September 2010


A few weeks ago I embedded a video showing the mTrip iPhone app, so if you haven’t seen that post, it might be best to read it first so the following makes more sense. I don’t normally do product reviews, but ever since I wrote back in April about the success of Lonely Planet in selling digital destination guides and then thinking about combining this with the prediction I made at the start of the year about in-flight entertainment systems moving beyond the cabin, so many of the different pieces have been coming together in my mind for how they might be relevant to an airline looking to carve out a unique position in mobile and ancillary revenue generation. So I’ve made an exception for mTrip; less because of the app itself and more because of the opportunity for airlines that the entire 3rd party travel app market could represent.

So with that in mind, I asked an intern in the office (he has an iPhone, I don’t) to take a look at the mTrip app for Chicago that I had been given access to and take over from me for a day on this blog.

Enough from me, and over to Danny De La Cruz from Vanderbilt University.

I recently moved to Chicago a few weeks ago and as a first-timer to the area Martin suggested I look at the iPhone application Chicago mTrip. After using the app for over a week as a site-seeing tourist, I feel like I’ve had a typical, if not extended  experience as an average user of the app. Below I’ve highlighted a few of my likes, dislikes, and how mTrip might be of value to airlines.

Let’s first start off with the likes. At its core, mTrip helps tourists navigate a new area. Your mobile phone is turned into a mobile tour guide. Users gain easy access to information, reviews, and suggestions about local attractions, cuisine, shopping, hotels, and even nightlife. Additionally, mTrip allows users to create a customizable multi-day itinerary based on the duration of their visit, interests, and desired “visit intensity.” What I particularly liked about the itinerary feature is the walking map it generates—the map shows the shortest walking routes users should take to see the day’s designated attractions from point A to B to C… Even more, the app uses the iPhone’s GPS technology to track the user’s progress between attractions.

As a quick side note, I thought the app’s augmented reality was an intriguing concept that might be useful to orient oneself from an eagle’s nest perspective, say on top of Willis’ Tower (formally Sear’s Tower). Otherwise until the augmented reality feature can identify individual buildings it’s nothing more than an intriguing concept. Nevertheless, as a first time tourist of the Chicago area, I found mTrip to be a good source of information to create a typical tourist experience.

With the good there is always the bad. One of the biggest problems I have with mTrip is my own bias against the concept of using the app and iPhone as a daily planner, tourist guidebook, and navigational tool. When I first landed in Chicago, one of the first things I did was buy a paper map of the city. Even though I am confident in the iPhone’s GPS capabilities, I personally prefer to have a physical map of the city streets; also, most maps include all of the tourist hot spots. Furthermore, I don’t like to have my day planned out and regimented. And though while it’s not for me, I certainly can see how this app would be a travel essential for the mom or dad that needs to have every part of the family trip planned, but doesn’t have the time or energy to do it themselves.

Another thing, with the $5.99 price tag on this app, it’s very difficult for me to shell out a couple of bucks on a application with very limited reviews and user ratings (the CHI mtrip app only got 3 stars and 15 ratings). I’m no expert, but I’m willing to bet that many users have the ‘you get what you paid for’ attitude which raises their expectations and lowers the ratings for mTrip. There is one solution and two methods I would recommend for mTrip to circumvent the pricing challenge—each with the potential to bring mTrip more revenue than app sales.

The solution for both methods is simple: make the app free. There are plenty of iPhone apps that have “lite” versions in which users have the choice to purchase the app at a price or watch advertisements within the lite app. While mTrip may not make $5.99 per user in the lite versions, the word ‘free’ will certainly attract more users and revenue.

Another path, and perhaps a more lucrative one, to making mTrip a free app is through partnerships with airlines. Globally, airlines are increasing the amount of investments in social media and mobile media. Already a few airlines, such as Delta and Southwest have iPhone apps. Delta even has parking reminders, terminal maps, and weather forecasts. In the rat race to create a superior app and gain a competitive advantage, it is not hard to imagine why airlines would be willing to buy mTrip’s technology for their own iPhone application. As a forerunner in this augmented reality market, mTrip already has the application made.

