Online competition for airlines has been growing for some time now; social media has exploded, more social networks and apps are being created every day, new digital devices exist, and consumers like the ease of online search, comparison, and booking. Hand-in-hand with the growth of online has been the growth of the indirect channel, though let’s remember that indirect sales aren’t limited to the online medium. Instead of fearing these changes, you must discover how to properly manage the indirect channel in order to achieve greater opportunities for your airline.
Importance of the Indirect Sales Channel
For airlines, although the direct sales channel remains important, you cannot overlook the rise of indirect sales. Indirect sales are still a main source of revenue for airlines (55%), representing over $500 billion USD in sales for all commercial airlines.
Travel Management Agencies (TMAs) and Online Travel Agencies (OTAs) are just two of the indirect players ruling the industry. In certain countries, OTAs reign supreme; in the USA, Online Travel Agencies represent 33% of indirect sales, while taking a share of nearly 80% in China. Seeing these numbers, it is clear the bargaining power off agencies is greater than what it was in the past.
It is critical to effectively manage the indirect channel in order to reach airline sales targets and achieve year-on-year growth for your airline.
There are 2 main factors in effectively managing the indirect channel for your airline:
It is essential realize that your partnerships and agreements with TMAs, OTAs, and other agencies will have direct effect on indirect sales. When partners help each other grow, there is more trust and eagerness to work together. This is what your airline ideally wants to facilitate. You want to identify and work with agencies that are stable, motivated, and consistently reach targets and achieve growth.
Managing incentive agreements is one of the top ways to motivate these indirect agency players and doing so effectively will boost your airline’s sales growth. The only way to effectively manage incentive agreements is through data and technology. Since agency structures are exceedingly complex, you need a platform that offers ease of integration, acceptance of all data sources, and advanced analytics.
Incentive Management Challenges
It can be complex to manage indirect sales channels and establish proper incentive contacts for agency partners. There are many challenges involved:
- Airlines’ lack comprehensive systems that provide end-to-end functionalities
- Difficult integration with current platform or future technologies
- Travel agency structures are complex
- There are many different types of incentive plans and loyalty programs
- Complex data and multiple data sources end in time wasted, revenue leakage, and confusing results
- Heavy investment in the indirect channel means that forecasts must be correct, or millions of investment dollars will have been wasted.
In order to leverage agency partners, align objectives, identify trends, establish the best incentive contracts, and retain agency loyalty, there are several things that your airline must be doing in terms of travel agency channel management.
Channel Management Solution for Agency Incentives
The first thing your airline needs to implement for effective incentive agreement management is a platform that offers a comprehensive view of your agency partners across key KPIs (market share, cost of sales, revenue, etc). This is a type of agency profiling and market segmentation. Only through seeing all the data, variables, and history can you properly assess the value of each agency; this will give you more power when negotiating incentive contracts.
This platform should also provide important data for your front end and back end incentive contracts. It can be divided into 3 stages: define, implement, and measure.
1. Define: Proper strategy definition and agency sales planning is essential for contract and incentive management. It will ensure you hit your expected ROI.
2. Implement: You must carry out modeling and simulation of incentive agreements based on multiple data source from different systems/platforms. This cuts back on manual data input, extended timelines, and revenue leakages.
3. Measure: Take follow up actions based on performance of promotions, incentive agreements, and deals.
Finally, your airline’s channel management platform should closely align itself with your agency partners by keeping in close contact with them and by offering advanced performance and payment management. For example, Accelya’s agency reporting provision enables agencies to understand their existing performance, gaps to achieve higher incentives, validation of incentive payouts, etc. Agencies strategies defined at the onset can be tweaked according to their performance, and alternate actions defined in case of the lack of unexpected returns. As sailors say, you must set the right course, but always be adjusting to any obstacles along the way.
The indirect sales channel isn’t going to disappear within the airline industry; in fact, it’s going to continue to make up a large portion of your airline’s sales growth in the future. Through effective management of your travel agencies partners, you can easily identify top performers, establish the proper incentive contracts, and reach your sales targets every single time.
Accelya’s Channel Management capabilities can help you do all this and more. Accelya’s offers a single platform for end-to-end functionalities around travel agency management, thus having a better handle on your indirect sales. We give you the potential to help your airline growth its travel agency sales revenues by up to 10%!