The technological evolution that has occurred in recent years has caused a change in the behavior of people and companies. What happens now in São Paulo can already be accessed at the same moment in Tokyo or anywhere else in the world. Technology and information brought great changes in the world. And this has also occurred in the travel industry, whether leisure or corporate.
It also emerged new business models, such as low-cost airlines and so-called shared-economy, for real estate or car rental apps. At the same time as they came up with the speech of low price, they gained a good portion of the market. And today the low price is only a seasonal attraction. Be aware, there are no miracles in a market economy, where demand is not continuously increasing, as we are facing in Brazil today. You cut costs to maintain low prices or you will be compromising your result, with tendency to disappear in the short term. IAG Group (owner of British Airways and Iberia) recently announced the launch of a lowcost carrier that will make transatlantic flights from Spain to United States. This new airline is named LEVEL. With very low fares, it will certainly cause furor in the market where it will operate, as in routes such as Argentina / Spain and United States / Spain. This is nothing new, of course. Norwegian, Norway’s low-cost airline already does it this today, connecting Europe to the United States.
But is not good? Low rates? Sure it is something very cool, but we know that there is a logic in all of this policy. The logic of the result in the botton line. To achieve sustainable results, there are ancillary revenues, which in the case of lowcost companies, make up an important share of their revenues. In Spirit, American lowcost carrier, the ancillary revenues represent 39% of its revenue. And, exactly because of this, they can afford such low rates. And we do not talk about the airline sector only, no. We talk about all segments. Hospitality, rentalcar, services, everything.
And how is the corporate scenario in this environment? Challenging, because companies insist on considering the ticket fare and the daily rate as negotiation reference, when these prices and daily are only tariff components. LEVEL is an example, while the fare from Barcelona to Los Angeles may cost EUR99.00, a meal will cost EUR35.00 and a luggage will cost EUR70.00, other services will be charged for the traveler to have a minimum comfort in more than 12 or 13 hours flying time. And this, no system can, today, count in a request or travel quote.
Certainly travel policies put in their booklet the lowest price as a mandatory reference. If so, they need to be reviewed, innovate and seek the value delivered by the provider, the real differential, because lower price everyone has. Equals.
And how is the behavior of the TMC’s in front of these new scenarios? Adapting themselves using management tools is the only way to deliver value services to customers, but they, customers, will also have to adapt to these new scenarios. To follow a well-managed travel policy, giving to the traveler complete flexibility is still a distant miracle.
(*) Part of this article was produced for Brasilturis Magazine (April / 17)