Top 3 reasons OTAs are jumping on airline merchandising

online travel agencyLeading online travel agencies (OTAs) around the world have recognized that travelers want more transparency, personalization and choice when shopping for travel. This, coupled with fierce competition in the online space, are some of the reasons behind the sharp increase in OTAs implementing airline merchandising on their sites. Actually, they’ve discovered it’s good business too. So, let’s have a look at the top three reasons OTAs have turned to merchandising:

Relevancy for users

It all starts with being relevant for consumers. This is why OTAs run thousands of A/B tests—which allow them to compare two versions of a web page to see which one performs better–each year. OTAs often have multiple sites running at any one time – all with the objective of identifying what works, in what situation, and at what time. Online travel agencies know that if their customers are not offered the content, functionalities, or level of service they expect they will go somewhere else.

According to Expedia, users perform up to 48 searches across eights sites, on average, when shopping for travel. Travelers want to be able to compare travel offers, like for like, to simplify decision making. They also prefer one-stop shops that fulfill all of their shopping needs in one go, and on the device of their choice. Online travel agencies have found that intuitive booking flows combined with enhanced retailing techniques that gently guide consumers to the services they value most tends to boost conversion and improve up-sell opportunities.

This is what Amadeus is helping OTAs achieve today with Amadeus Master Pricer. This unique flight search solution allows travelers to compare different flight offers with the price of an extra bag returned with the fare. Through this unique feature — which isn’t offered by any other GDS — travelers can compare apples to apples and book their holidays with confidence that they have full transparency and choice.

New revenue streams

Of course, it all needs to lead to more revenues. And it does. We are seeing various commercial models being deployed and, on average, OTAs are already reporting 10%-15% incremental revenues from airline merchandising. This is a vital uplift on the low margins they earn from base air fares. But this is just the beginning. Our research estimates that merchandising revenues for the industry are set to grow to $130 billion by 2020. With 110 airlines signed up to Amadeus’ merchandising solutions, including 83 already in production, we have critical mass and a very rich pool of merchandising content in our system. The time is ripe for OTAs to improve their profit margin, as opportunities abound moving forward.

Operational efficiency

Finally, technology and automation are essential for OTAs looking for efficiency. With hundreds of different service codes (checked baggage alone has more than 150!), booking formats, and different connectivity standards, ancillary booking can get complicated very quickly. Amadeus takes that complexity out of the equation for OTAs by simplifying the end-to-end integration process through standardization and booking automation. By driving more services online for consumers to pick and choose, merchandising also reduces load and operating expenses from OTA call centers.

So, what does this look like in practice? One major European OTA told us that before, they were only selling ancillaries for four airlines, because they didn’t have the resources to do the coding and maintenance necessary to integrate more. By switching to Amadeus’ new ancillary catalog and booking technique, which automates and standardizes the end-to-end integration of airline codes, they are suddenly able to sell ancillaries for more than 50 airlines in a flash. This kind of change can be a huge boom for business.

As the industry moves towards greater traveler-centricity, we see that it’s not just about the cheapest air fare. It’s about value and being able to personalize travel experiences. The world’s leading OTAs have already begun reaping the rewards of the new partnership opportunities with airlines and Amadeus is at the forefront of bringing the two together for a more traveler-centric industry.

 

Originally published on the Amadeus corporate blog.

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