An EyeforTravel Event |
If you are in the business of selling travel online: Your revenues could be higher! |
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Ancillary Revenue & Partnerships in Travel Europe 200919-20 May, Business Design centre, London |
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Event News
Ryanair mulls fat tax after online pollI think Ryanair is having a laugh here but apparently it is considering levying a “fat tax” following an online poll in which 30,000 passengers voted in favour of charging excess weight fees for very large passengers. The low-cost carrier would follow United Airlines which has just announced plans to impose such a charge on overweight people it calls “passengers who require extra space”. American Airlines is also introducing the charge. Ideas mooted by Ryanair would be to charge per kilo for males over 130kg (20 stone) and females over 100kg (15 stone); charging per inch for every waist inch over 45 inch (male) and 40 inch (female); charge for every point in excess of 40 points on the Body Mass Index; and charging for a second seat if passengers’ waist touches both armrests simultaneously. Ryanair’s Stephen McNamara said: “Over 100,000 passengers logged on to ryanair.com to take part in our competition and almost one in three (over 30,000) think that very large passengers should be asked to pay a fat tax. “With passengers voting overwhelmingly for a ‘fat tax’ we are now asking them to suggest which format the charge should take. The above four points seem to us to be the simplest, fairest and administratively easiest to apply. In all cases we’ve limits at very high levels so that a ‘fat tax’ will only apply to those really large passengers who invade’ the space of the passengers sitting beside them.” “These charges, if introduced might also act as an incentive to some of our very large passengers to lose a little weight and hopefully feel a little lighter and healthier. Ryanair confirmed the final poll results as follows:
How to annoy a key part of your customer base – well done Ryanair! Ryanair offers €1000 for the best ancillary revenue idea!Ryanair has launched a competition to find the best money making idea. Customers can suggest an idea by emailing competition@ryanair.com This Europe wide competition invites passengers to submit their most ingenious, wacky and creative ideas to Ryanair via the www.ryanair.com website to be in with a chance of winning a €1,000 cash prize. Launching the competition, Ryanair’s Stephen McNamara said; “Ryanair is Europe’s largest low fares airline and we plan to continue to reduce costs and fares by stimulating ancillary revenues. We have always provided passengers with choice, if you don’t want to pay for food – don’t buy it, if you don’t want to pay checked in bag charges – don’t bring checked in bags, if you don’t want to pay handling charges – then just use Visa Electron entirely free of charge. Since we confirmed that we are considering a toilet charge we have received a huge number of ancillary revenue suggestions from passengers and we want more. We are asking passengers to submit their ideas with the most creative winning €1,000 cash. Some of the best suggests to date are:
For more details, click here. It seems the airline is comfortable poking fun at itself but at least this is a way to try out your wackiest ideas and see if they might actually work! Announcing the Winner of the Free Pass to the Ancillary Revenue & Partnerships in Travel eventEyeforTravel is pleased to announce that London based Head of Marketing for Air Asia, Roy Bristow is the lucky winner of a free pass to the Ancillary Revenue & Partnerships in Travel Europe conference taking place 19-20 May. He will be joining the leading representatives of the top travel brands below at the event which will be co-located with EyeforTravel’s annual Travel Distribution Summit Europe 2009 -
United expects its ancillary revenues to reach $1.2 billion in 2009Network carriers in the USA, prompted by a tough operating environment, have been taking a leaf out of their low-cost competitors' book when it comes to chasing ancillary revenues. So-called full-service airlines have begun charging for the things passengers used to take for granted and a la carte pricing is starting to become the norm. But will this trend start to catch on with network carriers in other parts of the world? And how will the low-cost carriers respond to this blatant encroachment on to what has traditionally been their turf One US carrier that seems to be taking great strides to blur the line between the traditional, full-service network airline and the no-frills, pay-for-all-your-extras carrier is US Airways. The Arizona-based airline aims to generate $400 million to $500 million from its ancillary revenue programme in 2009. US Airways chief executive Doug Parker said at the recent Credit Suisse Global Airline Conference in New York that the carrier's ancillary revenue strategy, which includes charging for checked baggage and on-board food sales, has been "more aggressive" than