A study published today (October 24) by Infrata disputes airlines’ claims that direct distribution costs them less than third-party aggregation sites and GDSs.
The study claims that a ‘substantial’ increase in advertising costs combined with a reduction in GDS booking fees and less agent commission, as well as the cost of the customer service incurred by direct bookings make the difference between direct and indirect distribution costs “much smaller” than airlines contend.
The report, which was commissioned by the European Federation of Travel Agents’ and Tour Operators’ Associations (ECTAA) and the European Technology & Travel Services Association (ETTSA), says that airlines’ estimation of third-party distribution costs is wrong, finding that a direct booking costs €12.56 versus €14.21 for indirect purchases. However, the report’s authors argue that carriers aren’t taking ‘customer acquisition’ into account when calculating the cost of a direct booking, closing that gap significantly.
Ian Lowden, author of the study, says: “When taking into account advertising, marketing, customer support and payments fees, as well as the significant costs of online customer acquisition such as search engine fees, the costs of ‘direct’ bookings and those made through online and offline travel agencies is equivalent. Airlines seeking to justify a move to less transparent direct distribution schemes often omit from consideration these important – and unavoidable – costs.”
Christoph Klenner, secretary general of ETTSA, also claims the Infrata findings show some airlines may even incur higher costs by pursuing direct bookings.
A related report by ETTSA and ECTAA released earlier this month accuses airlines of ‘limiting competition’ through consolidation and pursuit of direct bookings.
Michel de Blust, secretary general of the ECTAA, adds: “We can only conclude that airlines must have other motives to push direct sales. One clear motive seems to be avoiding the transparency, convenience and choice that travel agents and neutral platforms offer consumers. In airlines’ direct sales channels, such transparency and choice do not exist, allowing them to make consumers captive and vulnerable to increased prices.”
The report was published just after US carrier Jetblue announced it was cutting ties with several 'low-yield' OTAs to cut costs, while Iberia and BA are set to introduce an £8 surcharge for GDS bookings from November 1.