Tuesday, August 28, 2007

TRAVELtech: The true cost of booking an airline ticket

First of my posts from the conference TRAVELtech. Have been listening to Tim Russell (MD of Amadeus Australia).

Tim made a very good point when looking at the costs of booking an airline ticket online. He presented research indicating that at a dollar charging level the cheapest place to book a flight is usually the airline’s own website where there is normally only a small credit card fee but no booking fee. Call it $0-$15 per booking. In the middle of the cost spectrum there is the online and offline agent where there are fees and charges ranging from $10-$30 per ticket. Finally At the end of the spectrum there is the full service Travel Management Company (TMC – corporate travel agent). These providers can charge upwards of $50-$60 per ticket.

On the crude measure of dollars per ticket, the airline direct site is the cheapest. However, Tim brings in the great point that when assessing the cost of booking we should really also be considering the time cost is searching and completing the transaction. When this is taken into account the cost spectrum is turned on its head. The TMC booking takes the least amount of time – say 15 minutes, the time it tkes to make a phone call to a dedicated agent. Next comes the online agent who can display multiple carriers in one place making searching faster. Finally the airlines direct site takes the longest – more than an hour because of the need to search more than one supplier before taking a booking.

Including these measures it becomes a neck and neck race between the cost of TMCs and online agents with airlines coming third.

If you are booking a leisure flight for the family and have all the time you need then time does not come into account but certainly in the corporate area there is a huge time difference between the different travel booking channels. Goes part of the way to explain the success of Webjet in Australia despite the huge fees they are charging.

3 comments:

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Anonymous said...

Well, clearly Tim has to dig out some well prepared arguments to justify the transaction cost that the GDS/CRS is adding to the value chain, and to some extent I'll admit he's right.

However, there are light in the tunnel, and some airlines are a lot more adaptive and innovative than Amadeus. They understand that IT is one of the ways they may stand out from the competitors and increase direct sales at the same time as they cut cost and promote their own brand on the web.

Check out Norwegian Air Shutle, which operates out of Norway.
Their "lowfare calendar" is so simple and efficient that it earned a usability prize last year. And the customers love it!

DY lowfare calendar

Also, you have the possibility to be presented the lowest fares each month during eg. "the winter months" choosing whether you are interested in "city weekend", "sun and bathing" or a "ski destination":

From Oslo to ski destinations during the winter


And for the tech interested readers:
Keep in mind how many lookups that must be done in schedules/availability and fares databases in order to generate this search facilities on the net! Now that is something which Amadeus are not able to deliver directly, so I believe there are pretty nice caching and aggregate solutions under the web pages.