its competitors, and the results have so far been better than expected. United Airlines has also been boosting its ancillary revenue streams through a number of measures traditionally associated with its low-cost competitors. By increasing fees for changing tickets and charging for extras that used to be complimentary, United expects its ancillary revenues to reach $1.2 billion in 2009, a 140% increase over 2005 and up a third on 2008. Broken down, the carrier expects to raise $600 million from ticketing fees, $250 million from first and second bag fees, $250 million from up-selling seats and $100 million from additional travel options, such as its door-to-door baggage service. Alaska Airlines vice-president finance Brandon Pedersen has described ancillary revenues as "the holy grail" for airlines, and says Alaska wants to look into more options "in ways consistent with our brand". In 2009, Pedersen sees opportunities for in-flight connectivity services, buy-on-board initiatives and "other things we might sell on our website". The carrier already charges for checked baggage. "I'm amazed at how quickly a la carte pricing has been adopted by US legacy carriers, and I'm also amazed that there hasn't been a passenger revolt," says Jay Sorensen, president of US consultancy Ideaworks' partnership and marketing practice. "With unbundling, the indications are that the base fare should drop, but what's odd in the US was that the product was unbundled and the overall price went up. Passengers were asked to pay a higher fare and to pay for things that were once included." As a result of the success US carriers have had with their domestic ancillary revenue strategies, Sorensen believes the trend will catch on with airlines in other regions of the world. "The world has been watching with tremendous interest what's been happening in America with the major carriers and waiting to see if they were able to pull it off. We will see more of this activity worldwide," he says, adding that Ideaworks "has had contact with some surprising airlines that are not normally involved in this activity". Mike Cox, managing director and head of corporate advisory at Seabury Group in New York, agrees that airlines in other regions of the world are taking notice of what the US network carriers are doing. "US carriers have found that [charging for ancillaries] is a good source of revenue and it hasn't dampened demand. Airlines are studying it and watching the fine balance between what certain fees do to demand and whether there's resistance," he says, adding that airlines will "exempt their best customers from these fees". Discount and unbundle Boosting ancillary revenues could be a valuable strategy for airlines as they head into what IATA is calling "the toughest revenue environment in 50 years". Tim Jeans, managing director of UK scheduled and charter carrier Monarch Airlines, says that in the current climate ancillaries are "absolutely central to the ability of airlines to make a meaningful margin". He adds: "While there is still significant downward pressure on fares and many upward pressures on the cost base, it is imperative that the gap is filled by ancillary revenues." For the full article published 19/12/2008, click here. For more information about Ancillary Revenue strategies visit www.eyefortravel.com/arev Managing ancillary revenue – the key to profitability but what are the risks?This week saw budget airline Ryanair announce a 19% jump in ancillary revenues for Q3 2008. The carrier is benefiting from strong ancillary sales, which rose by almost a fifth in the third quarter to 132m and now account for 22 per cent of group revenues. According to a recent article published in The Telegraph, Ryanair is set to earn £650 million in 2009 from baggage charges and booking fees. As the recession bites and airline traffic for the industry as a whole starts to decline, ancillary revenue could be the key to profitability for many airlines in 2009. Traditional carriers are following in the footsteps of the Low Cost Carrier model to unbundle their products and services and to also form lucrative partnerships with 3rd party supplier sites. With some airlines adding as much as 20% straight to their bottom the advantages of ancillary revenue are all too clear. However, what are the risks involved? One of the key points made at EyeforTravel’s Ancillary Revenue in Travel 2008 conference last February was the importance of a complete end to end strategy. Too many companies focus on the ‘next big product‘ or leading edge technology and do not think about what best suits their brand and consumer base. For example, let’s take Ryanair as a case study. It doesn’t take long to find negative customer feedback on the internet or in the press surrounding charges for Ryanair’s non-core products. A recent article in The Telegraph sparked fiery comments from the general public as it cited that Ryanair’s excess baggage fees are now three times higher in comparison to 2006 and that Ryanair will earn an estimated £435 million in baggage fees. The