Need something quickly? enter your email and we'll get back to you as soon as possible...

x

Lesley's Column

All Posts

15th June 2015

The fallout of direct distribution

Last week I commented on the Lufthansa announcement that starting in September it would charge passengers a fee for tickets booked through third party sites, including the global distribution systems.

This week I have been looking at how this trend for direct selling is impacting SMEs. The effect is clear for the larger corporate booking through a travel management company (fragmented booking process and extra cost), but how is it affecting smaller organisations who rely on their travellers making cost-effective bookings through OTAs (online travel agencies) such as Expedia and comparison sites such as Kayak?

Airlines are increasingly pushing travellers to book flights through their own websites where they can sell more services like in-flight entertainment and add-ons like hotel reservations.

This direct booking strategy also includes bypassing paying a commission to consolidated websites that book tickets.

For the booker, this means that the search for the lowest fare has become more difficult as the number of places where they can comparison-shop has dropped. In many cases, they just give up and go directly to the carrier’s website.

The financial advantages are clear: airlines want to be able to offer their own fare packages, bundles and add-ons. A significant portion of an airline’s profits come from ancillaries after you buy the basic transportation.

It can be very profitable. For example, last quarter Delta’s extra revenue from everything from baggage fees to merchandising rose 27 per cent — that’s an extra $50million.