This week’s musings, reflections and observations…

1. Despite the profundity of bad news about the travel industry, I continue to think that the industry’s financial woes present unprecedented opportunities for the travel affiliate channel to establish itself as a strong and valuable partner for travel suppliers worldwide (see item number 5 in my May 11th ‘Things I Think’ bog post).

Since positing those reflections, the industry continues to be battered by more bad news, with the airline industry most recently leading the pack.

Speaking at the 65th IATA Annual General Meeting in Kuala Lumpur, this past weekend, Giovanni Bisignani, IATA’s Director General, told delegates that IATA has revised several major elements of its industry forecast; they are now anticipating an unprecedented 15% decline in industry revenue, cutting the industry’s top-line by some $80bn, from $528bn in 2008 to $448bn in 2009, while ratcheting-up estimated industry-wide losses for 2008 to $10.4bn from their previous estimate of $8.5bn released just 2 months ago.  IATA also expects passenger demand to contract by 8% to 2.06bn travelers this year, compared to the 2.24bn carried in 2008.

In his prepared statement, Bisignani made it very clear as to the impact and implications of these somber statistics: “There is no modern precedent for today’s economic meltdown” and that This is the most difficult situation that the industry has faced. After September 11, revenues fell by 7%. It took three years to recover lost ground, even on the back of a strong economy.”

However, for travel affiliate marketers, perhaps the most compelling statement Bisignani made was this: “… Our future depends on a drastic reshaping by partners, governments and industry.” TravelDividends wholeheartedly agrees…and suggests that the travel affiliate distribution channel should be one of the ‘partners’ that the airline industry seeks help from to overcome some of the problems the industry is facing.  The question is: how long will it take before those airlines that currently don’t work with the travel affiliate channel wake-up to the distribution and economic benefits that the channel offers?  The longer they exclude travel affiliates from their distribution mix, the longer their woes will continue.

2. I think the following example from Virgin Atlantic Airlines (VS) and VisitBritain underscores this conclusion – and the wisdom of using travel affiliates: VisitBritain, The UK’s tourist board, launched its Get More Britain for Your Buck” campaign in partnership with Virgin Atlantic.

The new program promotes a range of summer travel bargains to Britain, including a 7 day ‘fly/drive’ package starting at $519, or a 6 night ‘London Fling’ featuring air and hotel for as low as $659 (all rates are per person and exclude airport taxes and fees).

These and other bargains can be found on VisitBritain’s online deals page, http://www.visitbritain.us/campaigns/virgin/packages.aspx, or alternatively at VirginAtlantic’s website, http://www.virgin-atlantic.com/en/us/index.jsp, and VSs tour division, Virgin Vacations, http://www.virgin-vacations.com/site_vv/index.asp.

American Airlines, United Airlines, and Continental and Northwest – all of which offer significant seat capacity and a range of tour packages for US travelers to the UK – are hemorrhaging red ink, while Virgin Atlantic, a much smaller airline by capacity, schedule and frequency, is reporting strong profits this year.  Besides the losses, what else is different about these U.S. carriers and Virgin…well, these other guys don’t work with travel affiliates.

Both VisitBritain and Virgin Atlantic are big supporters of the travel affiliate channel.  If you’re not familiar with Virgin Atlantic (which is also celebrating its 25th year flying with several other special travel affiliate programs), check out their affiliate offerings at AffiliateFuture, their preferred affiliate network.

3. I also think I should mention that VisitBritain’s affinity for working with travel affiliates doesn’t stop with airlines, hotels and car rental companies.  One of their better programs involves their Great British Heritage Pass, which is offered through another big-time supporter of the travel affiliate channel, The Leisure Pass Group.

The Great British Heritage Pass enables travelers to gain free entry to some 600 attractions, historical sites, museums and other points of interest around England, Scotland, Wales and Northern Ireland including Stonehenge, Edinburgh Castle, the Roman Baths, Shakespeare’s Birthplace and much, much more.  Passes are available for 4, 7, 15 and 30 day durations, and can be purchased either for individual or families.