negative comments were far reaching with two customers starting their post with the words ‘I hate Ryanair’. The main cause for complaint seemed to be that Ryanair’s ancillary charges are deemed to grossly exceed the marginal cost of providing the product/service. Whether or not this is sustainable remains to be seen. One thing’s for sure, with a 13 % increase in passenger traffic in Q3 of 2008, customers still continue to travel with Ryanair in their droves. Interestingly whilst a handful of groups on social networking sites such as Facebook act as channel for consumer backlash the majority of Ryanair Facebook groups actually plead for Ryanair to serve their city or country. Just how many customers they may or may not have lost due to high ancillary charges and the impact on Ryanair’s brand remains unknown. Chief Executive Michael O’Leary is confident of the airline’s future and the key role that ancillary revenue has to play in their business model. Direct copying of the Ryanair model though is likely to be fraught with difficulties. Looking to the US, traditional carriers have rolled out ambitious and ancillary revenue strategies. US Airways for example is set to earn ancillary revenues of $400 million to $500 million from its ancillary revenue programme in 2009. Leading ancillary revenue expert Jay Sorensen highlights however the importance of earning support from employees before implementing new ancillary strategies. Company buy-in to US Airways’ aggressive strategies was not immediate. In light of the introduction of soft drink charges one flight attendant commented ‘It’s degrading to our profession. We are safety professionals not grocery store clerks’. Sorensen compared this to the case of Ryanair where staff are reported to earn up to 10% of their salary from on board sales. Southwest continues to be one of the world’s most successful airlines and emphasizes the fact that it does not charge baggage fees poking fun at those airlines that do. Instead, Southwest earns ancillary revenue from innovative partnerships with car hire companies, hotels, resorts and gift cards – all carefully selected to suit their brand and customer base. With many different departments affected by the implementation of an ancillary revenue strategy, the challenges are certainly apparent. As Gina Baillie, EyeforTravel says ‘With careful management and coordination EyeforTravel Research has found that there still exists a vast opportunity for airlines and other travel companies to increase their revenues from non-core product sales. Technological advancement and a greater consumer acceptance of ancillary charges are just some of the factors leading to the growth of this key revenue channel.’ Leading speakers from some of the world’s most successful travel companies such as British Airways, Hertz, Gulf Air, Finnair, Aer Lingus, TheTrainline.com, Icelandair, and more will share their most recent case studies and expert advice at EyeforTravel’s Ancillary Revenue & Partnerships in Travel conference taking place in London, 19-20 May. Key topics for the agenda include –
For more information about the conference request your copy of the e-brochure here or alternatively contact gina@eyefortravel.com BA and other Top Travel Brands set to Expand Retail Operations to Increase Ancillary RevenueBA is set to rapidly expand its retail operations by massively increasing ancillary sales through its website by introducing a dynamic packaging facility for consumers. Speaking at a lunch last year to celebrate the launch of OpenSkies, BA chief executive Willie Walsh said the airline had barely “scratched the surface” of the opportunities of ancillary sales. BA’s revenue from ancillaries was “very low” compared with no-frills rivals’, said Walsh, who aims to change that by allowing a BA package to be bought in a single transaction. BA customers can now book hotels and car hire through its website but only as separate transactions. “There is an opportunity for us to sell more that we have not even scratched the surface of,” said Walsh. “I don’t think we had sufficient focus on it and we are introducing dynamic packaging on our website which will make it easy for people to book products other than the core flight. We will be able to say here’s a package of flight, hotel and car hire for a single price. It’s not just selling flights. “We will be more proactive in promoting it rather than waiting for the customer to come and look. We will be out there saying here’s what we can do for you. Here’s a neat little package.” The carrier will use inventory held by BA Holidays, which now offers hotels, car hire, sightseeing trips and transfers, but BA was also likely to talk to other suppliers. “I would not rule anything out,” said Walsh. He denied the move was prompted by low margins on flight sales and said it was a chance to grow revenue in the same was as no-frills airlines. However, he said BA would not be charging for check in or putting bags in the hold. “If you look at where the low cost carriers have been very successful, they have doing