Lee Hayhurst spoke to two long-standing partners in the travel sector who are proving there is a vibrant market for intermediaries selling flights as long as they put the customer first.
OTAs that sell flights on price alone have been warned they are finished in a sector that is embracing merchandising and offering transparency and added-value to customers.
He said Travix’s decision to embrace merchandising five years ago, working closely with airlines like Lufthansa and Air France/KLM, has paid off with a direct impact on revenues of 50%.
Travix has not followed other flight specialists in adding hotels and other product to increase margins believing if it can work with airlines to sell more ancillaries it will be rewarded for doing so.
“OTAs that focus on price and being the cheapest will disappear,” said Delaere. “The only ones that can survive are ones that are adding value for airlines, for the consumer and making decent money.
“We want to show the customer the true picture and what they can expect instead of all these flashy cowboy practices.”
This move to be more transparent and customised about what the customer is buying has seen Travix benefit from reduced calls to its contact centre while customer service has improved.
John Mangelaars, chief executive at Travix, said:
“For us it’s not about merchandising per se as a goal, it is about displaying the elements of a product. We combine merchandising from an airline with other products, so this whole ‘portfolio of things’ can help the customer decide which ticket they want to buy. This is for us why merchandising is a very important component in selling or offering the right product to the right customer.
“Six or seven years ago you would have a ticket, everything was included, there would be a high margin for the airline. People could say the airlines have taken stuff out and now they charge for that. I would say there’s much more customisation possible for the customer, there’s much more transparency.
“Merchandising requires a long-term vision, a long-term execution and a long-term partner. The past five years have been a great ride with Amadeus. Now we are at the point where we have a very complete and comprehensive portfolio that actually offers the right fare to the customer.”
The firm has retained its call centre in Berlin after deciding not to go for a cheaper offshore option, Delaere saying “you cannot ignore customer service”.
But he said, after 25 years in travel, roles are changing. “What I recognise in our teams is they’re all graduates, all database driven, it’s all about algorithms, artificial automation and coding.
“It’s all about how we can get simplicity out of complexity. Skills, and what people are required to do, are changing rapidly, and that’s a good thing.”
Travix facts and figures:
- Travix operates five brands: CheapTickets.nl; Vliegwinkel.nl; BudgetAir; Flugladen and Vayama
- It serves five million passengers annually, enough to fill 85 aircraft every day;
- The firm operates in 39 countries and has 580 staff in offices in the Netherlands, Australia, Curacao, Germany, India, Singapore, UK and the US
Amadeus and Travix have piloted developments in Iata’s New Distribution Capability (NDC) standard as part of the GDS’s NDC-X programme created to drive innovation in airfare retailing.
Delaere said NDC, regulation and consolidation will continue to change the OTA business model as ancillary merchandising increases and airlines take more control of distribution.
But he believes Travix’s success in embracing the changing demands of airlines by prioritising the products and services their customers want puts it ahead of the game in a fast-evolving sector.
“Demand for flights will remain very important and they will always be a place for flights specialists. The firms that are clever will survive and automation will be a pre-requisite.
“Those firms will survive because they will add value in the chain, but you need to be innovative and think beyond what you are doing today. Those that don’t will not survive.”
Francesca Benati, Amadeus senior vice president of online travel at Amadeus, said focusing on the customer experience is how OTAs can maximise revenue.
Travix merchandising facts and figures:
- In 2016 Travix integrated fare families
- It then started offering chargeable seats with the Amadeus seat map
- In 2018 Travix brought in chargeable bags through Amadeus Ancillary Services
- 50% increase in revenues attributed directly to merchandising
- Travix sees up to an 80% attachment rate of an airline ancillary onto a basic fare
She said the partnership with Travix, Amadeus and airlines goes beyond anything else she sees in the market. “They have been brave to invest in a long-term partnership,” Benati said.
“It’s not only the technology which is head of others. The good thing is they have also invested in people, partnerships and discipline.
“It’s the fact that we could secure the commitment of Travix, not just in tech but in people to maintain the expertise in the team.
“And the level of shared transparency has really proved to be successful. We have similar partnerships, but not with the same level of transparency.
“Every customer uses merchandising differently according to their strategy, but the way Travix has approached it has made them much more successful that the others.”
Although Travix is a keen supporter of NDC and the advances in airfare merchandising it promises, Delaere said the current coronavirus outbreak has been something of a reality check.
He said there is no way the NDC system could have coped with the “tsunami” of cancellations due to the virus because proper automation does not exist.
“At the moment GDSs are ten times better than anything in NDC. We have no idea how we would have handled this with NDC alone. Automation does not exist. It would have been a disaster.”
“At this moment of crisis and disruption it makes it more important than ever to have automation for scale and being really integrated to serve the customer. This has probably been underestimated.”