AdventureTravelNews

Global Study Commissioned by Amadeus Provides a Wake-up Call to Travel Suppliers as it Identifies Growth of 30% in Revenues from Third-party Sales by 2015

Madrid, Spain: A new industry study, Cross-Sell Your Way to Profit, charts the untapped revenue potential of third-party ancillary services* to the travel industry, with analysis providing a wake-up call to travel suppliers as it identifies growth of 30% in revenues from third-party sales by 2015. The study, conducted by Forrester Consulting, identifies the growth of new ‘extreme’ services such as virtual reality tours and digital concierges set to transform the customer experience in the next ten years; highlights what travel providers must do to effectively market new services; and outlines the central role of mobile in driving adoption of new services in the next five years.

The study was developed by Forrester Consulting, an independent research firm, and commissioned by Amadeus, a leading travel technology partner and transaction processor for the global travel and tourism industry.

The study states that: “Third-party ancillary services provide travel suppliers with an underexplored revenue-generating opportunity, expected to increase by 30% by 2015 compared to 2010. There is growing recognition that third-party ancillary services will become important revenue contributors to travel suppliers, provided they offer a relevant product mix and make these services available throughout a journey and across channels. Third-party ancillary services offer the potential for travel suppliers to extend the length and breadth of traveler interactions before, during, and after a trip.”

The study is based on quantitative research with 67% of respondents drawn from travel brands that generate annual revenues in excess of $1 billion. In addition, the study includes qualitative

input from industry experts across airlines, hotels, rail and cruise operators that details the scale of the revenue opportunity, the future third-party ancillary services set to drive sales and the shifting mix of channels required to effectively sell third-party ancillary services according to customer needs.

Key findings

Third-party ancillary revenue to grow 10 times faster than general sales in next five years

Third-party ancillary revenue is expected to increase by 30% during the period 2010 to 2015. Set against estimated travel industry growth of 3% during this period, analysis demonstrates third-party revenue growth is 10 times greater than that of general sales. The study finds third-party revenue is likely to represent 2.5% of total provider income by 2015 – or $25 million for a $1 billion company.

Extreme’ ancillary services set to transform the passenger experience allowing providers to innovate in the next 10 years

While traditional third-party services such as insurance, car rental and hotel room sales are expected to remain popular, travel providers see great potential in a range of ‘extreme’, as yet unexploited, products and services. By 2020, more than half of travel providers (54%) expect to offer virtual reality services that can help passengers experience airports, hotels and cruise ships before arrival, digital concierges to improve the in-hotel or airport experience (80%) and in-journey spa treatments (37%). Travel providers expect future services to be shaped by a combination of macro-trends with mobile having the greatest impact (81% believe it very important) and the rise in travel to-and-from emerging economies is also viewed as important (59% believe it either important or very important).

Mobile to match websites as primary channel for third-party sales

Although respondents recognise the limitations of mobile’s effectiveness to sell third-party services today, ranking it behind traditional channels such as airline ticket offices and hotel front desks, they expect a dramatic increase in importance over the next five years. Driven by the increasing penetration of smartphones and tablet devices, as well as the industry’s desire to develop more flexible selling capabilities travel providers believe mobile will be a very close second to websites in terms of effectiveness to sell third-party services by 2015. Increasingly mobile will be a primary channel for the sale of third-party services beyond the booking stage.

Respondents also highlight social media and self-service kiosks as increasingly important channels to reach customers with third-party offers.

According to Marcos Isaac, Director, Travel Services Business Group at Amadeus: “Today the industry is focused on the opportunity à la carte’ ancillary services offer, but this study spotlights the growing and significant contribution of third-party sales. Travellers are set to benefit from a host of innovative services in the future, often delivered by companies outside the travel industry. Travel brands of all types need to understand who to form partnerships with, what the revenue potential is and how best to sell third-party services if they are to maximize this opportunity.”

Cross-Sell Your Way to Profit is part of the Amadeus Traveller Series which is a global research initiative designed to stimulate new thinking and innovation in the travel sector.

To download a copy of the study, please visit: www.amadeus.com/amadeus/cross-sell-for-profit.html?PRESS=115

* Third-party ancillary services are those operated or delivered by a third-party provider to the travel supplier, for which the supplier earns revenue via the payment of fees or commissions from the third party.

2 Comments to Global Study Commissioned by Amadeus Provides a Wake-up Call to Travel Suppliers as it Identifies Growth of 30% in Revenues from Third-party Sales by 2015

  1. The online travel retail industry have been ignoring the ancillary revenue for duty-free sales for years, yet every duty free shopper needs to buy a ticket first. Perhaps this report and also the fight now developing between OTA’s and Airlines will help to focus their minds that they need to think creatively to generate revenue.

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