it in a different way. Their initial focus was car hire and hotels but they have gone much further now. Their definition of ancillary sales is different to ours.” In a Travel Weekly press release last September, Walsh highlighted ‘web distribution as "the best thing that has happened to the airline business". Half of BA's UK bookings and 30% worldwide come via ba.com and "80% of customers service their bookings online", said Walsh. "It gives significant additional value through ancillary revenue - we have learned that from the low-cost model." And it’s not just airlines that are realising the potential to increase ancillary revenue. Cruise, train, online travel agents and hoteliers are all jumping on the bandwagon. With a customer demographic envied by most retail players and ever-increasing traffic volumes, the opportunity to sell more online to travel consumers is here and now for the taking. Recent research from EyeforTravel has found that the economic turbulence has led to a greater emphasis on increasing ancillary revenue. Regional Director of EyeforTravel, Gina Baillie says ‘Travel companies are only just waking up to the vast opportunity available in the market to boost ancillary revenues. There is a rapidly growing array of ancillary product and service providers offering margins as high as 20%. Whilst care should be taken when mimicking the Low Cost model, ancillary revenues for most travel companies should be significantly higher – recession or no recession’. Baillie went on to highlight the risks involved in selling partner products. ‘Too many companies simply believe that they can place a partner product on their website and see the money roll in. They do not consider the impact on their brand and consumer base. Those companies such as Allegiant Airlines and easyJet who have implemented a complete end to end strategy are now reaping the rewards’. Travel companies can find out more about the opportunities and risks of implementing ancillary revenue strategies at EyeforTravel’s Ancillary Revenue & Partnerships in Travel conference taking place in London, 19-20 May. Head of Global Partnerships, Alyson Playford, British Airways will join leading executives from Gulf Air, Aer Lingus, The Trainline, Eurostar, Finnair, Starwood, lastminute.com, Octopus Travel, Transavia, booking.com (Priceline), Icelandair and many more. For more information visit http://events.eyefortravel.com/ancillary-revenue/ or email gina@eyefortravel.com "Recognise that ancillary revenue is important to an airline's prosperity"Ancillary Revenue in Travel Special Maximising your ancillary return is not just about commissions, products or technology but also your ancillary strategy which should now be at the core of any airlines' business. This viewpoint came from Steven Greenway, Chief Commercial Officer, SkyEurope Airlines during one of EyeforTravel's events (Ancillary Revenue in Travel 2008 conference held in Dublin) earlier this year. Referring to the retailer vs. flight supplier issue, Greenway said "We all now want to extract the "overall value" of the guest." This means flight, change fee, insurance, parking, car hire, hotel, baggage, seat selection, city guides, currency conversion etc. But in terms of problem in this arena, he said, "Too often we focus on what is the "next big product" or who has got the best deal, or even what leading edge technology should be adopted?." Reflecting on current approach towards ancillary revenue, Greenway said the ancillary ownership is fragmented, terming it as the old "silos" problem. According to him, there is no end-to-end thinking on how ancillary products can be implemented. Recommending a strategy in the context of ancillary ownership being fragmented, Greenway said, "Recognise that ancillary revenue is important to an airline's prosperity. Centralise all ancillary activities under one senior manager and work with various divisions to deliver on clear KPI's/revenue targets." On the other aspects of a successful ancillary strategy, apart from stating that all ancillary activities need to be centralised under one owner who is a senior manager, he referred to following:
From RM perspective, he said revenue management systems should be capable of integrating data and there should be a collected effort to offset distressed inventory. Ritesh Gupta Role of XML technology in enabling airlines to garner true additional ancillary revenueEFT Ancillary Revenue in Travel 2008 Special It is acknowledged that low cost airlines that have overcome the technology barrier by investing in this area and leading the ancillary market trend. "With the absence of the loyalty programme, they (LCCs) compensate by investing in new revenue streams which were quicker to implement than create a traveller database," according to Arthur de Perthuis, Head of Online Travel Sales EMEA - Hertz Europe Limited, who was one of the speakers during the recently held EyeforTravel's Ancillary Revenue in Travel 2008 conference in Dublin. On whether technology is a major barrier when it comes to car rental companies