HOW MOBILE IS EMPOWERING AIRLINES TO DRIVE ANCILLARY REVENUES

With global mobile penetration reaching 100% at the end of 20151, over 75% of online travel search expected to come from mobile in 20162 and circa 34% of total global ecommerce coming from mobile3, it’s easy to see why mobile has become a hot topic for airlines around the world. Due to the proliferation of mobile devices, the modern traveller has never been more connected, creating countless mobile moments throughout their journey that airlines can leverage to generate new revenues.

With high operational costs, intense competition, diminishing yields and tight margins airlines are under increasing pressure to find new ways to deliver revenue growth. In this post, we take a closer look at how the hyper mobile, ultra-connected world that we all live in has provided airlines with new opportunities to drive ancillary revenues by delivering exactly what end-travellers need at the right moment in their travel lifecycle.

MERCHANDISING MATTERS

In 2015 alone over 31% of digital travel sales were via mobile devices, with that number expected to climb to 46% by 20191. This represents a unique opportunity for airlines to generate significant ancillary revenues by offering personalised promotions and services at the right moment direct to travellers’ personal devices. By its very nature, mobile provides an ideal platform for the sale of ancillary services by enabling airlines to not only create new revenue generating moments but to also promote offers and services at exactly the right time in the end-travellers’ journey. Mobile enables airlines to transform generic promotions into more specific, tailor-made offers specifically tied to a user’s preferences, location and importantly, at the right moment or travel context when they are most likely to convert.

EXPLORING THE KEY ‘MERCHANDISING MOMENTS’ FOR AIRLINES

BOOKING PHASE:

Timing is imperative — there are certain moments in the journey lifecycle at which an end-traveller is more open to receiving offers and one of these stages is the booking phase. During this phase the end-traveller spends the largest proportion of their time planning, researching and comparing the costlier elements of their trip itinerary such as flights, hotels, insurance and car hire.

With mobile bookings in the US alone expected to represent $65 billion of online booking sales in 20164, it represents a significant opportunity for airlines to drive additional revenues by optimising their mobile search and booking flows. Embracing mobile also provides airlines with an opportunity to remove their reliance on third parties by selling direct to the end-traveller with research indicating that travellers prefer to buy services from the airline directly rather than a third-party due to the airline commanding a higher level of trust3.

48 HOURS BEFORE TRIP:

In addition to the booking phase the end-travellers’ purchasing mind-set continues into the 2-day period before they are due to travel. This phase represents a significant opportunity for airlines with 30% of travellers likely to buy ancillaries within this period4. During this phase of the trip the end-traveller begins to focus on airport specific services such as extra luggage, onboard meals, fast-pass through security, priority boarding, seat upgrades or access to passenger lounges. Traditionally airlines have offered a smaller subset of ancillaries aimed at maximising revenue however given the capability of mobile technology to target customers based on location, past behaviour and in real-time through push notifications, the opportunities to convert ancillary promotions in this period are far greater.

AT THE AIRPORT:

The mobile channel also provides airlines with an opportunity to service the more practical needs of the end-traveller on the day of travel. Leveraging mobile GPS functionality enables airlines to provide traditional time and location based offers such as transport and parking, check-in for additional luggage, lounge access and fast pass security. However, the ancillary revenue opportunities go far beyond this. Airlines that are focused on differentiating their brand can leverage mobile concierge solutions to provide a far superior airport experience and greater ancillary returns with targeted third party offers such as restaurant discounts based on your location at the airport, access to VIP lounges for travellers experiencing flight disruptions, fast-track options and access to in-flight entertainment.

Leveraging mobile to make the airport experience more enjoyable enables airlines to build long term customer loyalty and trust which can increase the average revenue per customer over time.

IN FLIGHT:

Airline customers are accustomed to in-flight shopping, but the constant connectivity provided by mobile devices onboard today gives airlines additional opportunities for ancillary sales. Airlines can identify frequent flyers and offer exclusive promotional alerts in real-time for in-flight services such as preferential seating upgrade opportunities for long haul flights. With in-flight Wi-Fi access becoming more common, airlines can become even more creative in how they monetise the in-flight experience. Prompting travellers to purchase Wi-Fi on board, offering access to premium music and video content, targeting frequent flyers with personalised promotions based on previous in-flight purchasing patterns or monetising commercial partnerships with 3rd parties such as Amazon and Apple are just some of the opportunities airlines can easily leverage.

POST FLIGHT — AT DESTINATION

Once the end-traveller arrives at their destination it represents another key phase of the travel lifecycle where airlines can utilise mobile to optimise ancillary sales conversions through personalised offers and services. Airlines can prompt travellers to view last minute hotel deals at their destination, book a taxi from the airport to their hotel, highlight itinerary suggestions on arrival or even promote discounted third party offers such as restaurant discounts that help improve the travel experience.

POST FLIGHT — AT HOME

Even on returning home travellers are still susceptible to mobile offers, with up to a quarter of end-travellers admitting to being open to receiving offers after their trip is over4. This again represents a significant opportunity for airlines to optimise revenue, build greater customer loyalty and extend the customer relationship especially among frequent travellers. Leveraging the additional customer data captured via mobile devices enables airlines to provide end-travellers with promotions that are personalised and targeted based on past purchasing patterns, enabling them to push new routes and fare sales that they know end-travellers are interested in.

SUMMARY — REAL-TIME, CONTEXTUAL, LOCATION BASED AND PERSONALISED INTERACTIONS COMBINE TO IMPROVE ANCILLARY CONVERSIONS

There is no doubt that mobile represents a unique opportunity for airlines in creating new merchandising opportunities. It provides airlines with a channel that gives real-time access to end-travellers and the potential to intelligently leverage passenger data to create offers and services that are personalised and relevant.

With 46% of all digital travel-related transactions predicted to come from mobile by 20196 (circa $350 billion) there is significant potential for airlines that embrace mobile as part of the evolution of the travel industry.

Sources:

1 Ovum, 2016, World Cellular Information Service

2 eMarketer, November 2015, Online Marketing Trends In 2016

3 Criteo, March 2015 — State of Mobile Commerce

4 Amadeus, 2014, Thinking Like A Retailer

5 eMarketer, November 2015, Most Digital Travel Bookers Will Use Mobile Devices.