Revenue Squared

Recent attendance at the Loyalty 2012 conference in Berlin highlighted several notable trends in the travel industry, which are simultaneously being echoed by our travel clients around the globe in regards to how customer expectations of loyalty and loyalty programmes are changing:

Additional key takeouts also worthy of mention include:

The following article focuses on three factors that will significantly impact the travel market in 2012: changing customer behaviour, technological advances and changing market dynamics.

Customer expectations are constantly changing, and – with the ‘empowered’ customer driving how businesses operate, along with the vast number of gadgets and options available for travel planning and booking – it has become imperative to understand how individuals are consuming content for their travel requirements and what drives their behaviour at various stages of the journey. The rapid rise of peer-to-peer recommendation as a primary influence on travel brand choice is reflected in the fact that for many regions TripAdvisor is now the number one travel site.
 

Consumers are looking for the best value at the best price and a connected travel experience. Brands need to proactively respond to these needs and measure these experiences in order to retain their customers and build a sustainable foundation for future growth.
 

The unstoppable rise of the smart phone represents both a challenge and an opportunity for airlines and hotels to demonstrate the value they offer beyond the price of a booking. Through these ubiquitous handsets, travel brands can interact with customers even outside the purchasing cycle such as providing trip advice, or annual memberships and lifestyle benefits, thereby remaining ‘top of mind’ with the customer for when an actual booking is made.
 

84% of US business travellers use their smart phones during travel**, suggesting the industry needs to further embrace mobile traveller services such as mobile itineraries, social communications, location-based information and offers, and on-the-go alerts, to ensure customer-centric product offerings are delivered. The travel experience is a multi-channel one; brands need to think beyond the check-in desk and the booking stage.
 

Delivering geo-location targeted offers and information will be the focus for the coming year, with astute brands leading the way to provide travellers with relevant and personalised content, offers, services and experiences as and when they need them.
 

The recession has delivered high-profile casualties in the travel industry and demanded that travel brands explore ever more innovative ways of generating revenue.

Over 50% of programme owners* continue to generate ancillary revenues by unbundling previously packaged products and services. In contrast, we have also seen re-bundling of core inventory offered as a new product line/membership to drive increased revenue.
 

A rather interesting recent development is American Airlines’ unveiling of their new plan to ensure continued loyalty from top tier AAdvantage members. Their Admirals Club lounges, which are strictly paid memberships (i.e. not available to elite tier or domestic premium ticket holders), are now also being offered as an ‘incentive’ to top tier travellers. For the next 12 months, elite members can choose from a range of benefits, including the option of a specified number of free lounge visits.
 

This year could bring about major changes in the world of ancillary revenues, and could see the airline industry solve the challenge of increasing customer spend while growing customer satisfaction. ‘Fare and room packages’ will become increasingly widespread, with specific benefits bundled with certain classes of fare, targeting different sectors of the market. Packages offered by bmibaby.com are a good illustration of what could become commonplace, particularly ‘FlyPlus’ and ‘FlyExtra’ – the opportunity to stretch these benefit packages further, beyond the bundling of core inventory, is clear.
 

The move from re-bundling to ‘segment-based’ annual memberships, offering a wealth of both travel and lifestyle benefits, is the biggest opportunity for travel brands to monetise their non-elite tiers and offer customers the opportunity to forward plan – a proposition of convenience and value that addresses the needs of many travellers.
 

Both airlines and hotels can gain commercial return from adopting a more personalised and tailored approach to their existing loyalty programmes – offering wider choice, value and relevance to programme members.
 

The world of travel has become even tougher with the oil price already having risen a further 15% since the start of 2012; adding even more urgency to the challenge of finding additional revenue sources. However, as we have discussed, there are a number of opportunities to improve the industry’s fortunes.
 

The ability to define and provide value and needs-based propositions to travellers, be they frequent or less so, remains the business challenge for brands to remain profitable.
 

The WTTC’s annual Economic Impact Report forecasts the global travel and tourism industry will grow by 2.8% in 2012, marginally faster than the global rate of economic growth, predicted to be 2.5%.
 

Let’s focus on our customers for the year ahead and that vigilance will pay off for our brands and our loyalty programmes.