Business model innovation is the hottest thing in online travel

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Innovation comes in many forms. Sometimes it’s new technology. But for a growing number of online travel agencies, it’s about disrupting traditional business models.

Denis Schaal

Travel online this week

One of the most exciting developments in online travel these days is that companies are disrupting existing business models with Air Asia, eDreams Odigeoand Hopper lead these efforts.

These three elements aren’t the only ones changing the way travel agencies traditionally do business online, but they provide some interesting test cases.

Airlines have traditionally made their money by selling flights, striking lucrative deals with credit card companies, and charging extras like baggage fees.

Whether he succeeds or not, A capital letterwhich operates AirAsia, can now boast that the Malaysia-based airline group’s super app has over 10 million monthly active users, and among the twists, AirAsia is now selling flights through its app to other airlines, as Airlines to Singapore.

In order to expand its network and revenue streams, AirAsia has partnered with the Czech Republic-based company Kiwi.com offer customers tickets on other airlines. AirAsia calls the offer FlyBeyond.

Of course, airlines usually sell partner flights under codeshare or joint venture agreements. It’s not new. But AirAsia doesn’t necessarily have deep partnerships with FlyBeyond airlines and tries to make its super app a one-stop-shop for customers to fly to destinations AirAsia doesn’t serve.

Whether AirAsia’s superapp strategy proves successful remains to be seen. A few years ago, Accor hotels tried to list unaffiliated independent hotels on its website, and it didn’t work. But AirAsia’s effort, as part of its superapp strategy to offer banking and payment solutions, as well as retail and ride-sharing products, appears to be paying off.

Edreams Odigeo, based in Spain, is part of a new generation of companies that are changing the way they operate to direct their activities towards subscriptions or memberships. As detailed in a recent Skift Research report, the Edreams Odigeo Prime subscription program, which offers discounts on flights and hotels, now has more than 3 million travelers paying between $60 and $75 a year to be members.

Edreams Odigeo generated around 40% of its €424 million in sales in the 12 months to May 2022 from its Prime subscription plan, according to the report.

In addition to Edreams Odigeo, many travel companies including AirAsia, a meta-search and review company Tripadvisorhotel brand Selinaand luxury accommodation provider Inspirationare shifting their business models to include subscriptions.

“Performance metrics for travel have traditionally focused on volume, pricing power and unit revenue (e.g. for hotels RevPAR, for airlines PRASM),” the report says. “Moving to a subscription model means that travel companies must also put in place training, systems and procedures to track and understand a new set of engagement metrics such as the initial cost of acquiring a a customer, customer churn, and customer lifetime value.”

Montreal-based Hopper is also changing the traditional business model of online travel agencies. With his variety of fintech-focused products, like freezing flight and hotel prices for a week or two for maybe $25 or $45, Hopper recently claimed his revenue rate is 30 times higher than in 2019.

Hopper is betting, based on its technology, that it will recoup far more money in fees than having to pay the difference for airfares or higher hotel rates for customers if prices spike.

In September 2021, Hopper CEO Fred Lalonde said about 70% of the company’s revenue comes from financial products and not from the sale of the trip itself, although this percentage is likely to be lower in 2022.

Critics claim that Hopper labeling these products as hype “fintech” offerings is hype, and they are actually a form of insurance. Either way, if an online travel agency is making significantly more money from price freezes than from flight and hotel commissions, it will disrupt parts of the travel agency’s business model by line, and imitators will no doubt follow.

In short

MakeMyTrip joins the Growing Club with SuperApp Ambitions

In an interview with Skift, Rajesh Magow, Group CEO MakeMyTrip, said the online travel agency not only wants superapp status in India, but also in the Middle East, where it launched its operations. He also seemed to hint at a deeper partnership with Amazon. Skift

Lastminute.com Group gets interim CEO

Other than Jie Sun in China, not many online travel agency CEOs are women. But the Amsterdam-based Lastminute.com group, reeling from the detention of its CEO and chief operating officer in an investigation into fraud at the Swiss Covid relief fund, has appointed Laura Amoretti as interim head. Amoretti previously held the position of Chief Account Officer. Skift

Airbnb co-founder steps down from day-to-day operations

Airbnb co-founder Joe Gebbia said he plans to step back from day-to-day operations at the company, where he chaired its in-house Samara design studio. Gebbia will remain on Airbnb’s board of directors and will remain involved with the independent nonprofit organization Airbnb.org. Skift

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