After writing recently about the perils of viewing ancillary revenue in isolation from the overall PRASM/PRASK picture, I was impressed to see the following from Steven Frischling’s Flying with Fish blog.

All told, at the end of the 2010 2nd Quarter, major U.S. airlines collected US$892,800,000 in baggage fees, for an increase of 33.3% from the 2009 2nd Quarter.

As Delta Air Lines continues to build its financial strength in fees collected, the airlines ranks the lowest among major network carriers in terms of Passenger Revenue Per Mile (RPM), earning 12.6¢ per miles where as United Airlines is earning 13.4¢ per revenue mile.

…and who earns the most per Passenger Revenue Per Miles? Southwest Airlines at 14.5¢. The low cost carrier, with the least amount of passenger fees, once again leads the U.S mainline airlines in its earning potential.

I’m a huge fan of ancillary revenue and the yet to be maximized upside of this category, but it is just one element in the overall revenue story.  

On an only slightly related topic, one thing I liked when I was coming back through Chicago O’Hare yesterday was how United were pushing their economy plus package. It got me thinking about about some conversations I’ve had with industry players recently regarding when in the customer experience it is most effective to sell unbundled services. I’ve probably had this conversation four times in the past week with various people, but most of the time we were talking shopping versus servicing; we never discussed what United are doing in the photo below – have a girl standing around the air-side kiosks with a suitcase containing a built-in screen extolling the virtues of trading up to Economy Plus (complete with a Starbucks promotional tie-in). Looks like the guy in the photo took the bait.

I spent the last couple of days at The Beat Live conference in Chicago and on the whole, it was a very impressive conference. Most refreshing difference was the limited use of Powerpoint in favor of much more panel discussion and audience Q&A. When you get someone like Tony D’Astolfo from Rearden Commerce moderating a panel you really see how much difference a good moderator can make. For someone like me who has been critical of poorly run panels in the past, I was watching with interest given my upcoming moderator role at Horizons in under one months time.  

I caught up with a number of airline employees at the conference, and it was also great to talk to Scott Hintz from TripIt, Gianni Cataldo from Datalex and Jean Collier from Travelport, all of whom I hadn’t spoken to for well over a year. Geoff Heuchling from Marriott made the most intelligent comment on stage regarding social media when he described the importance of a measured approach that took into account the long term commitment to maintain such initiatives, and Marc Casto from Casto Travel probably gets my award for the best questions/comments from the floor. Firstly his comment on some state laws prohibiting credit card surcharges (which the two of us discussed over the coffee break afterwards), but mostly for his comment near the end of the conference about transparency – I’ll get back to that point later.

One well attended session was that featuring American Airlines’ Managing Director of Distribution and Mechandising, Bridget Blaise-Shamai. Almost everyone was wanting to hear her talk on direct connect, but I actually took away a few other interesting points given my view on the growing importance of personalization in the online passenger experience. She referred to “psychographic and demographic data” as well as tier level and other data sources as being at the heart of the new HP host they have signed for, and later said “we are moving to a personalized shopping model at American” in reference to the AA position that ATPCo filing of ancillaries is not flexible enough for where they want to go, saying instead that they have been talking to and studying Dell and Amazon for best practice models. Holly Hegeman of PlaneBusiness had been quite down on the prospects for AA only the day before when doing the lunchtime presentation, and there is no doubt that AA are adopting a crash through or crash strategy on many of these things. Time will tell whether or not it pays off for them. 

