Populate the sidearea with useful widgets. It’s simple to add images, categories, latest post, social media icon links, tag clouds, and more.
Should airlines become OTAs? This is a question I have heard a lot lately. Hence, I wrote how some of the airlines are already flirting with the OTA model in my 2019 Airline Ancillary Revenue Trends article. The article is our most-read article currently, so there is certainly buzz around the OTA idea.
You probably heard about how your airline needs to take a bigger piece of the overall travel pie. Cross-selling hotels and vacation packages are the logical next step you need to take, right? Our research data certainly shows so:
60% of the 45 surveyed airlines in the 2019 Airline Digital Retailing survey (disclaimer: the final report is not published yet and is coming soon) said they do some sort of flight+hotel or vacation packages.
You also heard about how you as an airline control the first part of the travel journey, how you know the traveller’s intent, you have the data. So, cross-selling hotels and vacation packages should be easy for you, right?
The current reality is that just cross-selling hotels and vacation packages won’t make your airline an OTA.
In the ancillary revenue results published by IdeaWorks, the share of hotels and vacation packages is still insignificant for most airlines. For example, for HK Express Asian LCC airline and one of the leaders in ancillary revenue, hotels and vacation packages represent just 1% of total ancillary revenue. JetBlue’s share is much higher at 6% (one of the highest for vacation packages), but one could argue this is still a low number.
If you look at the website traffic for airline hotel and vacation packaging cross-selling website, you’ll see a similar story:
Airline vacation packages websites are still relatively small; you could even say insignificant. Furthermore, most of the traffic to vacation websites comes as referral traffic from the parent .com websites. You could interpret that as few digital marketing activities are currently going on to really build and promote the vacation website (hint: you can read more on that later in the article).
So, does cross-selling hotel and vacation packages actually make your airline an OTA?
I would say no. And most airline ancillary revenue results and website stats would confirm this. But how can you make it work? Is there a bigger potential for airlines to increase ancillary revenue?
As usual, I tried to answer these questions with the help of a real expert.
You probably can’t find much bigger experts in selling hotels and vacation packages than Expedia, right? Expedia and Booking.com are by far the world’s largest OTAs. In addition to running their own OTA business, Expedia through Expedia Partner Solutions (EPS) offers airlines, and other partners access to their huge hotel inventory.
Basically, if you’re an airline and want to cross-sell hotels, you can use their API or template solutions to do that. However, they don’t just offer content; they also help airlines with advice on how to be better at hotel and vacation packaging cross-selling.
Liu He, Senior Digital Optimization Consultant from Expedia Partner Solutions, is one of the experts that work with airlines and other partners, and I had the chance to talk to him about how airlines can grow their hotel and vacation packages ancillary revenue.
Seeing those small numbers when it comes to airlines cross-selling hotel and vacation packaging, I didn’t want to beat around the bush, so I asked Liu directly: What are we (airlines) doing wrong?
What we’re seeing it is almost a separate product, and I know we’re calling it ancillary. But realistically, I think when airlines started looking into the future right, I think the main thing is that they’re all turning almost into OTAs with flights and planes, right? And that’s the key thing. They need to start integrating the ancillary into the overall brand.
How is this seen in practice when it comes to airlines packaging flights and hotels?
I think one of the interesting things I see quite often in this space, at least in the dynamic packaging space, really is a lot of airlines actually going out and saying: here is a hotel, go pick a hotel. And here we’re going to give you a set of standard flights. We’ll just pick them for you.
And I think this is it’s an interesting gap because what we find is that actually drops conversion quite a bit. Because when you are picking that flight it could be a 1 a.m. in the morning, for example, and you know with no clear way of changing that, not a great experience.
I couldn’t agree more with Liu. Personally, I did a conversion optimization project for airlines cross-selling hotels on their websites. What most airlines do is take a hotel API, connect it to their flights, and create a “flight + hotel” tab on the main website.
In most cases, this is where it ends – they treat it as a separate product and fail to promote it anywhere. Then we’re not satisfied when there is not enough friction, and the conversion is not good.
But how should airlines fix that? I asked Liu how can you actually create a good vacation package or flight plus hotel package for your airline?
Airlines need to start to market and actually invest in this area. So, it’s no longer just about selling flights and throwing in hotels, cars, activities…What it’s about is actually focusing on that entire travel experience, right? And I think that is the absolute key piece. Because some of the most successful partners I have worked with, they’re the ones who really focus on this.
They actually don’t just say: “we’re selling hotels by the way.” They’re actually there investing marketing dollars, not just putting a little bit of spending on development. What they’re actually doing is: paid search (example: Google AdWords), in some cases they put TV and radio ads out — talking about the fact that they offer not only flights but also hotels.
