A significant factor affecting air travel distribution models is the fluctuating dynamics between sales channels.
Worldwide, airline direct channels and OTAs are expected to experience the most rapid growth. As a rule, the contemporary consumer is generally more inclined to purchase travel online. However, traditional sales channels still play an important role. For instance, travel agents still profit from luxury travel niches, such as cruises and round-the-world trips. Below, we explore how these dynamics are changing in 2018.
Direct online channels: The route to a more personalized booking journey
In 2018, online direct channels are projected to attract the most sales interaction. Direct channels tend to be the most economical option and the most efficient way to capture customer data. This is particularly the case for budget airlines, who utilize direct channels to up-sell ancillary products such as seat preferences, baggage allowance or priority boarding. As low-cost air travel becomes an increasingly competitive market, these added extras are critical to driving revenue.
From the perspective of the consumer, direct channels provide the best overview of an airline’s offer. Direct channels also facilitate a more personalized customer journey, where loyalty programs streamline transactions. Moreover, a recent study found that consumers felt that airline direct channels were more trustworthy than OTAs. This presents a significant opportunity for the industry; through capitalizing on this trust, airlines can cement this relationship by offering increasingly personalized services. However, this level of personalization is only achievable if airlines properly manage customer data.
Furthermore, the future of online sales channels is more than just selling seats; it is about selling a complete travel package. Airlines need to partner with other corporations to offer ancillary products such as car rental, insurance, and hotel rooms.
Indirect online sales channels: How increased sophistication is changing the market
Recent technological developments mean that the indirect sales landscape is changing. Whereas previously OTAs use of GDS made price the key product differentiator, now the IATA’s New Distribution Capability (NDC) is enabling more nuance. This new XML-based messaging standard gives agents access to richer content, allowing airlines to promote their complete product and ancillaries through OTAs and metasearch. However, it is likely that OTAs will maintain their dominance over the hotel market. This is largely due to the complex nature of hotel offers. Furthermore, research has shown that customers tended to believe the best prices were available via OTAs, despite thinking that direct channels were more reliable.
Traditional travel agents: Increasingly specialized offers and ancillary sales
The traditional travel agent is more than likely to continue to lose its market share. However, many traditional agents are remaining relevant by focussing on customer service and special offers. For example, travel agents still generate profit from the luxury travel market, where customers demand a hands-on, human level of service. Furthermore, customers from emerging markets also tend to prefer a personal touch. For instance, the growing middle-class in China and India tend to prefer agent-organized group travel.
In addition, travel management companies remain competitive in the business market. However, the big four – HRG, Carlson Wagonlit, BCB and American Express – are likely to consolidate their market share. Travel management companies are also exploiting new technology to update their offer in response to developing customer preferences. For the airline industry, these businesses provide important access to high-yield corporate custom.
Stay abreast of changes
Sales channels dynamics are in perpetual flux, constantly affected by developments in technology and new legislation. Therefore, airlines and other travel industry players need to make sure they make substantial investment in real demand analysis to monitor how the market is changing.