vendors
  • Have inbuilt content management system to handle website content and blogs
  • Configure travel policies for each scenario
  • Handle third party payment gateways
  • Manage a multitude of users with different privileges 
  • Effective ancillary management
  • Enable customers to have a comprehensive overview of the product’s performance

How airlines can benefit

When a potential passenger lands on your site looking for flight information and finds providers for all his travel needs, he is much more likely to make a purchase, especially when it is easy to compare different vendors. Besides, customers who are not comfortable with too much choice can opt for the packages on offer. 

Another major benefit to the airline is the increase in revenue brought about by targeted promotions that can be carried out for various customer segments. When it comes to selling packages, the ability to directly distribute them will lead to a reduction in operating costs. Additionally, airlines can satisfy customer expectations through personalized offers and packages.

Conclusion

In essence, as the “Amazon of travel,” a one-stop solution for all your passengers’ travel needs, you will have created a remarkable source of income that will help you gain an edge over your competition.

Speak to a revenue management expert today

GroupRM allows you to offer optimal pricing and a seamless booking experience to group customers. Book a demo to know more.

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