New revenue streams have become increasingly important but are airlines equipped to discover and optimize them?
Airlines must manage a dynamic environment. Technological changes, regulatory revisions, and market developments all affect decision making and the bottom line on a near-daily basis.
The most crucial shift is the evolution from selling an air ticket to selling a travel experience. In an intensely competitive industry like aviation, it is no longer enough to simply provide a means for the Frankfurt businessperson to visit Seoul or for families to come together for a special occasion.
Overcoming the traditional ticket-seller mindset and generating the optimal offer has become essential in an increasingly digital marketplace.
“Airlines have traditionally been in the enviable position of having a product—the air ticket—that is driven by necessity,” says Alan Dunne, Chief Innovation Officer at Datalex. “As airlines continue their evolution into travel retailers, they have started to expand beyond the traditional ancillary products to sell more and more experience-based products.”
Traditional ancillary products comprise such airport services as lounge access, fast track security, or priority boarding and on-board additions, including extra legroom seats, enhanced meal options, and Wi-Fi. But airlines can now go beyond these parameters. Moreover, this is more than simply being an agent for other parts of the supply chain—hotels and hire cars, for example. It might involve specialist pet care or a home-to-home baggage service or anything else that an airline believes might bring value to the travel experience.
“The nature of these products is different, as they are discretionary,” Dunne continues. “There are many aspects involved in making a compelling offer for a discretionary product and the best retailers leverage multiple sources of data to more accurately estimate market demand and optimize offers to provide a competitive advantage.”
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