Opinion: Are We Ready for Ancillary Fee Explosion?

Does the ongoing expansion of airline fees present an opportunity for travel agencies? A recent study by Travelport says yes, but notes plenty of tough challenges ahead.

Among the underlying issues is if travel agencies will have access to a full range of airline services and be able to meet consumer needs for service.

Travelport’s laudable study raises crucial issues including technology, marketing and regulation- on the impact of airline unbundling on travel agencies. It warrants a second look by agency owners and managers.

The basics are clear. Many airlines are unbundling services from their core flight product by selling preferred seating, meals, checked baggage, and other services separately, as well as offering additional services provided by third parties.

In Travelport’s study, agency respondents were asked to indicate how this change has impacted their businesses. The majority of respondents stressed the importance of offering these services to maintain the high quality personal service that characterizes the agency community among the travelling public.

The top three ways travel agencies say their businesses are impacted, according to Travelport: It’s confusing because every airline is different: 62 percent; It is more work for us, and affects productivity; 58 percent and, third, we must offer these services to remain a full service agency; 54 percent.

Although there are complexities that come with the new airline business model, optional and ancillary services also present positives for agencies, Travelport says. The survey included 610 travel agencies in 12 countries.

“Travellers and corporations are demanding more control, content choice, price options and pricing transparency. Optional and ancillary services are helping to answer these demands, giving travel agencies new opportunities to provide consulting services and expertise in organizing these services for the travelling public,” Travelport says.

Travelport’s study argues that: “Agencies are interested in selling all types of services made available by airlines. The vast majority of agencies surveyed believe travel agents should offer these services for their clients. Some said they would like to be involved in anything that adds value to the service they provide customers as their value would be clearly evident, particularly when that service requires consulting or expertise to organize the service.”

While both airlines and agencies want to provide travellers the best services, agency productivity is affected by ancillary services, Travelport says.

As revealed in the study, agencies across all regions of the world perceive booking these services represents a 29 percent increase in the time required to book an air ticket. At the same time, the vast majority wants to provide these services if the process is easier and more efficient.

“Agencies have historically had to adapt to dramatic industry change to compete and grow, and today is no different. Their challenges and objectives now and in the near future are to adopt ancillary and optional services,” Travelport says.

Travelport found that among agencies there was a strong demand for a single aggregated source of information and sales capability and the Global Distribution Systems (GDS) was listed as the most preferred channel to book and sell optional services by 70 percent of respondents. (Travelport in fact offers agents technologies to cope with fee proliferation.)

Travelport notes that the majority of agencies (77 percent) are currently booking additional services for their customers compared to just 8 percent of agencies who said they didn’t offer these services. Reasons cited for not offering these services varied, Travelport says, with agents in Europe reporting that ‘it doesn’t generate any additional revenues’ (41 percent), whereas in the Americas, 33 percent of agents said ‘most services are not available for agency booking’.

Respondents were also asked by Travelport to define the value they place on having branded fares available for sale via the GDS. (Branded fares are fares that are bundled together with optional services, such as preferred seat assignments and checked baggage fee.)  Agents indicated that branded fares would enable them to offer a full service to clients, as well as allow them to stay competitive with airline websites, Travelport says.

Fergal Kelly, Travelport’s vice president, content summed it up neatly noting that the research offers valuable insights on how travel agencies view and sell airline ancillary services.

“Agents understand that as the airline product continues to evolve and ancillaries form an increasingly significant role in the purchase decision and buying process, travel customers continue to look to agents to support them in purchasing itinerary solutions,” Kelly said.

Travelport’s welcome new study offers a needed perspective on how agents and agencies can prepare for future changes and challenges. Its worth a read especially with airline ancillary fees revenues estimated at $32.5 billion plus last year and growing.

Visit www.Travelport.com

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