But the key takeaway for me from the conference was that I got a much better first hand view of all the posturing of the different players when it comes to the touchy subject of ancillary services. It was hilarious to hear people from airlines, to corporate travel buyers, to TMC’s to GDS’s to newer technology entrants all saying exactly the same phase “we support transparency”  when it seemed to mean something completely different to most of them. This is where Marc Casto nailed it when he said something to the effect of, we are all talking of transparency, but to some that seems to mean transparency lite, where the fees for ancillary services are hidden behind 10 clicks and within a massive body of text on an airline website. I spoke to a number of TMCs and corporate travel buyers at the conference (these are people I rarely speak to in my normal daily work) and it was extremely enlightening to hear how fed up they are with the way things appear to be going.   

And if you are wondering about the photo, The Beat readers choice award for The Most Admired Technology Provider was won by Amadeus. My colleagues Nigel Aston and Debbie Iannaci are pictured with Jay Campbell from The Beat.

Southwest have put together some amazing pictures showing their history of direct ticket sales. Anyone working with airline technology will love reading the post on the Southwest blog as it shows just how far things have evolved – to get a taste for what I am talking about, the advertisement below is a classic.

OK, so I work for a competitor, and I know I normally try not to be too negative in this blog, but I couldn’t avoid commenting on some research released by SITA. It’s been a while since I’ve picked apart some dubious survey data, and this case from SITA is minor by comparison to previous examples, but it still interesting to look at.

Extra income from ancillary services

Meanwhile, airlines are increasingly developing sources of ancillary revenue, with 63% planning major IT investments to facilitate this over the next three years. Sources of ancillary revenue include unbundling current services such as baggage handling, priority boarding or meals, non-air services ( hotels, car, insurance) as well as up-selling through fare types.

What is wrong with the above paragraph? Upselling into a higher fare family is NOT ancillary revenue. The real story here is that increasing RASK / RASM is the real metric we should be concerned with and not looking at ancillary revenue in isolation. But that is not what gets headlines, so everyone keeps pushing the ancillary revenue story in isolation of the the bigger picture. A couple of notable exceptions to this being Southwest and Frontier. Remember this: if you really get your merchandising right and your fare families branded correctly, then it is possible that ancillary revenue may actually drop (at least in short term), even though you will be upselling into higher fare families more often and overall passenger revenue and profitability will increase. But upselling into a higher fare family is not ancillary revenue, it is ticket revenue.

The report from SITA continues

“A lack of standards and ambivalence in the relationship between airlines and GDSs could be the reason for the airlines giving much more attention to earning ancillary revenues through direct sales rather than through GDSs,” notes Kölle.

“This year’s survey results clearly show the airlines’ desire in this respect.” This is not surprising: GDS account for more than 50% of ticket sales, but fewer than 17% of responding airlines are selling unbundled services via their GDS.

Once again, I know I work for a GDS, even though I am not on the distribution side of the business. But that last statistic is quite misleading. I actually think the true number today might be below 17%, but it is not comparing apples with apples. Rather than go on here, I might save that point for the panel in am hosting on ancillary services at the Horizons conference next month. 

And to finish off with a company that in contrast has hit the mark – for hiring a marketing manager from well outside the box, credit must surely go to Gatwick based charter airline the Astraeus – impressive move hiring the lead singer of Iron Maiden into an executive role!

So often we hear stories about what the travel industry can learn from other industries when it comes to customer experience and implementing online technologies, so it was nice to see something recently taking the opposite stance. I’ve selected a few relevant paragraphs from the article in Hospitality Times.

The report cites numerous airlines, including AirTran, Delta, Southwest, United, and Virgin America, that use Facebook and Twitter to make last-minute offers, announce fare specials, or just keep passengers informed about delays and weather conditions. Hotel chains like Carlson’s Country Inns & Suites, Hilton, Hyatt and Marriott also actively use Facebook and Twitter to communicate and, more importantly, to keep customers involved. Hyatt’s Twitter account serves as a “virtual concierge,” allowing guests to ask and receive answers to inquiries and requests about the hotels and the areas surrounding them. Some travel providers are going even further by getting into location-based services. InterContinental, for example, is using Topquest to offer customers loyalty points simply for showing up at any hotel, restaurant or bar operated by the hotel chain. The gimmick is that the customers are required to alert friends on Facebook Places or Foursquare.

