While a small number of airlines have taken an aggressive posture against online travel agencies (OTAs) and metasearch engines (MSEs), most have accepted that aggregator partnerships have become a permanent, necessary part of their distribution strategy.
But playing well with OTAs in the search-booking sandbox poses drawbacks – starting with $5-$12 cut from each booking. According to data from Take Travel Forward, the global airline industry pays out $7 billion annually in commissions and fees to brick-and-mortar and online travel agents.
But those costs aren’t the only, well, costs: With the growth of OTAs and MSEs, airlines have paid to let others sell their inventory – enabling the aggregators, not airlines, to own the customer relationships long-term (and remarket to travelers over time). To win back flyers, airlines know they need to renew their focus on cultivating brand-loyal customers by regaining what they lost most in the rise of the OTA ecosystem: direct bookings.
For most global carriers, however, the direct-to-consumer strategies of the low-cost set aren’t sustainable. For larger airlines, the key isn’t becoming adversaries to the OTAs by selling all of their own inventory – it’s creating parity in their ability to attract customers directly to their websites, nurture them through successful transactions, and keep them engaged after purchase. That means boosting their investment in the key battleground of online customer acquisition strategy – online search – and using smart tactics to boost value on both the airline and traveler sides of the direct booking transaction.
Boosting value beyond bookings
Direct bookings on an airline’s branded website represent the highest value conversions for carriers for a number of reasons. For one, direct-channel interactions keep customers in the sales funnel longer – enabling airlines to drive more revenue from ancillary sales. (My company, EveryMundo, has found that ancillaries add anywhere from 5% -12% in overall revenue when a fare is purchased directly on the carrier’s website, compared to just 2% -5% incremental revenue when a fare is purchased through an OTA or metasearch engine.)
More importantly, though, direct bookings create direct relationships between airlines and travelers: Once a customer engages with an airline’s website, an airline can extract more data (and thus marketing value) from the customer relationship. By conceding so much search and booking volume to OTAs and MSEs, however, airlines have been missing those opportunities almost entirely.
With most consumers starting their travel planning with search, and OTA and MSE sites seizing the lion’s share of search traffic, carriers need to bolster their presence in search to attract new customers. But they do so at a significant disadvantage: OTAs and MSEs devote significant resources into developing and maintaining the complex infrastructures needed to compete in the online channel; Expedia alone pays a reported $2.8 billion per year on marketing. Airlines, however, have many other budgetary concerns to worry about (airplanes and regulatory issues being just a few).
To seize greater market share, airlines don’t need to pull themselves out of the aggregator ecosystem entirely. The key isn’t boosting SEO spend; its deploying solutions that help them borrow a page from the OTAs’ online search playbook at a lower cost. On the customer acquisition side, new technologies are giving carriers the performance infrastructure to seize a greater share of online search volume as a low-cost distribution channel.
With performance marketing strategy, airlines can “productize” their flight inventories for online search and create more touchpoints for acquiring customer data. Armed with that data, airlines can remarket to customers more intelligently and deploy more personalized campaigns to convert travelers via the direct channel. (I’ve seen one carrier increase new customer acquisition by more than 500% using performance infrastructure.)
Once travelers have been converted through carriers’ own sites, other tools help airlines maximize the value of customer data to earn greater lifetime value from those direct-channel conversions. Solutions providers such as 15below specialize in targeted passenger communications – such as flight status updates and other notifications – that maximize customer engagement and provide travelers with important information at the exact moment they need it (in the event of gate changes or disruptions).
Notification-driven solutions can also be integrated with a variety of airline data sources, helping carriers ensure their notifications reach as many travelers as possible and enabling them to deploy targeted upsell opportunities based on travelers’ activities. (For example, sending a discount on fast-track security access to a passenger who checks in late, or a dynamic car-hire quote based on booking insight and availability.) Those kinds of messages can keep travelers active and engaged with the airline well beyond the initial conversion, driving stronger loyalty and more ancillary transactions and return purchases.
The convergence of such tools can not only lessen the impact of OTA fees on airlines’ bottom lines, but also create untold opportunities for carriers to build brand awareness and cultivate customer loyalty. Data culled from solutions on both the acquisition and post-purchase engagement sides of a transaction can customize a passenger’s loyalty program, predict a traveler’s future behavior, or offer high-value perks and discounts based on how the consumer prefers to interact with the airline.
By driving search parity with OTAs and MSEs – and delivering greater value to direct-channel customers through targeted offers – airlines can grow their direct bookings more organically, and take a more direct-to-consumer approach without revolutionizing their distribution strategies entirely. Over time, that can make OTAs a less permanent, less necessary part of their distribution strategy (and ultimately boost airline revenue and marketing outcomes long-term).
Seth Cassel is the President of EveryMundo, the performance marketing technology and services company specializing in airline eCommerce and online customer acquisition. To find out more about EveryMundo meet with the team during Aviation Festival London.
By Seth Cassel, President at EveryMundo and 15below