Mega agencies product a net profit over supplier direct (ticket sold through agency, less commission

Sharpening conflict online between OTAs and Airlines renews discussion airport hotel copenhagen about the value of the offline airport hotel copenhagen distribution channels - namely the mega agencies that focus largely on the corporate traveler and the other, nearly airport hotel copenhagen 16,000 brick and mortar agencies still in business in this country.
As we listen to the media talk about the Expedia and Orbitz battle airport hotel copenhagen with American Airlines, I thought it would be useful once again to talk about the value of the various distribution channels from a NET profit basis basis from the airline perspective (as compared to the cost basis, which is what they generally talk about). And by the way, have you noticed that Henry Harteveldt of Forrester is EVERYWHERE in the media these days?!
As we have seen in the use of metasearch tools like Kayak, Bing Travel and Mobissimo, airline supplier direct site ticket prices airport hotel copenhagen are generally on par with online travel agency sales of those same airlines
airport hotel copenhagen With this assumption and based on the ARC numbers (outlined below), for the ticket sold through the OTA, the net loss/cost airport hotel copenhagen for the airline would be $42.80 for a domestic ticket and $66.18 for an international ticket.
So you can see American's point in being willing to take the chance of pulling out of this particular channel. You generally can't make up losses in volume, unless you have a total handle on your cost structure. And with fuel prices targeted to soar in 2011 and 2012 and labor contracts still being an issue to the major airlines, which are still unionized, it may just be better for them to take out some seats, give the passengers more legroom ( can I get an amen to that? ) and make a profit on the seats that they sell themselves and those sold by their offline travel agent partners.
However, I fear that if American feels that they have scored a win on this particular battlefield, they will then proceed emboldened to continue their distribution shift away from the traditional airport hotel copenhagen travel agencies, who they alienated at the beginning of the last decade, first with commission caps, then cuts, then out and out elimination of commissions as a birthright.
Mega agencies product a net profit over supplier direct (ticket airport hotel copenhagen sold through agency, less commission, less GDS fees, as compared to that same ticket sold through the airline's web site) of $28.13 domestically and $771.38 internationally.
This includes the mega agencies, which are mostly corporate (Amex, Carlson Wagonlit, BCD, HRG, Maritz, Omega, CWT/SATO and SATO), the online agencies (Expedia, Travelocity, airport hotel copenhagen Orbitz, etc.) and "all other agencies", which at this time is made up of just under 16,000 agencies. The numbers in the chart are for the first half of 2010.
Domestic Average airport hotel copenhagen Ticket Price (Sales) airport hotel copenhagen includes taxes and fees and is the total sales for all tickets issued by the channel/category, divided airport hotel copenhagen by the number airport hotel copenhagen of tickets. The mega agency airport hotel copenhagen category issues 24.6% of all tickets, and also represent 24.7% of all ticket sales. Online agencies produce 33.4% of all tickets and 32.7% of all revenues. The other agencies produce 42.0% of all tickets and 42.6% of all revenues.
International Average Ticket Price (Sales) includes taxes and fees and is the total sales for all tickets airport hotel copenhagen issued by the channel/category, divided by the number of tickets. The mega agency category issues 12.3% of all tickets, and due to the higher average ticket price internationally, also represent s 22.6% of all ticket sales. Online agencies produce 24.0% of all international tickets and just 18.1% of all revenues. The other agencies produce 63.7% of all international tickets and 59.3% of all revenues.
The Agency airport hotel copenhagen Commissions are all calculated at 10%. The fact of the matter is that the average commission domestically for all but the megas may actually be less than the 10%, but we felt this was a conservative assumption. Internationally, the average commission may actually be higher than 10% for some agencies, but it is still likely airport hotel copenhagen a good average for this exercise.
For the Global Distribution System (GDS) fees, we have used an average of $4.00 per segment and an average of 4 legs/segments per ticket. Again, some of the GDS fees may be slightly higher than that on a per segment basis, but the average number of segments generally sits below 3, so this after is once again conservative.
The GAP that is calculated is the GROSS ticket price, less the Commission, less the GDS fee, less the average estimated ticket price for supplier direct (which for this exercise is identical to the online airport hotel copenhagen agency ticket price for the reasons outlined airport hotel copenhagen above). So without allocation airport hotel copenhagen of any other costs, this is the net profit airport hotel copenhagen or loss from the channel as compared to if the airline sold just via its own consumer direct channel.
airport hotel copenhagen Now those of us in the industry know that consumer direct from a supplier direct is by no means a FREE channel. They have call center costs, branding/marketing costs, web development and infrastructure costs.
We know from experience that the use of broad industry averages can be misleading when looking at your own situation as a supplier. For instance, if you put your head in the oven and your feet in the freezer, the average temperature of your body is not really relevant, is it?
It is 2011 and business fundamentals still work. You have to make more than you spend, and still have to service what you owe. Don't make the mistake of assuming that your own channels are "cost free".
Make friends of those that sell your product at the highest possible price and cost you less than your own channel. And if you choose to say goodbye to those who sell a large quantity of your product at a true loss, then so be it.