By Paula Santos (Lisbon, Portugal)
(Part 4 of 4 – part 4 . Read Part 1 and Part 2 and Part 3 here.
Unprecedented Opportunity for Collaboration, continued?
The second model is based on creating value via cross-promotions which can be applied without an integrated marketplace, but the potential is, of course, bigger if that is the case. As such, this is a simple model, applied in many industries, including travel & tourism, but somehow there are very few examples involving airport and airlines. The most known case, which was received as a big breakthrough, is the BARTA trial implemented by Budapest airport, Wizz Air and Heinemann[i]. This model is basically based on the generation of cross-promotion opportunities from the airport and its partners towards the airline offer and vice-versa. If all of this can be done digitally, for example with QR codes or digital vouchers, the impact will increase since it will be easier for the passenger to use and it will be possible to better track the impact and adjust the offers to each segment and thus improve relevance.
The impact of this model is smaller than the previous one, but even so, it can generate additional sales between €1M-€1,5M for a base scenario of two million passengers. This figure will depend on the relevance, easiness, and commitment to promote this to their clients from both parties.
The third and final model is based on creating value via loyalty programs. Very few airports have successful loyalty programs (for example, Club Airport Premier implemented by Nice Airport or Heathrow Rewards by London Heathrow), being that airlines are much more advanced in this area. So what would be the benefit to airlines, already with huge marketable consumer databases (for example, easyJet has a database of around 30 million clients), to partner with airports with still small databases (most of them still below 500 thousand marketable clients)? The opportunity can rely in the type of passenger segment (typically more business and more frequent travelers) and in their localization (outbound pax), which can be useful for example when launching new routes to or from a given airport or new add-on services. Another opportunity is the possibility to negotiate special benefits for the loyalty program, and thus enhancing its value. For example, by giving airline customers special conditions to access fast track or airport lounges or discounts at the stores or by giving to airport customers early bird prices for new routes or special promotions.
Again, this is a pretty common model, but with very limited use between airport and airlines. Based on the case study mentioned above the potential is around 750k-1M € of additional sales.
Are there challenges to implement these models? Of course!
To begin with, due to the fact that airports and airlines have delayed this collaboration for so much time, some add-on services are already included in the airline marketplace and/or reservation process, and airlines may prefer to negotiate with OTA/ aggregators that cover multiple airports. For example, easyJet works with Holidays Extra for Lounges and Parking, with Booking for accommodation and with Holiday Taxis for private transport. But everything will depend on the overall value generated by this collaboration versus the existing model.
Another problem is related to the fact that airports only recently began to invest in aggregating their offer in a common digital platform. So, many airports still don’t have an ecommerce platform implemented (mainly limited to online parking reservations), or one that can easily interface with other systems. And even those airports which were the innovators and early adopters in terms of ecommerce platforms (examples like Copenhagen, Changi, Frankfurt, Nice), very few have integrated seamless reservation and buying processes over multiple services (for example, the retail offer is not integrated with parking offer), and struggle to bring all relevant commercial partners onboard.
And finally, the ever-existing problem related with integrating legacy IT systems & architecture (sites & apps) and customer data. But, with the current state of technology, achieving this integrations is much simpler and less costly that in the past.
Airports will always have the problem of customer data and struggle to build loyalty, even those with high outbound traffic. They need to become relevant and focus on solving passengers’ main needs. Imagine that you want to fly to Paris and your home airport offers not only the possibility for you to search the most convenient flight options (time, price, etc.), but also shows you the best options to arrive at the airport, allows you to buy duty free products or order a meal for pick-up (anytime from the time you book the flight until 1 hour before the flight), manages any unforeseen issue that can affect your travel time by alerting you, giving you other options, redirecting you via fast track if needed and guaranteeing that, even if you miss your flight due to unforeseen events, the costs from rebooking is covered. Most airports have an high value asset – they are a trusted entity. But few position their brand towards a multi-platform strategy based on this asset. Of course, that a passenger can get all of these services from different players, but not in an integrated and seamless process and without fearing that the quality of service will be low. Operational exchange of information between players is already a reality, but only true collaboration will allow for this level of service.
Problems exist, yes, but what will happen if airports and airlines decide not to collaborate?
Due to the limitations imposed by the C-19 pandemic, both airlines and airports will certainly lose revenues from less spend per passenger from the ones who will actually travel. Part of their available share of wallet will certainly not be captured due to the reasons mentioned above. But the main risk comes from digital-native companies, that are strongly investing in the travel ecosystem. One example is Fliggy (part of the Alibaba ecosystem) that disputes with Ctrip for the dominance of the Chinese OTA market. Fliggy is a marketplace which leverages Alibaba’s customer base, where airlines, hotels, retailers and other partners open storefronts and communicate directly with consumers. Basically, it offers an end-to-end passenger experience. What is the objective of Google Flights and Google Hotels if not to offer an integrated travel platform in the future?
Is it finally the time for airports and airlines to forget their usual quarrels and discussions on who owns the passenger and develop true collaborative models? If not, someone else will capture their passengers’ share of wallet.
It’s now or never …
[i] https://www.moodiedavittreport.com/a-huge-industry-opportunity-budapest-airport-wizz-air-and-heinemann-hail-compelling-results-of-barta-shopping-initiative/