You saw from our stats that most vacation websites currently get a majority of their traffic from their parent airline website, which means most don’t really promote it. What Liu is suggesting, though, is that you need to have a digital marketing strategy if you want to build your airline vacation package website.
Next thing that Liu mentioned was loyalty:
One very important thing is, we’re talking a lot about loyalty. In a lot of these airlines, they have a loyalty product. And it’s really for loyalty “earn” and loyalty “burn” as well. The best airlines are actually integrating that with hotels, for example, or cars, activities. All of this is what ties it all together.
When I’m talking about loyalty, it’s not really just about giving away points or coupons; it’s actually about how do you use these kinds of tools to show value in your brand for that customer. It’s really about how you frame it.
Most airline vacation packages websites that I reviewed during the 2019 Airline Digital Retailing research didn’t include much loyalty information.
Which brings us to what I personally believe is a key to successful airline hotel and vacation package cross-selling: building a strong value proposition.
If you want to build your airline vacation brand or even just effectively cross-sell hotels, you need to show to your customers the WIIFM.
WIIFM stands for “What’s in it for me.”
People won’t buy a flight + hotel package from you just because you bundled it together. Just putting together the flight+hotel tab (or a vacation website) and showing a 3rd-party hotel offer is not enough.
You need to show them a clear value and benefit of it. And this is where most airlines fail.
I asked Liu if there is an OTA example your airline can use for building a clear value proposition and loyalty integration?
One of my favorite examples is actually what the Hotels.com guys actually do. So, when you start looking at secret prices, this is more about playing on the fact that it’s exclusive. But they also do the I guess the “coffee card” approach, which is “buy ten nights, you get one free.” It’s something to give that customer a goal, but it’s also again playing back on the fact that it’s something that’s of value to them, that they should be aiming towards – and that’s absolutely the key.
Remember the stat from the intro paragraph? JetBlue at 6% of total ancillary revenue is one of the airlines making the most out of hotel cross-sell. If you look at their website, you’ll see this certainly isn’t a coincidence.
If you try to book a flight to Cancun, they will offer you a vacation bundle cross-sell:
Then during the booking of a flight + hotel bundle, JetBlue does a good job of building a clear value proposition:
As you can see the JetBlue case combines all of the elements that Liu stated as needed for successful airline hotel cross-selling.
The final piece of the hotel and vacation cross-sell puzzle that Liu talked about is personalization. We almost can’t do an airline marketing article without mentioning personalization, right?
Here, Liu mentioned an area where airlines actually have an advantage over OTAs:
By nature of their businesses (I think you know, they’re much older than the OTAs), they’ve got a very very loyal customer base, especially flagship airlines where they’ve got their own loyalty programs and have had the same kind of customers rolling through quite consistently. So, suddenly you have a very very good view of that customer’s travel habits.
In addition, for hotel cross-selling you already have the flight booking data:
The second thing is also that once they’ve booked their flight, for example, you suddenly know where they’re going to go. You know their itinerary, you know their baggage size, all the information is there. So now the whole thing is: How do we start recommending the kinds of hotels they are interested in. Which hotel are we going to recommend based on the signals that we get from that booking?
Liu went on and mentioned some very straightforward cases. However, even such small tweaks can impact conversion significantly:
For example, on a very simple level, you’re going on a business flight, you are spending a couple of thousand pounds… What we’re probably not gonna show you is hostels. So we’re going to show you higher-end hotels and then booking opportunities for the rest of the day. So for example, when these customers book the hotel, we will consider what kinds of activities they might be looking for. Every time they make a booking, we’re starting to profile the customer a little bit more.
It is important to understand what kinds of activities they are interested in doing when they arrive wherever they are flying to. For example, two parents or two adults, two children, they are booking a family hotel, or they might be booking one of the Disneyland resorts. Now we know what kinds of activities they might be interested in. They’re not going to go to, let’s say to a rave or something like that, right? It’s really about how do we start using that information continuously to, I guess, learn and start personalizing.
One of the things Liu and the team at Expedia Partners Solutions does is offer a recommendation API to airlines. This API uses machine learning algorithms and data to provide the best possible recommendations for hotel cross-selling.
If you liked this and other Diggintravel examples and want to learn even more, we have some special things for you:
I am passionate about digital marketing and ecommerce, with more than 10 years of experience as a CMO and CIO in travel and multinational companies. I work as a strategic digital marketing and ecommerce consultant for global online travel brands. Constant learning is my main motivation, and this is why I launched Diggintravel.com, a content platform for travel digital marketers to obtain and share knowledge. If you want to learn or work with me check our Academy (learning with me) and Services (working with me) pages in the main menu of our website.
Diggintravel - Smarter Travel Marketing
Copyright © 2016-2023