Travel Companies Missing Ancillary Opportunities at Point of Customer Purchase

February 16, 2012

Guest Post: Al Lenza, CEO of Lenza Group LLC.


Despite critics' best efforts to demonize the travel industry's continued expanded offerings of optional services, their sustainability not only seems assured, but we are in fact only in the embryonic phase.

This is based on 2 important, fairly basic factors. First, airlines, car rental companies, cruise lines and other sectors all seek and need new sources of revenue outside the core transaction price. Secondly, (with bag fees the exception) an overwhelming number of customers want the option to enhance their particular travel experience and will pay to do so. Some examples:

  • Some customers want and are willing to pay for premium cabin or just for plain better seats.
  • Some want to guarantee a private table in the packed cruise line dining room.
  • Many customers are willing to pay extra so their hotel room is not by the elevators.

The list is endless. And certainly travel is not unique - it just seems to get the scrutiny that few other sectors do, and often accused of nickeling and dimeing and of "hidden fees". But consider what other industries routinely do - the iPad is not really $499, Dell laptops are not $399, the Kindle eBook is not $79, and smartphone plans are not $29.99. Those are basic advertised price points but effective rates paid by most customers are significantly higher, determined by each individual customer based on preferences. All of these "add-ons" are sold with the initial purchase.

These examples point out where travel companies are mostly missing out - successful up-selling and cross-selling at point of sale. For various limitations in distribution (mostly done in supplier websites) and technology (limited capability to sell in corporations, for example), most travel-related merchandising is done near the check-in window. So outside of checking in, there is a huge market that remains largely untapped. And outside respective supplier home markets, few optional services are sold today as few are even enabled outside the check in environments.

Unlike unbundled products like airline bag fees (collected on day of departure) there is a large untapped market for value-add products and services offered and sold in connection with the initial travel purchase. Products like premium cabin, seats and wifi in hotels, airlines, and cruises are just some examples of services tailor-made for selling with the initial purchase. Suppliers with the right technology and content partners are figuring it out.

It is only a matter of time and potentially worth billions.

 

About Al: Al has been involved in all aspects of distribution for airlines, online travel sites, Global Distribution Systems (GDS) and various industry joint ventures. As Vice-President, Distribution and E-Commerce at Northwest Airlines, Al was responsible for developing and implementing all of Northwest’s distribution and e-commerce strategies. He negotiated all GDS and OTA agreements and was a leading player in the creation of airline joint ventures Orbitz and Hotwire. Prior to Northwest, Al held various management roles including Vice President at Continental Airlines and its GDS, System One Corp.