By Martin Kelly
Man cannot live on bread alone – nor can the most modern of travel businesses survive and thrive using a single sales channel such as the Internet – even when it is delivering more than 90 per cent of business.
Virgin Blue, which generates between A$6 and A$9 million in online revenue every day, has just taken another major step in its distribution diversification program, launching its Application Protocol Interface (API).
Launch customers are online retailers travel.com.au and lastminute.com.au, powered by Arnold Travel technology, while links will be provided to Zuji and Carlson Wagonlit.
The API provides these companies with a “doorway” into Virgin Blue’s new and more flexible Navataire Skylights7 booking platform – giving them live access to most inventory.
The integration costs are significant, and borne by the agents, but Virgin Blue claimed the upside is enormous, and that long-term benefits can be found on a number of levels – notably access, speed and better customer service.
It also gives online retailers a “hands free” approach to increasing productivity and commissions through the carrier, which can reach eight per cent if sales targets are reached or exceeded.
Manager e-Commerce at Virgin Blue, Steven Greenway, said the days of Low Cost Carriers enjoying explosive growth solely through the online Business to Consumer sales channel have largely disappeared as the sector matures.
“All Low Cost carriers will use a multi-channel strategy as they grow into new more, complex markets and customer segments in order to drive revenue – the trick is to avoid overhead costs,” he said after speaking at TRAVELtech in Sydney.
“Relying on the web alone for sales growth produces a restricted framework – growth can be achieved but only in increments.”
Consequently, Virgin Blue is also expanding its GDS coverage – adding Amadeus to its existing relationships with Galileo and Sabre.
“The GDS are very efficient in terms of aggregating content and providing agents with a tool to book airfares,” Mr Greenway said.
“At the end of the day, the GDS, as much as we say we hate them, provide a service. Pricing, however, generally outstrips value.”
To overcome this, Virgin charges a A$15 premium for the GDS fares, which are usually premium rates available to corporate or government clients, or international markets it does not have access to, such as the Pacific Islands.
Therefore Virgin Blue is able to keep key corporate and agency customers happy by giving them better GDS coverage (ie: service) a necessary move if the company is to continue growing beyond its low cost base.
Other distribution options are also emerging in the Australian market. Virgin has had discussions with Bezurk, a travel search engine set to launch soon, but has not yet signed with them.
Greenway said while travel search engines can deliver online sales leads on a “cost per click” basis, the technology they use to screen scrape deals “pounds” the member websites, affecting usability for (commission free) customers going direct.
However, he said, the likes of Sidestep and Kayak are going well in the and that usually adopts American trends so the odds are that travel search engines will probably work in this market.
On the product side, Greenway said Virgin will ramp up its wholesale offering and improve Dynamic Packaging technology to better integrate a “limited number of simple products”.
So, Virgin Blue is in the process of becoming a hybrid carrier as it gets squeezed at both ends of the market by Qantas (top) and Jetsar ((bottom).
“But we are staying true to our low cost base and still believe in user pays,” said Greenway. It’s just that the times – and market – is changing.