So what can online marketers learn from the social media experience of the travel industry according to Hospitality Times?

  1. Social media has moved well beyond casual friend-to-friend connections into the realm of legitimate usage as an important communications channel for business.
  2. Adding social media to the media mix is a good strategic move for a time-sensitive, highly competitive business, where it can be used to disseminate late-breaking news and make last-minute offers.
  3. Using social media for its generational appeal – to reach a younger demographic that’s more socially connected – is smart, but not to the exclusion of other media that may have broader applications to diverse age groups. It’s important to know your audience and utilize the specific media channels that they embrace.
  4. Figuring out ways to leverage location-based services, if they’re relevant to your business, can create new opportunities to drive customers and their friends to local establishments.

Earlier this week I made a reference to Tripit and how over 20% of Google employees are registered with this itinerary sharing service, but what I had meant to add at that time was a comment on privacy. I was pushing Tripit to work with Linkedin years ago, but now I’m becoming a bit more wary of sharing my itinerary data – I don’t always want everyone to know which airlines I am visiting, and seeing which city I am in pretty much gives the game away. 

Which leads me to changes Google have recently made to Orkit. I’ll finish with the video below, as it seems like Google are thinking along similar lines – social is great, but it needs to kept in context. I might share my itinerary with work colleagues, but sometimes I don’t want to share this with every person within my Linkedin network. That network contains journalists, competitors and others for whom this information is not always appropriate. Great contacts, and people I enjoy keeping in touch with, but this leads to me underutilizing the benefits from both Linkedin and Tripit because I am now uploading fewer and fewer travel itineraries.

I remember meeting some of the guys from Mexican LCC Volaris over a year ago at a conference and they were telling me about how they would refund the ticket price (with a voucher) if the plane arrived more than 15 minutes late, but I’m reasonably sure they no longer run this offer. At the time, that really stood out to me as a great way to build a start-up brand. So which airline got my attention today?

Before answering, I’ll tell you which non airline company got my attention with an advertisement that really gets to the heart of how to compete aggressively when you are the underdog with a new low cost business model. It is an ad for flat screen televisions.

Remember when Spanair went after Ryanair, but it was only lightly aggressive, so it didn’t get any cut through. You either build the brand through a positive message, or if you choose to attack a competitor then there can be no half measures about it. And this is what Kogan does so well in the video above.

When it comes to getting the message out in a positive way, Tripit have used their Silicon Valley ties extremely well to generate strong word of mouth – I saw something in The Beat recently quoting Google global travel manager Michael Tangney saying 4,000 of the 22,000 employees of Google are registered Tripit users! And whilst on Google, did you know that 1 in 4 searches done via an Android phone in the US is done using voice rather than typing.

But back to aviation. If you don’t know the following airline and you live in New York or Waskington DC, then if things go to plan, maybe a colleague or friend will mention them to you soon. From their own website:

OpenSkies is a unique airline operating direct business class flights between Paris (Orly Sud), New York (Newark Terminal B) and Washington (Dulles) at very competitive rates. Launched in June 2008, this premium subsidiary of British Airways combines the know-how of one of the biggest airlines in the world with the quality and commitment of a small airline that maintains a close relationship with its passengers.

And why are they hoping you will hear about them? Well, it takes a very confident airline to offer a non-voucher money back satisfaction guarantee, and OpenSkies have just done it. If you are not satisfied, tell them why, and get a refund. I like it; the terms and conditions for a refund don’t look onerous, so I just hope they aren’t inundated with freeloaders. Personally I would have tried to make the Ts & Cs a little tighter, but the more you let legal and other cautious types interfering with a bold plan, then the less chance that plan has of ever getting into the consciousness of consumers in the crowded market for trans-Atlantic aviation.

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