and airlines joining hands together for ancillary revenues, he said, " Until an airline embraces XML technology, they will not benefit from the true additional ancillary revenue opportunity. Being able to dynamically offer real-time availability is key to maximising car rental penetration," he said. He added, "However with our flag carrier partners such as Air France for example we have really pushed the technology boundaries by developing innovative services for passengers, as well as offering customer benefits worldwide, including savings, offers and rewards." de Perthuis in an interview with EyeforTravel's Ritesh Gupta spoke about trends in ancillary revenues. Excerpts: Ritesh Gupta: How do you assess the relationship between car rental companies and airlines when it comes to ancillary revenues? Arthur de Perthuis: The relationship between car rental companies and airlines has entered a new era. As a major partner for airlines, we work in collaboration, strategically to optimise the revenue opportunity. In order to respond to our partner needs, we have developed a dedicated Centre Of Expertise (COE) covering Strategy, Account Management, Marketing and Pricing. This substantial additional revenue stream is also key for the airlines to be able to offer the most competitive fares in the market and to add value to their passengers' experience. Ritesh Gupta: What new trends have you seen especially in Europe? Arthur de Perthuis: In the 80's the trend was for Frequent Traveller Programs with flag carriers. In the 90's Hertz was one of the first to offer car rental as an ancillary product. Airlines are now following this trend and optimizing cross-selling opportunities through their communication channels. The next stage is emerging with a fully integrated packaging experience similar to the traditional Tour Operator/Travel Agency offer but dynamic. Ritesh Gupta: Global cross and package sales on airline websites are expected to be worth around 82 €bn from 2008 to 2012. What do you think are going to be the key drivers for the same from a car rental company perspective? Arthur de Perthuis: Key success factors will depend on whether the airlines are ready to fully integrate the travel experience as part of their flight booking process as well as communication channels. The dynamic packaging offered by Hertz enables us to sell a bespoke product to suit the traveller profile. This will be the key influencer to increasing car rental penetration as well as the average basket value. CRM optimisation will be the next phase to offer a customised product within the passenger travel life cycle. Ritesh Gupta: An industry executive last year told me - Usually an airline that hasn't yet accomplished real conversion in car hire are ones that have technology barriers, or that haven't seen the value of a multi supplier car hire offering as a source of ancillary revenue. Do you think technology is a major barrier when it comes to car rental companies and airlines joining hands together for ancillary revenues? Arthur de Perthuis: Until an airline embraces XML technology, they will not benefit from the true additional ancillary revenue opportunity. Being able to dynamically offer real-time availability is key to maximising car rental penetration. However with our flag carrier partners such as Air France for example we have really pushed the technology boundaries by developing innovative services for passengers, as well as offering customer benefits worldwide, including savings, offers and rewards. Ritesh Gupta: Technology is now allowing airlines to completely outsource the car rental ancillary product, and shift more of the benefits of the channel towards the airline rather than others. What kind of progress do you think airlines have made in this direction? Arthur de Perthuis: Low cost airlines that have overcome the technology barrier by investing in this area and leading the ancillary market trend. With the absence of the loyalty programme, they compensate by investing in new revenue streams which were quicker to implement than create a traveller database. Ritesh Gupta: From traditional carriers perspective, it is being said that airline executives have other non-operational concerns about launching ancillary revenue strategies. One is that selling more frills to economy passengers would dangerously blur the distinction between first-class and economy service. From Hertz perspective, what have been the major concerns of traditional carriers? Arthur de Perthuis: Flagship carrier strategy is not focussed on ancillary revenue as their key objective is to retain their high yield leisure and Business travellers. Traditional carriers have concerns about losing the customer through out the booking process along with their customer database. Our partnership with flag carriers such as SAS is focused on adding value to their travellers by offering a customised experience and unique benefits such as upgrades or bonus miles. Ritesh Gupta: Airlines generate traffic to their websites that should be used to capture a larger share