And for travel affiliates, here’s the best part of the Great British Heritage Pass: they offer 5% commission on every sale, with performance incentives potential of up to 7%. With an average transaction value is GBP £130 (approximately $208), travel affiliates can make a minimum of about $11 per pass, before incentives kick in.  Not bad for a product that can only be purchased outside of the UK, which makes the Heritage Pass a great attention grabber for most tourist planning their trips to the UK.

The Leisure Pass Group, the largest and most respected developer and administrator of tourism related smart card sightseeing passes and systems, also offers a London -specific sightseeing smart card, The London Pass. This pass provides entree into over 55 of the top tourist attractions in London, including the Tower of London, Kensington Palace, St Paul’s Cathedral, Windsor Castle, London Zoo, the London Aquarium and Shakespeare’s Globe.   Similar to the Heritage Pass, this product also offers a great pay-out to travel affiliates; with a base commission of 4% and performance incentives of up to 7%, The London Pass has an average basket value of GBP £187 ($368)…which, if you haven’t figured out, is almost the cost of an airline seat to London!

Both The Great Heritage Pass and The Leisure Pass Group/The London Pass can be found at Commission Junction, the affiliate network used by these two stellar British travel merchants.

4. Staying on a European travel theme kick, I think that President Obama and his family’s State visit to France will spur interest in some American travelers to replicate this popular president’s Parisian sightseeing itinerary and plan summer and autumn vacations to Paris.

Furthermore, my sense is that some enterprising travel affiliates will quickly pull together a campaign that mimics that of President Obama’s family, and in so doing, make a tidy profit along the way.  For those travel affiliates interested in crafting such a program, I suggest you work with Air France, which has a US affiliate program, and if you’d like to monetize the Obama’s actual sightseeing itinerary, then you should offer The Leisure Pass Group’s Paris Pass to your customers as well.

I’d be interested in hearing from any of our readers who decide to offer an ‘Obama package’, or if they hear about another travel affiliate offering something similar, how well this program performed for them.

5. To end today’s thoughts with another airline vignette which further puts the sorry state of the airline industry into perspective, it was reported this past week that Irish low cost carrier (LCC) Ryanair will in fact implement its ‘pay-per-pee fee’ at some point over the next year or so.

In a recent article in The Guardian, Michael O’Leary, the oft-quoted (and rather abrasive) CEO of the über LCC is quoted as saying of the speculation about forcing passengers to pay for a trip to the loo: “We are serious about it,” and, when asked if Ryan Air would consider charging £5 a toilet visit in order to eliminate the need for in-flight lavatories altogether, he replied: “If someone wanted to pay £5 to go to the toilet I would carry them myself. I would wipe their bums for a fiver.”

The point here is not the absurdity of O’Leary’s remarks, rather, the painful truth that underscore them, for in fact, most of Ryanair’s – and increasingly every airline’s profits – are being driven not by the carriers’ air fares, but rather from ‘ancillary’ revenues derived from their providing for a fee services that in the past used to be included in the airline’s base airfare.  For Ryanair, in 2008those fees topped £518m, or $832m, or a whopping 23% of overall revenue.

That’s the wave of the future for all airlines around the world; travel affiliates should take heed of this trend, and when designing their airfare campaigns with airlines, online travel agencies, or consolidators, make sure they optimize the sale of these ancillaries to their customers.  That’s where the money will be made.

Love him or hate him, O’Leary always makes great copy.  Until next week’s TITIT (Things I Think I Think), I’ll leave you with a couple of other classic O’Leary answers to questions asked by the travel trade for you to ponder …. Ciao!

On Ryanair’s no-refund policy
“What part of no refund don’t you understand? You are not getting a refund so f___ off.”

On environmentalists
“We want to annoy the fuckers … The best thing we can do with environmentalists is shoot them … They are luddites marching us back to the 18th century.”

On himself
“I don’t give a shit if nobody likes me.”

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