Traditionally, low cost carriers like Easyjet have relied primarily on low prices to keep their customers loyal, but as they attract more business travellers to complement their leisure travellers base, they are increasingly over lapping with traditional carriers It is therefore not surprising to hear that new CEO Johan Lundgren’ will be taking their “Loyalty” scheme much more seriously moving forward and investing into it.

Currently, Easyjet say 46 percent of its passengers fly once per year and that returning customers book twice as many flights a year as new customers. This obviously reduces marketing acquisition costs and is as also likely to driver higher ancillary conversion, as returning customers tend to trust the brand more to deliver ancillaries such as transfers and hotel accommodation.

Legacy carriers base their loyalty programs around lounge access, free pre-booked seating and points based access to free flights anywhere on their networks. This allows them to incentivise and inspire business travellers based on free upgrades and seats for leisure travel on both its short haul and longhaul networks.

EasyJets low fair mentality and sophisticated yield model, make the provision of discounted fares based on mileage points unlikely. Similarly, Easyjet are unlikely to want to operate expensive airport lounges, which are primarily required by business travellers needing to work whilst travelling and less attractive to its core leisure customers.

Easyjet could get radical and create a low cost version of airport lounges. For example why not do a deal with common airport locations such as Starbuck’s to offer free coffee and dedicated Easyjet phone charging ports?

It might also decide to offer free or discounted in resort or home to airport transfer services via its existing partnership with Holiday Taxis (I wish!!).

Ironically, the biggest problem Easyjet face is the success of its paid for “Easyjet Plus”  Booking Card. This costs £199 a year, but for frequently travellers flying more than 5 times a year, this still provides great value as it provides an extra carry-on bag, pre-booked seats, priority security clearance and speedy boarding.

It’s hard to see what else Easyjet could cost effectively offer frequent travellers and as such I would expect Easyjet to launch a points based system to reduce the cost of this card for its frequent flyers. This would appeal to both business and leisure travellers alike and would be relatively simple to administer as an add on to its existing “Manage my booking” section which already records all previous and upcoming flights.

The only “Extra” I’d like to see added is some free hold luggage, but given how much revenue low cost carriers make from luggage, now they are yielding prices by flight, I think this may be to “heavy” a cost for them to bare.

The old adage is that “loyalty” comes at a cost, but in today’s google dominate world, this cost is often lower than the acquisition costs of recruiting disloyal customers each time via ppc or price comparison sites.

So for me “Low cost loyalty” is a must and not just a tradition carrier concept.

I recently came across a presentation I gave 18 ago to a group of financial analysts, to explain the various role’s played in the holiday booking process

It talked about three stages of booking a holiday, “Dream, Research and book” and looked at the roles travel agents, call centres and online players played in the booking process.

At the time I was fairly dismissive of Travel agents, who I described as “Inconvenient Brochure Warehouses” that acted as intermediaries for either there in-house tour operator owners or where “Independent” selling a range of pre-built from multiple  holiday companies.

I wrongly predicted a rapid decline of high street agencies, as more customers migrated from “Walking”, to “Talking” to a call centre or “Clicking” to book unemotive travel online.

To be fair this “CWT” migration circle did occur, but ironically the biggest shift in the longer term has been from talking to a call centre to booking online via intuitive and content rich OTA sites that are delivered via high speed broadband connectivity. Although the overall number of High Street Travel agents has sharply declined, Independent agents have survived or even thrived once you include the home working sector.

To me the reason why is simple.

Travel Agents have evolved from being intermediaries, to become “Travel Advisors” who offer a massive range of “Dynamically packaged” holidays or specialist tour operators whom offer differentiated and complex product that is not easily booked online.I personally think the key element is not the product sold, but the word “Advisor”.

In an internet enabled world where online sites offer millions of holiday options, “Personalisation” and “Recommendation” are key online buzz words and the primary focus of most IT development teams.

Online players struggle with the above, because most customers search their sites without ever revealing who they are and have to know what they want before the can search, severely restricting the data required for personalisation.

Contrast this to a shop environment, where the customer is sat in front of the “Advisor”, who with experience can often identify the right products by just looking at them and can ask them much more complex questions about what types of holidays and destinations they are willing to consider and flexibility over departure dates to get the right holiday.

Good travel agents can also influence the “Dream” stage by recommending destination customers may want to visit and as all online players know, the earlier you capture a customer in their holiday booking process, the more loyal they become. That’s not to say some customers won’t just walk out of the shop and simple holidays online with an OTA or directly with supplier.

However, “Advise” does have value, particularly when applied to more complex or higher spend holidays, where customers still want the reassurance of advice from a travel “Expert” before booking.

Lastly and probably most importantly, online advertising costs continue to rise and are now so high that the average “success only” commission paid to travel agents, mean that agents are again the preferred distribution for many cruise lines, most touring and adventure operators, not to mention new entrants like the OTA On the Beach.

The mantra of “If you can’t beat them, state using them again, has never been more true”

The hotel only sector in the UK is inevitably becoming commoditised as its easy for customers to compare prices by visiting multiple sites via Google or price comparison sites such as Trivago and Tripadvisor.

The same can be said for the flight only market, as I can’t remember the last time, Skyscanner was not my first point of choice, when looking for flights.

However, the same cannot be said when looking for holidays, although players like Kayak and Travel Supermarket are trying to establish a position.

Dynamic Packaging has exponentially increased customers holiday choices with thousands of both flight and hotel options, which when multiplied together yield around 100 million holiday options that each OTA can offer on their sites.

Putting an aggregation and comparison layer above this is very hard, with current sites only comparing offers on the cheapest flight option and passing customers onto the OTA to modify their flight choices. Given that most OTA’s have access to the same flight and hotel suppliers, the savings available from comparison are low compared to the total holiday price and often customers simply use the comparison sites as a listing of OTA’s to look at before booking.

The biggest comparison threat therefore comes from Google, who could combine their already successful flight and hotel search’s to allow customers to Dynamically Package their own holiday options in the same way the OTA’s do.

However, the new European Package Directive puts a massive regulatory block on this, as it clearly states that facilitating the booking of flights and hotels requires the provider be a “Principal”, provide bonding and taking responsibility for the delivery of the product.

This is completely alien to the Google media model and unless they enter the process via a partnership with a global player, willing to take on these responsibilities, its simply not going to happen.

You then look at the Global market place and quickly realise that the major players such as Booking.com and Tripadvisor only really operate in the hotel only market and currently not packages, leaving only Expedia is a likely option for the European market partner.

Although, Expedia worldwide are a major player, they have never fully got their heads around the European package market, leaving players like On the Beach, Love Holidays and Teletext to dominate the UK dynamic packaging sector. Combine this with the large element of the holiday market still accounted for by the traditional holiday giants of Tui, Thomas Cook/Jet2 holidays and you can quickly see that even Expedia could not provide an effective comparison tool for Google

So my simplistic conclusion is that although Google and Booking.com are set to dominate the hotel only sector, the Package Travel Regulations provide a substantial barrier against entry into the European package holiday sector, allowing further growth for the UK’s leading OTA’s not only in the UK market, but increasing in other fertile markets like Holland, Poland and potentially the highly competitive German market place.

This growth however is likely to come via acquisition, as the cost of establishing a brand in other European markets, is often greater than the cost of buying an established player and improving its performance by utilising shared technology and bed buying synergies in the background.

Cross European consolidation of the dynamic packaging sector is definatly coming, but it’s just as likely to be driven by UK OTA’s as international giants like Priceline, Tripadvisor and Expedia. However, don’t rule out China’s C-Trip buying one of the UK’s major OTA’s as the first building block to establish a European strong hold.