Innovation comes in many forms. Sometimes it's a new technology. But for a growing number of online travel companies, it's all about disrupting traditional business models.
Dennis' Online Travel Briefing
Editor’s Note: Every Wednesday, Executive Editor and online travel rockstar Dennis Schaal will bring readers exclusive reporting and insight into the business of online travel and digital booking, and how this sector has an impact across the travel industry.
Online Travel This Week
One of the most interesting developments in online travel these days is companies overturning existing business models with AirAsia, eDreams Odigeo, and Hopper leading these efforts.
These three aren’t the only ones changing the ways travel companies have traditionally conducted business online, but they provide interesting test cases.
Airlines have traditionally made their money selling flights, entering into lucrative deals with credit card companies, and charging for extras such as bag fees.
Whether it succeeds or not, Capital A, which operates AirAsia, now can boast that the Malaysia-based airline group’s superapp has more than 10 million monthly active users, and among the twists, AirAsia is now selling flights through its app from other airlines, such as Singapore Airlines.
As a way to expand its network and revenue stream, AirAsia partnered with Czech Republic-based Kiwi.com to offer customers tickets on other airlines. AirAsia calls the offering FlyBeyond.
Sure, airlines commonly sell partners’ flights as codeshares or as part of joint venture agreements. That’s not new. But AirAsia doesn’t necessarily have deep partnerships with the airlines in FlyBeyond, and is trying to make its superapp a one-stop shop for customers so they can fly to destinations AirAsia doesn’t service.
Whether AirAsia’s superapp strategy proves to be a success remains to be seen. Several years ago, Accor hotels tried to list unaffiliated independent hotels on its website, and that didn’t work. But AirAsia’s effort, as part of its superapp strategy to offer banking and payment solutions, as well as retail products and ridesharing, seems to have some upside.
Edreams Odigeo, based in Spain, is among a new crop of companies changing the way they operate to tilt their businesses toward subscriptions or memberships. As detailed in a recent Skift Research report, the Edreams Odigeo Prime subscription program, which offers discounts on flights and hotels, now has more than 3 million travelers paying $60-$75 per year to be members.
Edreams Odigeo generated some 40 percent of its euro 424 million in sales in the 12 months through May 2022 from its Prime subscription plan, the report found.
In addition to Edreams Odigeo, lots of travel businesses, including AirAsia, metasearch and review company Tripadvisor, hotel brand Selina, and luxury accommodation provider Inspirato, are orienting their business models to include subscriptions.
“Performance indicators for travel have traditionally focused on volume, pricing power, and unit revenue (e.g. for hotels RevPAR, for airlines PRASM),” the report said. “A shift to a subscription model means that travel companies must also put in place training, systems, and procedures to track and understand a new set of engagement metrics like the upfront cost to acquire a customer, customer churn, and customer lifetime value.”
Montreal-based Hopper, too, is changing the traditional online travel agency business model. With its variety of fintech-oriented products, such as freezing the prices of flights and hotels for a week or two for perhaps a $25 or $45 fee, Hopper recently claimed its revenue run rate is 30 times higher than in 2019.
Hopper bets, based on its technology, that it will recoup way more money in fees than in having to pay the difference for higher airfares or hotel rates for customers if prices soar.
In September 2021, Hopper CEO Fred Lalonde said some 70 percent of the company’s revenue came from financial products, and not selling the travel itself, although that percentage is likely lower in 2022.
Critics claim that Hopper labeling these products as trendy “fintech” offerings is hype, and they actually are a form of insurance. Regardless, if an online travel agency is making way more money on price freezes than on flight and hotel commissions, that will disrupt parts of the online travel agency business model, and imitators will undoubtably follow.
MakeMyTrip Joins the Growing Club With SuperApp Ambitions
In a Skift interview, MakeMyTrip Group CEO Rajesh Magow said the online travel agency wants not only to achieve superapp status in India, but in the Middle East, as well, where it has launched operations. He also seemed to hint about a deeper partnership with Amazon. Skift
Lastminute.com Group Gets an Interim CEO
Other than Jie Sun in China, there aren’t a lot of CEOs of online travel companies who are women. But Amsterdam-based Lastminute.com Group, reeling from the detention of its CEO and chief operating officer in a Swiss Covid relief fund fraud investigation, appointed Laura Amoretti interim boss. Amoretti most previously served as chief customer officer. Skift
Airbnb Co-Founder to Step Away From Day-To-Day Operations
Airbnb co-founder Joe Gebbia said he planned to step away from day-to-day operations at the company, where he chaired its in-house design studio Samara. Gebbia will remain on the Airbnb board and will stay involved with the independent non-profit, Airbnb.org. Skift
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Tags: accor, airasia, airbnb, capital a, Dennis' Online Travel Briefing, edreams Odigeo, fintech, hopper, inspirato, Kiwi.com, lastminute.com, makemytrip, online travel newsletter, selina, singapore airlines, Skift Pro Columns, subscriptions, tripadvisor