This is a viewpoint from Sabre CEO Tom Klein. For more executive perspectives, browse the ongoing Exec Pulse series here.
Ancillary revenue has been the greatest source of revenue growth for airlines over the last several years. In 2015, ancillaries contributed roughly $60 billion of industry revenue last year. The ancillary channel is a significant contributor to the increased profitability recently enjoyed by many airlines.
Understandably, airlines want to deliver continued growth in this area, which Sabre wants to help facilitate. At the outset, airlines focused on generating this revenue through their direct channels. This means that there’s quite a bit of untapped demand elsewhere.
One clear channel of growth in ancillary revenue is the travel agency channel. We expect the next spate of growth will be driven through the GDSs. This is a new opportunity for airlines, who are able to offer branded fares, bundles and ancillaries to travelers via agency partners.
Investments made over the past few years have resulted in enhanced GDS capabilities that are now mature enough to drive meaningful sales activity. These product capabilities, combined with a critical mass of airline participation, is driving the current exponential growth in the sale of ancillaries and bundles through the agency channel.
There are clear signs that more and more airlines are embracing (or getting ready to embrace) this strategy. Those that do will likely see a windfall while those that don’t will be at a competitive disadvantage.
“If you distribute it, they will come.” -Sabre CEO Tom KleinShare
The desire to enhance the traveler experience, coupled with the commercial willingness to expand access, is growing. This reality is especially timely, as both airlines and agencies pursue revenue growth. Agencies hold long-standing relationships with business and leisure customers. This long-term commitment to their customers positions them as a conduit for personalization. Agencies also use their depth of knowledge to streamline the ability for passengers to customize their trips. This is the hands-on hospitality that many travelers expect.
Airlines are also interested in empowering the traveler. This is accomplished by expanding the depth and breadth of bookable options across all channels. As carriers look to burnish their retailing and merchandising skills, executives are increasingly acknowledging the need to sell their products and services where the consumer wants to buy them.
Regardless of channel, the consumerization of technology creates an expectation of a seamless user experience. And that expectation exists for both the end consumer and those serving that consumer.
Building for the future, today
An experience that differs measurably across channels is an inconsistency noticed by today’s traveler. That’s why we built the new Sabre Red Workspace. Extended merchandising capabilities mean that travel consultants have the ability to tailor any given trip to the traveler’s unique needs. This is the expansion from agent to consultant, from reliable executor to trusted advisor.
By giving consultants direct access within the GDS workflow, they are better able to serve their customers. Better service and faster, intuitive technology leads to more opportunities to offer travelers what they desire. This satisfaction also generates more revenue. For airlines, this new revenue comes from clear differentiation of their products within the agency workflow.
A consumer making a travel purchase has his or her credit card in hand, ready to buy. At this buying stage, airlines need to capitalize on the opportunity to target the right add-on product to the traveler. By enlisting their distribution partners, airlines facilitate unique itineraries and personalized services that enhance the travel experience.
Loyalty and long-term success are achieved through not just the most helpful booking experience but also following it up with a personable, memorable travel experience. That’s what excellent travel agents do. And that’s the capability we are enhancing through technology innovation.
This was a viewpoint from Sabre CEO Tom Klein. For more executive perspectives, browse the ongoing Exec Pulse series here.