- January 15, 2016
- Posted by: admin
- Category: Tourism
In the first quarter of 2016, U.S. travel agents’ sales of ancillary airline products and services increased by nearly 350% year-over-year by transaction, and by nearly 170% dollar-wise.
The new figures were released last week by ARC, which attributed the rapid growth to the increasing abilities of carriers and GDSs to complete the transactions.
Meanwhile, total ticket sales were down dollar-wise by about 4.5% in the first quarter, but the number of transactions was up nearly 4% year over year, pointing to lower airfares.
Bob Mann, president of airline analyst R.W. Mann & Co., said “The ARC trends in transactions and sales track with airline top-line unit revenue and total operating revenue: more passengers/transactions, greater ancillary sales due to GDS facilitation and agency engagement, lower fares/sales, lower revenue but higher airline operating margins and net profits.”
Ancillary sales are reported to ARC through electronic miscellaneous documents (EMDs). ARC has been EMD-ready since 2010, but sales have only started to rise in more recent years.
In the first quarter of 2016, agencies reported EMD sales of $8.3 million, up from $3.1 million in the first quarter of 2015. The first quarter of 2016 saw 106,792 EMD transactions, up from 23,745 in 2015’s first quarter.
The majority of EMDs (97%) are seat-related ancillaries, according to Philip Myers, manager of settlement services at ARC. The remainder include down payment deposits, service fees and a generic “other” category.
ARC attributes the increase to EMD readiness.
“We’ve been ready for EMDs for years and years now, but the volumes haven’t been what we thought they would be,” Myers said.
“But it is trending up now, and I think most of that is based on the carrier readiness for agents to sell the product, and the GDSs’ ability to have the tools available for the agents to actually issue those EMDs.”
Mann agreed that EMD readiness was a factor in ancillary sales.
“Two years ago, GDS providers were still struggling with how to enable the technology, a year ago they were rolling it out as airlines added offers and this year it is being used effectively by agents,” he said.
ARC’s data reflects that. Transactions grew from 54,442 in 2014 to 236,059 in 2015, a nearly 334% increase. Sales-wise, 2015 also saw a huge leap, from $3.8 million in EMD sales in 2014 to $19.5 million in 2015, a 410% increase.
Myers said he expects the number of EMD transactions to continue to rise. He also said ARC has always felt there would eventually be one EMD per ticket transaction, “but it’s taken a lot longer to get to that point than we originally anticipated.”
Despite the lag, Myers said that will likely eventually be the case, adding, “I think it’s just a matter of time.”
Overall number of ticket-sale transactions by U.S. travel agencies also increased, from 41.3 million in the first quarter of 2015 to 43.2 million in the first quarter of 2016. Dollar-wise, sales were down from $24.1 billion in 2015’s first quarter to $23.3 billion in this year’s first quarter.
According to ARC, the data point to lower overall airfares.
Mann agreed and said larger carriers are engaged in “more aggressive price competition with fast-growing ULCCs [ultra-low-cost carriers], notably Spirit but also Frontier.”
He also said he did not believe the trend would stop anytime soon.
“I don’t see majors backing down from competing head-to-head with ULCCs,” Mann said. “If they do, they lose markets, and their hubs start to die.”
Mann also pointed out a trend that he is seeing, but that was not necessarily reflected in ARC numbers: “The increasing amount of carrier-direct and directed sales, as airlines continue to try to reduce GDS fees and distribution costs overall. This, despite improving agency engagement in the sale of ancillaries.”
Leave a Reply
You must be logged in to post a comment.