In 2012 Google published their “Future of Airline Distribution” report and estimated that travelers used 22 websites, apps and social networks to plan and book their trips. Last year, Expedia re-evaluated this figure at 38 digital channels and since 77% of travelers are undecided on a specific airline when booking they would look first at internet search engines and metasearch before landing on an airline website.
Airlines are well aware of this issue and while internet search engines are an essential piece of their customer acquisition, they come at a hefty cost. Competing on AdWords with big boys like Expedia and Priceline (respectively spending $3.3B and $2.3B in 2015 on online advertising), is a very expensive game.
On the other side, metasearch propose an alternative model that looks effective. But, let’s do the math…
As we have seen before, travelers search up to 38 different sites and at least five of them are metasearch. Of course, on each metasearch they will make at least 100 shopping requests to explore different dates, options and other pieces of information to finally make 1 booking!
How does this translate on your airline website? So picture this – as you are most likely competing with other airlines for the same itinerary, plus some OTAs, you will respectively get only 1 out of 10 of the successful bookings, assuming your offer is competitive enough.
So bottom line: 5 meta * 100 searches * 10 = 5000 searches and all channeled to your airline website that let’s face it, finally results in 1 booking!
This 5000:1 look to book ratio is actually much better than what you would see most often. I can already see some distribution managers pulling their blue or red PSS contract to check how much they are charged for each fare search. Ouch. It is not really a cheap customer acquisition, is it?
Moving to a cost-effective model
Such model requires a shopping technology that is able to manage massive volumes with a cost not related to the number of queries generated by the metasearch.
Precomputed technology manages massive searches without the increasing transactional costs required by other platforms. With the help of this alternative tech, that uses intelligent processing techniques to deliver high performance major airlines turn their metasearch distribution into an effective customer acquisition channel.
The opportunity to build a robust NDC strategy
Ideally, NDC aims to bypass intermediaries like GDSs but it comes with a challenge. All those searches that were once hitting the GDS, would now have to hit the airline.
A critical component of the Sales Offer strategy is the capability to address massive volumes of search in a cost-effective way. Airlines’ marketing teams are looking to go beyond look-to-book ratio constraints and create inspirational, theme-centric and budget-driven shopping, as well as long-range calendars or e-mail and re-marketing campaigns.
As part of a forward-looking distribution strategy, airlines would benefit by adopting alternative solutions that give this freedom and break them free from the dependency on legacy providers. Obviously, some of them will be tempted to lure their customers with offers as much attractive as they are restrictive, in order to maintain their monopoly.
So the travel industry is slow in changing, as several executives said during the last IATA WPS in Dubai, but light speed change happens when combining modern commerce technology with an open to transformation mindset.
About the AuthorMore Content by Gary Mayger