Revenue management used to be easy for travel providers. Airlines used yield management software to fill as many seats as possible at the highest possible price for each. Hotels did the same with rooms. But, as pricing has become competitive and transparent via online travel agencies (OTAs), margins on core travel services have shrunk. Travel providers are looking for new sources of revenue. How does this affect travel consultants?
Revenue stream — or river?
Consider that airlines earned close to $60 billion from non-fare revenue streams like baggage fees, food costs, premium seats, and seat changes in 2015 — up 18.8 percent from 2014 levels, according to a report from IdeaWorksCompany and CarTrawler.
Hotels lag the airlines in tapping additional revenue streams — only about 35 percent of them even measure earnings from food and beverage services, according to an EyeforTravel report. Yet this is changing. That same report found that 60 percent of hotels source 10 percent of revenues from ancillary sources and nearly a third have added 25 percent to their bottom line through these offerings.
EyeforTravel: 60% of hotels source 10% of revenues from ancillaries, adding up to 25% in profit
Your challenge as a travel consultant? To wade through the myriad of fare and extras options to help your customer find the best value for them, which may not always be the perceived lowest price.
Make sure your travelers aren’t paying more while trying to save money
Yet as travel providers reach beyond their core services for additional revenues, consultants have to keep in mind the end user and explain these fees to customers.
Customer satisfaction drives repeat business for both travel management companies (TMCs) and travel providers. TMCs know that if travelers aren’t aware of various fees and how to maximize their trip, customers are going to become cynics and sales will be hurt — not to mention brand loyalty. (More detail on that point here.)
Often, you can help your travelers spend less by helping them know where to spend more. A seemingly higher fare might have extras built in (e.g., paid seat, included baggage) because of the negotiated travel policy — resulting in savings overall. Or in the case of leisure travel, you can help a family get seats together when paid seats sell for lower rates — and are still available!
Finding the balance
Technology plays a critical role in finding the balance.
Total revenue management software provides in-depth, real-time data on how revenue-enhancement strategies are performing. Companies can tell how fee changes affect customer demand instantaneously, allowing them to fine-tune their offerings as they receive data.
Is $50 for baggage checking too high, driving customers away? How about $40? Will customers pay only $10 for in-flight Wi-Fi access, or would they go to $15? These results can be used to make decisions on pricing and put the customer, the consultant, and the provider in a better position.
But even beyond dynamically adjusting fees for demand, total revenue management platforms can be integrated seamlessly with customer satisfaction measurement. That way, consultants and providers can find out quickly which fees customers accept without resistance and which make them consider switching brands.
They can test combinations of benefits and rewards to offset dissatisfaction — for instance, if you pay $50 for more legroom, you can also board earlier — to find the optimal combination of cost and service. Next-generation revenue management systems can help travel consultants and providers understand what their customers are spending on, across all revenue streams, in real time.
These systems offer feedback on the choices travelers are making and the way these choices affect overall customer satisfaction. They should be quickly understood so even new travel consultants can present the best offering to travelers, even as those offerings become more complex.
These next-generation platforms can help you find a balance between generating additional revenue and preserving customers’ loyalty.