Ancillary Revenue: Moving from Extra Fees to Extra Value

By Brandon Carter | Updated on Aug 25, 2015 8:34:00 AM

LA_play1One of the hardest moves in business is transitioning a product from free to paid. The freemium model utilized by Spotify and other online services is do-able, but totally free to totally paid?

Nothing but grumbles.

Yet that’s where many travel companies have turned in attempting to create ancillary revenue. Luggage fees, seat selection, paid hotel room wifi, and $7 bottles of water in the mini fridge aren’t exactly winning customers over.

Revenue-wise, it’s working. Reports estimate over $38 billion in ancillary revenue was generated in 2014.

On the other hand, the travel industry is taking a beating in the minds of consumers. Airlines and hotels rank third and fourth in unfavorable sentiment on social media, and airlines in particular have some of the lowest loyalty scores around. (Click here for these and other loyalty statistics.)

The margins on travel, hotel and car rental bookings are admittedly thin, making ancillary revenue a primary matter, however.

The answer isn’t more fees and extra charges, it’s offering customers something of relevant value.

All City Savings

Whether in the booking process or in the weeks between booking and traveling, people are planning their itinerary. They’re looking at amusement parks, restaurants, tours, sporting events, and so on.

What if you could help them save on every one of those purchases, putting possibly hundreds of dollars back in their wallets?

That’s the idea behind All City Savings, an ancillary revenue service from Access Development. All City Savings offers destination-specific savings passes in every US market, with thousands of local restaurants, retailers, sporting events and all of the major theme parks.

(Click here to read the official All City Savings announcement)

These passes are sold for as little as $10, with a generous rev share going back to the travel provider/OTA.

$10 to the consumer, with savings at places they were already planning to spend on is a pretty easy sell. They’ll make that $10 back, and probably quite a bit more, in a single redemption.

Integration can be as simple as adding a link to your website, but the Access APIs allow for custom, real time integration.

Need an example? A major international airline has integrated All City Savings - and doubled their revenue on every successful purchase in the process. Click here to check out the case study.

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Enhance the Sale

By offering more relevant value to every sale, OTAs and travel companies get the revenue they’re looking for, but they also get something else: customers who really feel like they got something of value for the extra bucks they spent.

Those small transactions can pay off in big ways. The primary benefit is customers will be more inclined to return to the same provider next time.

That’s the element missing from the current state of ancillary revenue upsells. By thinking more of what customers value, and not just charging them for what they once received for free, those loyalty rankings are going to leap.

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Topics: upsell programs, customer loyalty, Ancillary Revenue

Written by: Brandon Carter

Brandon is a writer and marketer for Access Development. He's a frequent blogger on customer and employee engagement & loyalty, consumer trends, and branding.

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