From the editor
A major growth driver of the global tourism industry market is the rising disposable income of the population. The travel industry is acclaimed to be the second fastest growing sector in the world. According to The World Travel and Tourism Council (WTTC), the travel and tourism sector grew at a rate of 3.9% in 2018, contributing $8.8 trillion in revenue as well as 319 million jobs to the world economy.
The travel industry is therefore; a booming industry.According to the International Air Transport Association (IATA), airline passenger volumes will double by 2035. It is imperative for businesses within this sector to think strategically to prepare for future growth.
Robots and travel
Is the robotic age closer than we think? Changing consumer habits and behaviour within the travel industry has motivated the popularity of robotics. Millennials and generation Z customers are increasingly seeking self-service methods. As a result the computerisation provided by robots appeals to travel agents, hotels, OTAs and other travel related business within the industry. So the answer is in fact a resounding “yes”.
An interesting robotic development within travel thus far is Travelmate. Travelmate is the robotic suitcase which removes customer hassle from travel. The suitcase has the ability to follow its owner around autonomously. It uses collision detection technology and has 360 degree turning capability. This removes the need for the customer to carry the travel case.
Robots are also being utilised within travel agencies and hotels. Robots are used to gather important information from the customer and relay it back to the agent, thereby improving efficiency. Japanese based Henn-Na Hotel has 100 rooms featuring multilingual robots at the front desk, robot porters and a robot arm locker service.
The impact of ancillaries
on revenue in the travel
Booking.com found that 80% of customers prefer to self-serve in order to get the information that they need when booking for travel. It is also common that with an increasing range of online travel options that customers choose to shop around before making a purchase. According to Tnooz, American holiday package buyers visit approximately 38 travel sites before booking. Travel merchants therefore need to provide additional value, over and above the flight ticket, to win customers. Ancillaries offer the ability to add customer value while simultaneously generating more revenue streams.
According to Mckinsey, ancillaries alone contribute an estimated $50 billion – $55 billion a year to airline profits exceeding the industry’s $31 billion average annual operating profit.
Ancillary revenue can be split into four categories according to a study by Amadeus:
- A-La carte; Ancillary revenue generated from selling products or services separately. In this instance the customer is clearly looking for a solution that improves the overall travel experience.
- Commission based; Ancillary revenue generated through dynamic packaging handled seamlessly through one transaction and where choice is left to the customer. These include offers such as personalised packages, subscriptions and branded fares.
- Point sales; Using points as incentives in the purchasing of business promotional or loyalty based activities.
- Advertising; Ancillary revenue generated from an inflight magazine or fee based product samples.
According to Phocuswire (powered by Phocuswright, it is a comprehensive daily news companion providing exposure to sought-after research, valuable industry data and expert analysis to the travel industry), “Airlines are the ‘gateway’ to the travel experience”. This is because most journeys start with the flight, however, there are various opportune moments in the time leading up to departure to engage with customers. Airlines are investing more and more into ancillary related technologies to capitalise on these opportunities.
The more accessibility there is to a diverse range of ancillary products, the greater the ability to offer relevant products and contribute toward unique customer experiences, increasing customer satisfaction and in-turn ancillary revenue.
For airlines specifically, a large gap is recognised within the analytics space for ancillary products. This stream of focus is usually left to the responsibility of marketing/sales teams and is therefore completely separate from revenue management decisions.
The key to maximising ancillary revenue is offering the best product suite to the customer while maintaining a fluid reservation experience as well as alignment between revenue management decisions and marketing/sales teams. Enabling access to various customer touchpoints, as well as, the ability to provide “hyper-relevance,” which means to serve customers differently based on their constantly-evolving needs. This demand based ancillary model will drive more revenue and satisfy customer needs as the development of ancillary revenue requires travel businesses to become travel retailers, providing services that extend beyond their core travel offering.