of the total spent planned by the traveller. But add on products and upselling requires a change culture of those facing the customer and the tools they use. From car rental company perspective, how easy is it for you to fit in talking of culture change? Arthur de Perthuis: Culture change is driver by revenue opportunities! When you can prove the business model of our partnership, culture change comes quickly! Ritesh Gupta: To what extent do you think dynamic cross selling of car hire through airline websites is replacing existing channels for car hire such as meta search, brokers and the suppliers own sites? Arthur de Perthuis: Airlines have a key competitive advantage of being the first step in the travel booking process. Their strong brand and powerful CRM database are key factors in gaining traveller's confidence and adding value to the travel experience. There is no need to leave an airline website as long as you have a good dynamic product and availability. Ryanair's ancillary revenues up by 19pc in Q3
Ryanair's ancillary revenues grew by 19 percent to €132m in the third quarter even as the airline slipped into the red for the first time since the company went public in 1997. The Irish airline posted losses of €102 million for the three months ending December 2008, compared with a €35 million profit during the same period the previous year. Average fares fell by 9 percent to €34, while fuel costs rose by 71 percent to €328m. Revenues rose by 6 percent to €604.5m, as traffic grew 13 percent to 14m, as more consumers switch to Ryanair's low fares from high fare competitors. Ryanair's CEO Michael O'Leary said: "Our Q3 loss of €102m was disappointing, but in line with expectations, and was almost entirely due to a €136m increase in fuel costs." Average fares (due to recession and weaker Sterling) fell by nine percent to €34, but this decline was largely funded by a three percent reduction in non fuel operating costs. "The general economic environment remains extremely difficult, as the recession saps consumer confidence, but this is proving to be good for Ryanair's traffic growth, as more and more passengers switch to Ryanair's lowest fare lowest cost model. Many of our competitors have in recent months reported short-haul traffic falls, while Ryanair continues to grow. We will continue to lower fares to maintain our traffic growth and high load factors," said O'Leary. "Ancillary revenues grew by 19 percent to €132m, and now account for 22 percent of revenues (19 percent last year). We expect our onboard mobile telephony service to become operational at the end of February on 20 Dublin based aircraft, and this trial, which will last for six months should be extended to some 40 aircraft by the end of the summer. We expect initial revenues to be small, but believe that in-flight communication will be a strong source of ancillary revenue growth in future years," he said. Ryanair said that its lack of hedging in the fourth quarter would enable it to take full advantage of the low oil price. As a result, the carrier upgraded its full-year profits forecast to between €50 million and €80 million yesterday. Its previous guidance had been to break even. For more information about Ancillary Strategies for the travel industry please visit - http://events.eyefortravel.com/ancillary-revenue "Recognise that ancillary revenue is important to an airline's prosperity"EFT Ancillary Revenue in Travel 2008 Special, Dublin This viewpoint came from Steven Greenway, Chief Commercial Officer, SkyEurope Airlines a.s. during EyeforTravel's inaugural Ancillary Revenue in Travel 2008 conference being held in Dublin. Referring to the retailer vs. flight supplier issue, Greenway said "We all now want to extract the "overall value" of the guest." This means flight, change fee, insurance, parking, car hire, hotel, baggage, seat selection, city guides, currency conversion etc. But in terms of problem in this arena, he said, "Too often we focus on what is the "next big product" or who has got the best deal, or even what leading edge technology should be adopted?." Reflecting on current approach towards ancillary revenue, Greenway said the ancillary ownership is fragmented, terming it as the old "silos" problem. According to him, there is no end-to-end thinking on how ancillary products can be implemented. Recommending a strategy in the context of ancillary ownership being fragmented, Greenway said, "Recognise that ancillary revenue is important to an airline's prosperity. Centralise all ancillary activities under one senior manager and work with various divisions to deliver on clear KPI's/revenue targets." On the other aspects of a successful ancillary strategy, apart from stating that all ancillary activities need to be centralised under one owner who is a senior manager, he referred to following:
From RM perspective, he said revenue management systems should be capable of integrating data and there should be a collected effort to offset distressed inventory. Ritesh Gupta |
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