BOOKING and service fees are emerging as a crucial source of income for Australian online retail sites with Webjet reporting that fee income now accounts for more than 50% of its gross profit.
In fact, Webjet appears to be setting the global benchmark for online fees, charging a A$14.95 processing fee on all bookings, land or air, in addition to an extra A$3.45 per person per sector ‘Seat Price Guarantee’
This means airline passengers pay A$21.85 to book a return flight through Webjet – up to five times higher than its local rivals, which charge as little as A$4.40 per booking.
In the United States, online airfare booking fees have settled at $US5 after a fierce price war, similar to rates in major European markets such as the United Kingdom.
Webjet Managing Director David Clarke said his customers have no problem with paying such comparatively high fees and that rivals are crazy for not cashing in.
In the past 12 months Webjet has increased its processing fee by 115% and its Seat Price Guarantee has risen 345% from $1 to $3.45 without suffering customer backlash.
“What I don’t understand is why our competition don’t charge higher fees,” Clarke said.
For online airfare bookings, ZUJI charges $8 and Flight Centre is at $6.95. Travel.com.au and Lastminute.com.au charge $4.40 (domestic) or $9.90 (international) – a situation that may change soon.
Managing Director of Travel.com.au Adam Johnson commented: “I really feel at the moment that we are probably a little bit under the market rate.”
Clarke said “however extraordinary it may sound” many Webjet customers don’t care one way or the other about service fees.
“In fact, greater than 50% consider fees a reason for doing business with us, and we believe that this is a result of an absence of bias (through its airfare booking matrix).”
However, this is a service most other leading sites now offer.
So the multi-million dollar question is: why should people stay with higher-cost online retailers?
But no-one has the answer right now, and it is in nobody’s interests to ignite a price war.
Right now it’s a waiting game.
As for the future, Clarke believes that service fees are not only here to say, but that everyone will soon be charging them.
“I think the simple fee structure that now exists may become more more complicated and equate back to product value.”
“And I’d be really surprised if the major online airlines don’t start charging internet fees.”
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