What can hotels learn from airline booking and distribution?

When it comes to distribution and bookings, hotels can learn a lot from the airline industry. In recent years, major airlines and low-cost carriers alike have sought new ways to drive bookings and ancillary revenue, without relying so heavily on the major distribution systems.

Instead of focusing purely on flights, some airlines are also investing in the entire travel journey. Rather than merely getting passengers from A to B, they’re selling a host of services and extras to smooth out the entire trip.

In the following post, we’ll highlight some of the latest distribution and booking trends in the airline industry, and highlight the potential lessons that hotels can apply to their own distribution strategies.

Delivering Richer Content

Last year, Amadeus and Sabre (two of the three major Global Distribution Systems) struck a deal to use ATPCO’S Routehappy Rich Content. This means airlines will be able to funnel richer content to travel agencies, online travel agencies, and travel buyers. While the technology will take years to fully roll out, it’ll help airlines better distinguish themselves from the competition and support traveler decision-making.

In addition to videos and images, passengers will receive useful information about their flights, including legroom, baggage allowance, Wi-Fi, and cancellation policies. This move represents a key turning point in airline distribution, but many carriers are still keen to reduce their reliance on third-party fare distributors.

Next-gen distribution

Airplane flight path graphic

Airlines primarily distribute tickets via three global distribution systems (GDSs), Amadeus, Sabre, and Travelport. The GDSs provide airlines access to a worldwide network of travel agents and OTAs in exchange for a fee on each booking, averaging US$12 per round trip.

These fees are nowhere near as high as those paid by hotels to OTAs (usually between 15-30% of the total booking), but given that over a billion flights are booked every year, airlines are paying out vast sums of money overall.

The incentive for airlines to reduce paying these middleman fees is pretty clear. Relying less on the GDS also means airlines can drive significantly more revenue by unbundling their fares and then offering services like luggage, extra legroom, and food and drink packages as added extras.

With that in mind, what exactly are airlines doing to reduce their dependence on the key distributors?

Innovative tech solutions

Partnerships with innovative tech startups might prove a fruitful new option. While it’s early days, companies such as Duffel promise to help airlines sell tickets through a new model of distribution.

By connecting to an airline’s reservation systems via a single API, Duffel allows travel suppliers to search, book, and pay for flights based on the latest availability and real-time prices. In addition, travel suppliers can purchase extra services and additional offers on in-flight meals or luggage allocations.

Based on this kind of partnership, traveler shoppers can enjoy more flexibility and choice over their flight options, and airlines benefit from suppliers actively selling add-ons and extras.

New technology is also helping low-cost airlines sell tickets on each other’s platforms.

The Worldwide by easyJet platform lets passengers book a connecting flight with easyJet’s partner airlines — Norwegian and WestJet. This arrangement allows airlines to sell tickets without an intermediary, such as a GDS or OTA.

Focusing on their own platforms

For years, airlines have underinvested in their own direct booking platforms. But this is changing, too. Last year, JetBlue stopped selling tickets through a dozen online travel sites in an effort to drive more traffic to its own website.

Discount carrier Spirit Airlines also started allowing customers to buy flights and change reservations through messaging platform WhatsApp (although customers must pay a $25 fee for the privilege.) With advancements in artificial intelligence, there are suggestions that other airlines may start allowing passengers to book through WhatsApp.

In an effort to capitalize on the booming Chinese tourism industry, both KLM and Ethiopian Airlines now allow passengers to book flights, track their flight status or check-in online all through WeChat — the all-in-one Chinese super-app.

Elsewhere, Singapore Airlines has built a new app that includes augmented reality, real-time language translation, and a feature that combines image recognition with speech and natural language processing to identify user intent and recommend relevant Singapore Airlines destinations.

Boosting ancillary sales

In the past, airlines have focused on selling tickets as their main revenue stream. However, revenue from ancillary services has boomed in the past decade. A report by Car Trawler and IdeaWorks predicted airline ancillary revenue would exceed $109 billion in 2019, which is nearly a five-fold increase from 2010.

The report highlighted that airlines are now providing “a sophisticated array of ancillary products along with a superior customer experience…” and that “the very best operators in the market are distinguishing themselves from the competition by using intelligent data insights to own the last mile.”

In short, airlines are getting better at knowing their customers and promoting services to enhance their overall experience.

Inspiration for hotels

Grand Hotel Entrance

Below, we’ve outlined some of the ways hotels can take inspiration from the way airlines are rethinking bookings and distribution.

Invest in your direct platform

With more sophisticated websites and apps, airlines are differentiating themselves from the competition, personalize the shopping experience, and selling more ancillary products and services. When it comes to the hotel industry, this is an area that’s ripe for investment.

Hotels often don’t treat OTA commission costs with the same level of attention as their own marketing channel, despite these costs ranging up to 15-25% of the incoming revenue. In reality, hotels can make the biggest impact to their bottom line with an optimized direct channel. There are numerous ways you can turn your hotel website into an invaluable revenue channel including:

Widen your distribution strategy

While often disregarded, metasearch can be a hotel’s most profitable marketing initiative. Google, TripAdvisor, Kayak, and Trivago (the four major metasearch players) each have their own benefits depending on the specific segments and markets you wish to reach. Ultimately, you need to select the channels that provide the maximum chance of conversion based on the budget at your disposal.

Airbnb is also a nascent but buzzworthy distribution channel for hotels. The company recently raised its attractively low commission fees (up from between 3-5% to 14%), but it still offers hotels a way to reach a different type of audience. However, be aware that this channel is more suited for very specific types of small independent properties over larger chain or resort properties.

Focus on ancillary services

One of the biggest opportunities for hotels to drive additional revenue is through ancillary services. Low-cost airline Ryanair is a master at this, promoting extras such as baggage fees, priority boarding, paid lounge access, onboard catering, and car rentals.

There are a host of ways your hotel can drive revenue through ancillary services, such as:

  • Sell local tours and activities: Hosting local tours and experiences is a great way to drive additional revenue and enhance the entire guest experience. You could host regular art and music events, movie nights with gourmet snacks and Champagne, or curate guided hikes in the local area.
  • Focus on the needs of your audience: What added extras might your target market want that you’re currently not selling? If you attract a lot of families, services and extras of value include personalized lunch boxes for kids to enjoy on family day trips, entertainment passes to popular attractions, or swimming lessons with a qualified instructor.
  • Cater to Business travelers: Corporate travelers are highly receptive to ancillary products and services that can make a trip more comfortable and convenient. According to a whitepaper by iSeat, popular ancillary services for business travelers include high-speed Wi-Fi, parking, stay extensions and paying for non-breakfast dining options.

Time to rethink distribution

A growing number of airlines are shifting their reliance on traditional distribution systems and finding new ways to drive revenue. There are lessons here for hotels to learn, which are underpinned by the need to reduce their dependence on the travel tech giants.

For more help on this topic, check out our post on how your hotel can optimize its distribution mix and make better data-driven decisions.

Nancy Huang

Nancy Huang

Nancy is the Senior Marketing Director at Pegasus and expert in strategic communication, brand development, and content marketing. She is an admitted travel junkie and loves finding amazing hotel deals when booking direct. Contact her at nancy.huang@pegs.com.

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