This week’s musings, reflections and observations about travel affiliate marketing…

1. I think it’s great that more and more executives in travel companies up and down the travel value chain are jumping head-first onto the ancillary revenue bandwagon…for many companies, this is a ‘no brainer’ as selling ancillary revenue sometimes is the difference between making a profit or loss. This viewpoint – as well as a number of insights which carry strategic significance for those in the travel affiliate industry – was brought home in a recent interview conducted by Eye For Travel with Bobby Healy, CTO of car rental industry booking engine and middleware solutions provider CarTrawler.

The article opens with a frank warning that the “…mere addition of an ancillary product to the existing offering is no longer sufficient” for travel companies to maximize their potential ‘wallet share’ of their customers.  Rather, to be successful, Eye For Travel argues that suppliers must fully integrate their ancillary partner seamlessly into their website; this in turn will enable them to “…offer their customers the ability to add ancillary products either as individual components or fully-integrated as a dynamic package.”

In response to a number of follow-on questions to this observation posed by Eye For Travel, Healy provided several strategic insights and recommendations as to how travel companies can build an effective ancillary strategy.   One series of interrelated question in particular grabbed TravelDividends’ attention: Given the huge possibility of losing a customer at any point while they’re on the retailer’s website, when is the optimal time for a retailer to “hit the consumer with cross sell options” without jeopardizing their core product, Eye For Travel asked Healy?  How can suppliers attain these “right times right from the moment a consumer comes to their site? Should you start selling add-ons from home page?”

“Actually,” Healy responded, “… there is no single place to ‘hit’ the consumer – we prefer to call it “touch” by the way.”  Citing airline and car rental examples to buttress his conclusion, Healy went on to say:  ”Typical lead in time for a flight booking is 44 days.  Typical lead time for a car rental is 19 days.  Where is the consumer for those other 25 days? That’s where you lose them – so if you are taking your online retailing seriously, you’ll be perfecting how you touch your customer during those 25 days and you won’t be overly worried about what you’re doing on your home page, or the size of your call to action buttons.”

To further substantiate the premise that inserting an ancillary revenue option directly (and early on) into the booking path didn’t have any noticeable impact on customer drop-out rates, Healy went on to say “As for add-ons, I’d say yes.  From experience we see upwards of 30% of ancillary sales being generated on the home page. I don’t see that as cannibalizing the core product.  There is no core product.”

We concur with Healy’s observations, and believe that if travel affiliate marketers aren’t integrating ancillary revenue programs with their core offerings, or thinking about ways to increase and leverage their customer ‘touch points’, they should be.  We’re also curious as to what experiences our readers – travel suppliers and travel affiliates – have had with ancillary revenue programs, and whether you agree with Healy’s comments…drop us an email and let us know!

2. I think that just when most people think that things can’t possibly get any worse, that’s a cue that we’ve only seen the ‘tip of the iceberg’.

This appears to be the case for the U.S. airlines.  The Air Transport Association of America (ATA), the U.S. airline industry’s trade organization, reported last week that passenger revenue fell 26% in May 2009 versus the same month in 2008.  May’s performance extends the industry’s monthly year-on-year passenger revenue decline to a seventh consecutive month.

The ATA also noted that the number of passengers traveling on U.S. carriers in May fell 9.5% while the average price to fly one mile fell 17.6 %.  The revenue implosion extended beyond mainland United States operations, including the trans-Atlantic, trans-Pacific, and Latin markets.

So, what could be worse than ATA’s financial report?  How about the warning from Fitch Ratings which postulated possible bankruptcy filings by United Airlines, American Airlines, and US Airways, while downgrading Delta Air Lines’ (DL) credit facility rating into the speculative or ‘junk’ category.

As reported on ATWOnlineFitch Ratings cited “the continued erosion of the airline’s near-term cash flow generation” for Delta’s downgrade, and furthermore expects that DL will “report another year of substantially negative free cash flow in 2009 as the airline struggles to adjust capacity to a diminished level of demand.”

ATWOnline quoted the Fitch representative as saying despite the challenges facing DL, it “…is in better shape than several of its rivals.”  While Delta’s credit rating was lowered from B to B-, in comparison, American Airlines, US Airways and United Airlines all have ratings of CCC, and according to Fitch, any of those carriers could be forced to file for bankruptcy protection as early as the winter if operating trends fail to stabilize.

I may be stretching the positive impact that travel affiliate marketers have on the financial performance of those airlines that choose to work with the affiliate distribution channel, but I don’t think that it is just a coincidence that the least ‘endangered’ U.S. airline from among this group, Delta, is also the only one that distributes its products through travel affiliates.

Does anyone else share my sentiment?

3. I also think the sorry state of today’s airline industry has been perfectly summed up by old friend Dale Moss, Managing Director of all business class airline Open Skies.

Never one to mince words, last week in The Transnational, an online news source focused business travel management and procurement, attributed this quip to Dale:  ”There are two kinds of airlines now. There are those who talk about their objective of survivability and then there are those who lie.”

Methinks Dale is right.  It should be duly noted that Open Skies is not immune to the trials and tribulations facing most airlines today; according to many public sources, unless their performance improves considerably, Open Skies may be shuttered by its parent, British Airways.

4. I was saddened to hear about the passing away last week of cruise industry pioneer Mauro Terrevazzi at his home in Monaco.  His achievements in and contributions to the global cruise industry are countless, and have helped to pave the road for the industry’s success.

To highlight just a few, Mauro was the founder and former CEO and Chairman of Silversea Cruises, arguably the preeminent upscale cruise line in the world, as well as former CEO of Sitmar Cruises and senior executive with Vlasov Group.  In 1984, along with 11 other partners from Vlasov Group, Mauro founded VShips, which in short order evolved into one of the world’s largest ship management companies.

I had the privilege of working on several consulting projects for Mauro during his time with VShips and Silversea.  He was truly one of the great visionaries and leaders of the modern cruise industry and a true gentleman. Mauro will be greatly missed.

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2 Comments

  1. The numbers quoted for lead time to purchase have been updated (http://shearwaterblog.wordpress.com/2009/05/21/bobby-where-were-you/), but the general theme remains the same. I totally agree with your comment regarding “thinking about ways to increase and leverage their customer ‘touch points’” as there are so many points where a customer can be sold to, and not just when they make the original purchase.

    Posted June 30, 2009 at 12:49 am | Permalink
  2. Nick

    Hi Martin,

    Many thanks for providing us with the updated lead time numbers…I suspect those will continue to shrink, given the the realities of the marketplace. I’ve read your blog posts on ancillaries and you present some terrific insights and ideas to the travel trade.

    I trust all is going well foe 1-A, despite the downbeat travel market.

    Thanks again for your comment and I look forward to staying in-touch.

    Cheers,

    Nick

    Posted July 7, 2009 at 8:37 am | Permalink