January 30, 2018, by Gilad Berenstein, CEO of Utrip
In an increasingly competitive environment, airlines and travel companies are always seeking ways to increase revenues. In-destination activities and ancillary services are two major trends that are greatly influencing the travel industry. Let's look at how airlines can benefit by combining these two trends.
The Demand For In-Destination Activities
Travelers today are increasingly embracing the in-destination activities that make their trips more memorable. Although people still want to stay in a comfortable hotel with great service and amenities, they're now even more likely to seek destinations that offer interesting, educational and entertaining activities. A recent poll reveals that 69% of travelers would rather spend money on activities than a nicer hotel room. This has profound implications for the future of travel.
Travelers now want to have meaningful and transformative experiences rather than simply relaxing or basking in luxury. Travel tours and activities are estimated to reach $183 billion by 2020. People are very diverse when it comes to the types of activities they prefer. Some seek sports and outdoor activities. Others prefer art and historical tours while others want to sample a region's food and wine. Thus, travel companies are compelled to identify niche markets and find out what types of experiences people in their markets are after.
The Growth of Ancillary Services
Industries relying on secondary or ancillary services for profit is nothing new. A common example is movie theaters that profit more from popcorn and refreshments than ticket sales. This is becoming a major factor in the airline industry. As many airlines struggle to remain in profit, fierce competition makes it difficult to raise ticket prices. Ancillary services, which include everything from baggage fees to in-flight services such as food and entertainment, provide airlines with additional sources of revenue. Ancillary services were estimated to be $82.2 billion worldwide in 2017. According to Amadeus, 70% of airlines offer ancillary services.
Passengers don't always appreciate this practice as people naturally prefer to get things for free. However, it offers people more personal choice so they don't have to pay for services they don't want. As ancillary services continue to expand, airlines are looking for more creative products and services to offer passengers. In addition to familiar services, airlines are offering a wider range of options, such as access to airport lounges, a wider selection of merchandise, and bundling flights with other holiday items such as hotels, car rentals, and activities.
How Airlines Can Benefit From These Two Trends
This is a good time for airlines to profit by creatively combining these two trends. Travelers are revealing a strong interest in compelling on-the-ground activities while also coming to expect a wider range of ancillary services from airlines. By partnering with travel companies and technology providers that offer tools centered around in-destination activities, airlines can make travel more enticing and increase revenue.
Airlines can make destinations more exciting by promoting specific activities for travelers, making it more convenient for customers who can book many of their activities at the same time as their flight. As most people now book trips online, it's not difficult to set up a wider range of options where people can easily access information. There's a great deal of potential for airlines to start offering more on-ground activities as ancillary options.
In the near future, we can expect to see airlines offering a wider array of ancillary services and finding ways to profit from the popularity of in-destination activities. These two trends are quite complementary and there's no reason for travel companies not to combine them in creative ways.