Tuesday, June 17, 2008

SITA Air Transport IT Summit

I am in Brussels today speaking at the SITA Air Transport Summit. My talk is part of session called "Getting ready for your digital traveler". I will be speaking on Mobile based services in travel- where are we today ? Challenges and opportunities".
I was fortunate to share a van ride this morning with Yemmi Agbebi, Director of Portfolio Marketing from SITA based in the UK. Yemmi was directly involved with the Bluetooth test at Manchester Airport. Essentially SITA working with the airport installed Bluetooth stations that enabled various services for travelers. Announcements are made every few minutes instructing travelers to go to a Bluetooth area and and agree to receive messages regarding their flight. Research showed that the average traveler checks the flight board 4-5 before going to the gate. By enabling the Bluetooth communication, travelers received information about their flight lessening the anxiety associated with the boarding process. The most interesting aspect of this test is the impact on airport stores. Once enable and accepted by the user, airport stores send electronic coupons with bar codes that offer discounts to items at the shops. So how did the test go? (note I am quoting these stats by memory so please treat them as estimates). Approximately 7.2 million passengers go through the Manchester airport on an annual basis. 42% of them enabled this Bluetooth connection. The average expenditure per passenger increased from approximately 12 BPS to 16 BPS. The general feedback has been very positive as customers appreciate the information about boarding and the discount offers from the airport merchants.
This is another example of how Europe is way ahead of the US in mobile technology. Considering the current economic pressure on airlines and airports, the Manchester mobile test proves that mobile marketing can have an impact on consumer behavior.

Thursday, June 12, 2008

Airline Ancillary Revenue and the Long Tail

This week I am London and I had the pleasure of presenting to and participating in the Datalex User Group meeting. Datalex who has been a Travel Tech client for many years, provides a distribution platform to airlines and travel agencies. The audience consisted of major carriers and travel distributors. One of the hottest topics we discussed is the concept of ancillary revenue. This can be defined in a number of ways. The traditional model was developed by low cost carrier RyanAir who essentially charges for all services (bags, refreshments, etc..) and in addition also sells merchandise on board. Due to the fuel crisis we've seen the legacy carriers follow suit with baggage charges and other fees. The airline term is ancillary revenue, but I believe the real opportunity is the Long Tail. At the conference, I had the pleasure of meeting Chase Cunningham most recently of the now defunct low cost carrier Skybus. Chase was in charge of ancillary revenue for SkyBus. Chase spoke about selling everything from in flight advertising to merchandise (a la RynanAir) . Due to his efforts Skybus even sold Ohio State football tickets on their Website.
I believe the coming wave in mobile and in-flight technology presents an interesting opportunity for airlines to expand the concept of ancillary revenue. By expanding the ancillary revenue definition beyond fees for formerly free services, to more of a Long Tail concept, airlines have a unique opportunity to help promote airport merchants, and destination services. The mobile platform in particular is an excellent way to provide more destination type of services. Rearden Commerce a major corporate booking tool supplier has released a Blackberry version of their product that allows ancillary services such as show tickets and restaurants reservations to be made on the smartphone. There is no reason airlines could not provide a similar service and profit from the referral. When onboard Internet arrives courtesy of suppliers such as AirCell, the airline can use the captive audience to sell a much more expanded version of SkyMall. Now a days when you go to the movies, all sorts of advertising is displayed while you wait for the previews to start. Airlines have an equally captive audience. Of course care needs to be taken to not overload the passenger with promotions as that could anger the traveler and hurt the brand. Providing the right balance of destination oriented content for the on board and mobile experience is in the near future and represents an important ancillary revenue opportunity for airlines.