on 06 October 2009
There is some confusion about extra services (which are mainly non mandatory to the end customer) that are now available on many forms of mainstream travel products such as flights.
Much of the confusion and concern comes from agents who sell these products [e.g. see this Facebook group setup by agents who are upset with the new BA seat reservation charges] [Hat tip: Travel Weekly UK]
Or read what tweeting business travel agent Murray Harrold has to say about the new United Airlines baggage package:
Why should United travelers “save” money of baggage fees? – The fees are not supposed to be there in the first place!!! I mean: First, take something away and charge for it, THEN turn round and say, “Here’s how you can save…all this goes to show that airlines have got themselves into a big hole – more precisely, all these bright young exec’s…and they are just ruddy clueless how to fix it. What a ruddy shambolic lot. I wouldn’t trust any of them to run an airfix model airport.
Murray is worth paying attention to if you are on Twitter as he summarises the agent perspective eloquently.
The problem is these agents are looking at all these ancillary products through the wrong lens. Yes of course it is about the money but it is also about centralising bookings. No wonder agents are upset – but they put the issue down to airline incompetence rather than well considered strategy. The agents are complaining about the wrong point!
To understand what I mean we have to go back to initial principles.
I do a lot of work with small tour operators. Many of them come from a tailor made tour background. They start with the idea that they are based in a destination and can pretty much sell you whatever tour you want.
These tour operators really struggle to be successful online. In effect they are promoting a service not a product.
A lot of my conversations with these small tour operators relates around advice to create a few sample products (tours). These products can then be promoted and used as the basis of a tailor made tour. These products can be listed on a website (and 3rd party websites).
In this situation these tour operators have had to decrease variations of their product in order to be able to market online.
It is the same with working with agents. By decreasing variations it makes the product easy to learn, easy to sell and enables an agent to be confident they are selling an appropriate product.
Back to the airlines. By increasing variations they make it much harder for agents to sell their product. A customer who finds they can’t get the information they need from an agent may end up looking on the airline’s own website and therefore booking directly.
Summary – if you want agents to work with you, if you want distributed transactions, then reduce product variations. If you want customers to book direct (via centralised transactions) then increase product variations.
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Alex: Your latter note about the complexity in agents handling ancillary services for airlines is precisely the point. In many cases, the airlines’ strategy is to push direct-to-consumer bookings. The carriers like the complexity. They want agents cut out of the picture.
After all, many of these ancillary services from the airlines are unavailable in the global distribution systems (GDSs) that agents rely on.
And, the airlines are in no hurry to give agents the ability to book these products.
It is largely a direct-to-consumer play by the airlines.
Errr… No, not quite. Firstly, I should say that I am a business travel agent. I don’t “do” holidays, really (unless they happen to be for my established clients) so I can’t speak for the high street type agent – that said, I was a high street type myself,in a previous life.
What you miss, Alex and Dennis, is that agents themselves have changed. They are not really that into booking cheap return flights – simple stuff – indeed, when it comes to this, many will suggest that the client goes and does it online because it is not worth the time trouble and effort.
Now, I do book simple stuff, but that stuff will remain with agents because many of us recognise that what we do is for the sort of people that do not – or cannot – do it themselves, they do not have the time to faff about or are making arrangements on the hoof, or have a travel policy that needs to be policed or they do not wish to employ someone themselves to muck about all day on various websites, making comparisons, going back to another site and having to make a final decision there and then. Only GDS users can “hold” stuff, or can assemble a complex itinerary, across airlines and continents or can see in instance the comparison twixt prices across a number of airlines on one route (not to mention consolidated fares).
As regards to seats and luggage, it is an irritation – and let me remind you that what agents book is (usually) good value stuff – we are talking £400+ return to Paris, not £10. And I would add that even FlyBe have a way on Amadeus (gosh!) of pre-booking luggage. Actually, it is not difficult as all we do is to tell people that when they do their online checkin, to pay their baggage/ seats/ right to breathe Oxygen at 32,000 feet then, rather than at the airport. I do not believe that is is some sort of machiavellian plot to move stuff online as a) you have been able to book online for some years now – and we are still here b) the reasons people use agents has not gone away – and won’t (for reasons given above) c) Airlines are not that stupid and do realise that we do a lot of stuff they simply cannot do – If they really wanted it all online, they could do this overnight by simply stopping publishing their content through the GDS systems. So, all we have to do is tell the clients to sort it out when the do an online checkin – or if we have to do it, up go our fees. Fine, more money for us agents so no skin of our noses, frankly.
Anyway, this was not the reason for my statement. It goes like this: “What, would you say, should the man on the Clapham Omnibus reasonably expect an airline fare to cover?” I need a bag with me, I would like a cup of tea and a spot of food if a long way, I would like somewhere to sit, I would like to be able to safely get on and get off and I would expect all reasonable, known taxes included, I expect a competent crew. Okay, you can expand this at will. The thing is, when you start taking out stuff that should really be in the “reasonably expected to be included” section and make people pay more for such an aspect – you get a problem. Actually, you don’t get a problem, you get irritated passengers and as I said elsewhere (on Tnooz, funnily enough) this is not how to retail travel (another story, but legacy airlines are useless retailers). The other side of this coin is, of course, if I leave in, say, food – how much will this add in and how much increased customer satisfaction and thereby trade will it generate? So, I can go El Cheapo Air to Paris for £5 with nothing, or I pay £10 with Sooperdooper airlines and get a cup of tea, no one gives me a hard time over luggage and if I turn up early, I can get the seat I want – Where is that boundary? No-one as yet has tried to figure it out – (legacy) airlines still follow each other sheep-like using the one corporate brain cell each has been allocated with mind-numbing assuredness as night follows day.
