Ancillary potential overlooked

SteveJonesBy Steve Jones

Some years ago, I covered a story about dog walking that drew some of the fiercest condemnation from travel agents I can remember. The criticism was not directed at me, I should add, but at the suggestion of a business consultant called Nolan Burris.

He argued that to make up for airline commission cuts, travel agents should become a little more imaginative in the way they earn money. Burris then unwisely proffered the idea of walking the dogs of clients to partially offset the declining revenues they were earning through good old-fashioned commissions.

Suffice to say it did not go down too well. There were howls of protest as retailers objected to being told to take dogs for walks to earn a living at a time when their skills and expertise were being devalued by commission cuts. My recollection of the dog walking tale was triggered by a story in Travel Daily last month which detailed a study from IdeaWorksCompany.

The research firm, which advocates a strategy of “building revenue through innovation”, released figures showing how much revenue airlines generated through the sale of ancillary product in 2014, which included baggage fees, seats with extra legroom, commission from hotel and car hire bookings, and earnings from co-branded credit cards.

The results were remarkably impressive. Qantas saw ancillary revenue jump 8% to US$1.38 billion, the equivalent of US$50 per passenger, while United Airlines topped the table with US$5.86b.

It got me thinking. If airlines have been able to build revenue streams beyond their core function, namely the sale of airline tickets, why haven’t travel agents explored opportunities to expand beyond the booking of travel?

Fundamentally, diversification is something agents have never been particularly good at.

While other retailers have taken a good hard look at their business model and tried to diversify and spread their risk, travel agents, as a rule, have stuck rigidly to what they have always done – book travel, and nothing more.

Not one of the agencies I have visited has ever had anything on sale. There are racks of free brochures, but never is there anything to buy. Yet the travel spin-offs are wide and varied.

You’ve just put down a deposit on a US holiday, are excited, and the chances are you’ll be in the market for a guide book. But when was the last time you saw a travel agent selling Lonely Planet guides or maps? Surely an outlet specialising in sending people on holiday should be stocking guide books to the very destination they have just sold to a customer?

What about selling a range of travel gadgets? What about plug adapters, sun hats, flight pillows, sunglasses, phrase books – the list of travel related ancillaries is endless. Larger stores could offer a small selection of luggage, with a broader range available online. Consumers want and need this stuff, yet I am unable to buy any of it in the very place I have booked my travel.

It’s not even an innovative thought – it’s common sense – but so few retailers appear to do it. No one is suggesting it would generate rivers of gold, but any idea that creates additional revenue in a competitive industry with slim margins must be worth exploring.