Monday, February 23, 2015
Marketing Mischief: Travelport 2014 Results - $3.5 billion left on the table
First, Gordon Wilson shared that their "attachment rate" of a hotel to an air ticket is up to 43 hotel segments out of 100 air tickets sold. While on the face, this sounds really wonderful, the focus on selling hotels to an air traveler is actually the core problem of the travel industry and a major opportunity for the GDS companies.
In the US alone, out of the 1 billion trips taken that involved an overnight, 87% of those were by car and NOT by air. Therefore, if you are measuring your attachment rate to air, then 43 out of 100 is a miserable number.
In the US, there are 130m trips by air, so 43% of those are just 55.9m trips.
That leaves the hotel bookings for 870m trips on the table. At Travelport's average segment revenue of $4.10, by my calculations, that is $3.5 billion left on the table.
The continued focus on the air traveler will eventually be the death of the GDS, as someone else will snatch up their dominant market position, gained by this air focus over the last 30+ years.
Second, I noted that without the sale of Orbitz Worldwide in 2014, Travelport would have lost $265m.
That is a sad state affairs for a mature business, but it is a result of focusing on a stagnant sector of the business (the air traveler) and ignoring the part of the market that is completely underserved. Marketing mischief at its finest.
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