So, I do not know much about your increasing/ decreasing variations theory but agents having been living with such in their subconcious mind for ages – and taking them in their stride. Remember agents are retailers – and ruddy good ones at that. They do not have to retail travel – they could retail just about anything.
I think that the variations question comes down to commoditisation. In a low margin business (which let’s face it is what most mainstream B2C travel businesses are), there is nothing worse than the equation of ‘price war + ease of comparison’.
By making travel products hard to compare, you make it much harder for customers to compare apples with apples. And in this situation they tend to gravitate towards a limited set of well-known brands.
I actually don’t think distribution is an issue. Typically distribution via the web is more or less the same cost as via agents, once you have factored in costs of sale from online marketing, web discounts and the like.
Alex you’ve nailed a couple of good things there, but I think there is even more strategic intention than you think…
It all has to do with internet distribution – which for many airlines is the biggest channel. Users can compare rates easily on the internet and metasearch engines make it even easier. There is only one way to come on top and that is to offer the absolute lowest possible rate.
Can you see the difference between:
1. a £100 rate with £20 for 1 bag and £10 for speedy boarding (tot = £130);
2. a £130 rate inclusive of one free bag and online seat assignment (tot = £130 too…).
Right, the first one comes on top. If the airline can be displayed on top for £100, the exact same pricing on GDSs or offered to OTAs in a bundled format makes their direct channel coming on top.
Some may say I am overestimating the importance of metasearch. It might be true today, but my take is that it is just the beginning.
Quite so, DJ – making comparison difficult was an art form introduced by, well, agents – a long time ago. If Lunn Poly said “£100 off” independents said “10%” off and vica versa! Again, correct, the cost of distribution via web and/ or agent has never been proved. Web distribution is a fixed cost (under technology) which blurs any comparison – not forgetting many airlines still pay commission – sorry, “bounty” – on affiliate web sales. gency distribution airlines paid nothing for, unless something was sold. Indeed, airlines are not trying to just get distribution onto the web – they want it on the web on their site – trouble is (as I say) airlines are not retailers – Expedia and Travelocity, etc are and are a lot better at web sales than airlines are.
Now, what Daniele is on about is (again!) cheap stuff. There is no issue with cheap stuff – agents would even prefer people to book this online anyway. There is no money in it and it is a waste of an agent’s time.
Anyway, agents are quite used to adding £30 on to any low cost airline proce, before making any comparisons.
All boils down to one thing – airlines are rubbish retailers.
@Murray
> airlines are rubbish retailers.
I think you’re dead right. But then again most larger travel cos are run by number crunchers who have never been even close to their customers let alone listen – and then respond – to them.
For me it’s not a retail thing, it’s a margin thing. Bums on seats matter more than customer satisfaction and repeat business. Sadly.
When it comes to seat and baggage fees or any other charges, airlines have seen they have worked for others and not impacted the number of bums on seats, so why not charge? As Danielle says it makes the lead in fare look cheaper and customers then buy the services they want – I can’t remember the last time I actually enjoyed an airline meal, so why pay for it? The next step for the airlines is to personalise their available services based on who you are and what have bought or are likely to buy.
To your point Alex about decreasing variations, if customers can understand the airline product offering, then surely agents should be able to as well? Complex variations for customers and simple for agents sounds like the wrong way round. Going direct doesn’t necessarily make sense for all airlines in all markets, so agents still have an opportunity to interpret complexity and add value.
DJ – Yes, very salient remarks, thanks!
There seems to be several issues:
1. Level of Customer Expectation – Is it reasonable for a so-called full service airline to remove bits from the fare and charge for them? How is this perceived by the customers?
2. What does the “man on the Clapham omnibus” expect a fare to contain? (No-one has ever tried to answer that one! I suggest (for a full service airline) The fare to include: A modern, properly serviced aircarft with a trained and fully competetent crew, The ability to arrive at a place of loading (airport) and expect it to be clean and tidy with proper provision of service such as restrooms and an appropriate level of retail services along with refreshment opportunities; the ability to easily pass through check in and security services without undue delay; to be able to take with me a reasonable level of belongings which are appropriate for my destination and for my time there, to be provided with a level of comfort appropriate for the length of journey, to include such food and drink as may be reasonably expected for that length of journey; to arrive at my destination and find that place of arrival clean and tidy (ever considering local customs and habits); at all times throughout the booking and journey process, to have easy contact with a representative of the or all the company (ies) responsible for my travel arrangements.
Okay, not perfect, but a start – as there is no definition of what a fare should comprise!
3. Never has so much spend been spent by so few on attracting such little income! Why is there so much focus on “cheap”? Especially when the full fare and business types fares are going through the roof, increasing by leaps and bounds almost daily – £5,000 across the pond – £300 an hour – and you get there no quicker than a person paying £30 an hour. All you get is a bigger seat and a bit better grub (as I have said before. Business people pay £470+ to fly from London to Paris, £600+ for London to Stockholm and pushing an eye-watering £1,000 for London to Nice – and in many cases these people will suffer the same “add ons” assomeone paying £30 for the same trip. Further, business people are earning money for UK PLC, lesiure travellers are not – sooner or later more and more firms will realise how much they are getting screwed and this will provoke a furious backlash.
These cheap travellers have to be funded – and they are funded by (mainly) business travellers – so this additional cost is in part refelected in the cost of goods and services we buy. The thing is, even business travellers will realise what is going on, sooner or later and then – airlines, you ain’t seen nothing, yet!