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Amadeus: Diversification Vital to Online Agents

August 24, 2010 By: George Dooley

Acquiring new and retaining existing customers is a key area for improvement among Europe’s online travel agencies, Amadeus says in a new study of online travel agencies (OTAs). Joined by Hermes Management Consulting, Amadeus released the results of its study: "Understanding Online Travel Agencies’ Cost Drivers and Ways to Optimize Business in Europe".

The main conclusion: although the European online players have improved and are closing the gap with their U.S. counterparts, there is still room for improvement in terms of efficiency and yield of product mix. Key drivers include: revenue diversification, improved shopping experiences for consumers, better automation and improved marketing..

The study was conducted with the sample of five online mid-sized travel agencies from Scandinavia, France, Germany and the Netherlands and offers comparisons with U.S. online agents.

The sampled European online agents need to focus more on marketing non-air products, which provides a higher margin (12.8 percent vs. 6.6 percent of the margin on air bookings). While non-air products represent 76 percent of traditional leisure travel agents – and nearly 50 percent of U.S.— OTAs’ revenues, according to PhoCusWright, only accounts for 14 percent of the European OTAs' gross sales.

The traveler’s overall shopping experience could be enhanced by more relevant content, so that the traveler’s visit to an OTA website can provide all the elements of the trip, Amadeus says. As conversion rates for the studied OTAs are very low, they will need to stand out by offering savvy travelers an experience that will make them want to book more and increase loyalty. Technology needs to be adapted to respond quickly to customer demands and trends.

Automation is an area where the European online travel agencies have seen a lot of improvement in the past few years; nonetheless it continues to be a key area where costs could be lowered, Amadeus says. Call centers, fulfillment, and marketing in particular are key areas where increasing efficiency and automation can show immediate benefits.

Accounting for an average of 54 percent of all OTAs expenses and 1.22 percent conversion rate through online channels, marketing expenditure proves to be a large and inefficient expense, Amadeus reports.. This together with the lack of loyalty programs and CRM solutions, points to the fact that acquiring new and retaining existing customers is a key area for improvement.

“European online agents have shown resilience in the last couple of years, increasing their revenues year-on-year despite the tough economic downturn. They now need to move a step forward to transform this positive trend into revenue opportunities,” explains Stéphane Durand, director of online and leisure for Amadeus.


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