Tiger Airways might just be after a portion of your hotel bill, maybe even a bit of what you spend on food and drinks.
The budget priced carrier is moving to enforce the same one-stop on-line sales strategy that Ryanair and easyJet have perfected in Europe by putting an extensive inventory of hotel and resort bargains on its booking web site.
These European low cost airline leaders can get more money per passengers from the high commissions they charge accommodation providers than they do from the fares. Their customers get a cheap fare, typically for a weekend away in a different part of Europe or the UK, which they can only buy on-line from the airline site, plus an opportunity to self package a hotel room at a big discount on the normal published rates. The airline gets the satisfaction of cutting out ‘parasitic’ middle men, to paraphrase Ryanair’s media hungry CEO, Michael O’Leary, by collecting those commissions the traditional distribution networks of travel shops or third-party booking engines see as their own. And the likes of British Airways or Lufthansa get toasted because the end result is that the low cost carrier makes considerably more money on the total deal than they do trying to sell a higher fare seat to whatever city is targeted by the offer.
The European low cost giants have also found that some hotels, and most guest houses or boutique retreats, are enthusiastic supporters of this form of marketing because the volumes of business that budget airlines attract fill the blanks in their bookings caused by the peaks and troughs of business travel and the major holidays. It also saves them from the inefficiencies of print advertising compared to on-screen marketing to a customer who has already decided to travel to their location.
In some cases, where the hotel offer includes meals, theatre tickets, or incentives to eat and drink in-house, the deal the airline has with the accommodation supplier generates a share of total spending instead of just the room rate.
For very small hotels or retreats, print media advertising is far too expensive or haphazard to contemplate. But the Ryanair and easyJet booking process can rotate their availability across the booking screen in a manner that makes filling those rooms much more certain. At a fee, of course, which the Ryanair or easyJet customer never sees.
It is not clear how far down this path Tiger will go. It has struck an arrangement with the on-line hotel portal Zuji to sell inventory for its Asia-Pacific bookings. But the intention is clear. Tiger wants to lift its earnings by redirecting the revenue its flights might otherwise generate for the third-party or downstream retailers who provide the margin rich add-ons that leisure travellers need.
Tiger needs to do something, given its lack lustre results from selling air fares.
And it risks stirring Jetstar, Qantas and Virgin Blue to lift their game in pulling more hotel and resort sales to their own booking sites despite the any pain it might cause their relationships with some important travel shop chains.
