The travel industry is transforming. Flights have become a commodity as modern technology has made it easy to compare and check prices. But it’s still not easy to buy ancillary services, which is a bit worrying considering they represent the most important future revenue sources. On top of this, making a rich assortment of services readily available to your customers and offering what your competitors don’t is a great opportunity to differentiate your brand. When you enable your customers to conveniently tailor and enhance their travel, they will get a better travel experience – and you get more of their spend. And even better, bundling a commodity – like flights – with other services makes the commodity less price sensitive. Everybody happy!
So, as they stand to gain (and lose) so much, why aren’t most travel companies there already?
Well, looking at online travel agents (OTAs), traditional travel agents and even tour operators, they don’t offer their customers much in terms of extra services, nor in terms of consistency between different customer interfaces. Flights and hotels could be bundled with a wide array of choices – seat reservations, extra baggage and pre-order products to mention a few – which we know many travellers are willing to spend their hard earned money on. Seat reservation has proven one of the lowest hanging fruits, reaching conversion rates of up to 45% and showing healthy margins – that is, if the right merchandising techniques are applied.
However, offering seat reservation service in the booking or post booking flow is not an easy task. Legacy systems and multiple airlines with different integrations make this a major project where the enthusiasm quickly subsides. Resellers could develop their own solutions but this does require a considerable investment and very high maintenance.
To stick with seat reservation as an example, it means managing a large number of seat maps, aircraft layouts and setting up some sort of clearing house function to settle kick-backs from every connected airline. Or, they could continue to refer their customers to the airline.com web site where they probably have to enter their booking details all over again – provided that they know which airline they are travelling with. Obviously, this is not very user friendly, nor does it provide a good travel experience, which reflects in low conversion levels (4% is not unusual). To reserve their seats, they probably belong to the group we can refer to as the Really Desperate Buyers. And even if they are persistent enough, the reseller not only loses passengers to another web site but also the revenue.
As for most of the airlines, their indirect sales channels – Travel Agents, OTAs and Tour Operators – actually generate the majoruity of their sales. Yet they offer very limited flight-related sevices and even less so called rich content. How can they leverage their resellers to increase their ancillary sales – and at the same time their flight sales? Well, they can sell via their GDSs, heavily limiting their ability to launch new, differentiating service quickly enough and absorbing a large share of their margins. Or, they can continue trying to increase sales on their own web site, relying on the minority of customers who book direct. But even this has proven something of a a half measure, looking at the usually low conversion rates.
THE SOLUTION: CONNECT TO AN MDS
MDS stands for Merchandising Distribution System. ‘Okay’, you ask, ‘do we need another three letter abbreviation?’ Well, this one we need, or at least that which it represents. The MDS connects providers (carriers, hotels and other relevant services) to the indirect sales channels (tour operators, OTAs and traditional travel agents). It not only aggregates and distributes fares and availabilities, but also additional services like choice of seating and extra luggage. On top of this, the MDS merchandises the ancillary services to optimise conversion and revenue, from search and booking to post-booking.
This means that rich content is offered dynamically at the right time and place. The MDS makes pricing more dynamic and uses revenue sharing models that incentivises all parties to sell and promote the offerings, instead of penalising them by additional costs. Sounds alright, doesn’t it? Too good to be true, perhaps?
By simply connecting to the Paxport MDS, a service provider will make their services available and effectively marketed to travellers across a multitude of sales channels. Flights can easily be bundled with seats, hotels or a wide range of other services. And the reseller can offer their customers flight- and non-flight services that they have never been able to sell before, adding revenue and differentiating their brands.
Just as many petrol stations have done, they can outsource the actual shop to a retailing expert. And perhaps the best news: this is all available through one single contact – the MDS.