Selling Airline Tickets Through Agencies: Why A One-Size-Fits-All Approach Fails
In a post-COVID world, every single flight matters to the bottom line, and having an incentive plan based
solely on the cabin and fare class sold – without regard to the Agency’s market share contribution, Point of Sale, Route, and your NDC strategy – is going to impact your growth. Because not only are you not rewarding your best sellers you’re sub-optimizing your revenue with every booking.
About as passionate about price as one can get, we at Pricefx have some very strong (and knowledgeable) opinions on and solutions for airlines looking to optimize their indirect channel sales strategies to ensure they’re never leaving money on the table.
Let’s explore how you can move away from a one-size-fits-all approach for commissions to an optimized model that adapts to the extreme pace of industry change expected in 2022.
The Return of the Indirect Channel
Post pandemic it’s expected the % of airline passengers booking via agencies will be once again equal to those booking directly with carriers. Clearly, the indirect channel’s strategic importance is returning. Yet for most airlines, your ability to fully harvest the value from the channel continues to be sub-optimized. Are you one of the airlines that incentivise your slice of the 196,000-plus agencies WW the same regardless of the quality of revenue and volume they produce?
Here’s the issue. Airline N and others like them are employing the same incentive strategies across all agencies and routes. ‘OTA A’ (who sells 20% of overall ticket volume) is paid the same commission as a local agency for the sale of a first-class ticket from London to Hong Kong as for a flight from London to Paris. Clearly the travelers and competitive dynamics are different. Advanced incentive software with tools to design and optimize commission models rewards the value both agencies contribute globally.
From 2021 thru 2026 global travel is expected to have a CAGR of 9.71% with the market reaching 690 billion USD by 2026.
Two Major Problems with A One-Size-Fits-All Strategy
1. It doesn’t reward your best sellers.
What if you had a different strategy for travel management companies than you have for online travel agents or retailers? Could you optimize the commission you’re paying out? Does it seem practical to pay ‘OTA A’ and a local travel agency the same commission for the same fare class for two different itineraries?
2. It does not take into account competitive dynamics.
If Airline A is providing 2% and Airline B is providing 5% commission for the same itinerary, the travel agent is automatically going to choose B. End of story. If you’re operating with a one-size-fits-all commissions structure, especially one where you aren’t adjusting to competitive dynamics, you’re cutting off your nose to spite your face. Incentive optimization software with advanced AI can help you fine-tune your strategy to ensure you’re maximizing revenue and growing your market share.
It’s Time to Restructure Your Commissions
In times like these, every single flight matters to your bottom line, and if you’re employing the same commission model across travel agencies and routes, you’re sub-optimizing your indirect channel revenue. A well-structured incentive program gives an airline a significant competitive advantage.
It’s time to improve your agency strategy so that you’re leveraging the latest tools that enable you to design, simulate, then deploy and manage, bespoke commission models with different front and back-end incentive plans adapted to the PoS, type of agency, route, fare class and NDC.
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