Harnessing Data To Drive Ancillary Growth

Over the past decade, ancillary sales have surged within the airline business, going from 6% to 15% of total revenues, according to OAG. Initially, airlines unbundled the core elements of seat sales to boost revenue, but further gains will require them to act more creatively.   

Now, data and analytic intelligence are driving the next stage of growth through the smarter application of ancillaries, targeting specific services and products at passengers based on their preferences, pain points, and travel habits, as well as an operator’s own priorities.

“We leverage data to determine the product a traveler would be most likely to interact with during or after booking,” says Danielle Brown, Chief Marketing Officer for Plusgrade – an industry leader in AI-driven ancillary revenue solutions catering to the aviation, cruise, rail, and hospitality domains.

Its software integrates directly into its customers’ booking systems and loyalty programs, linking between the two when necessary and offering different products and services.

These might include a seat upgrade for a business traveler, encouraging loyalty program members to purchase currency they need to book reward travel, or perhaps a smaller-ticket item like seat blocking as a gateway purchase for a passenger who usually av*oids add-ons. Providing such entry points can also feed through to core revenue generation, as a significant portion of customers who upgrade will stick with that class of travel for subsequent bookings or continue to build a travel bank of loyalty currency.

“We’ve uncovered a clear pattern: when travelers experience and understand the benefits of an upgrade, there's a significant increase in the likelihood of them choosing an upgrade for their next journey,” says Brown.

Other inputs that might shape an ancillary recommendation are the length of the route and how far in advance a person is booking.

“The psychological dynamics vary significantly,” notes Brown. “We're seeing a big uptick in day-of-travel purchases. Travelers are mentally segregating the cost of travel from the upgrade or seat block –they are perceived as separate transactions.”

She adds: “We have a highly skilled data science and analytics team embedded within our marketing department. The team develops sophisticated models to determine the optimal offer for a traveler, while also ensuring maximum profitability for our partners.”

Smart ancillary marketing should also be tailored to a supplier’s needs, helping them operate more efficiently within certain parameters. For instance, an airline might tell Plusgrade how many business class seats to hold back, or how much loyalty revenues it wishes to generate in a certain period.

“We have advanced to the point where we can provide AI-generated recommendations around program optimization,” says Brown. “For example, if a route has consistently had three empty business class seats in the last five flights, our focus should be on targeting those seats for upgrades rather than keeping them as hold-backs.”

Plusgrade also helps maximize frequent flier revenue by tailoring points or mile offers to customer preferences, for which it has data around all the major loyalty programs following its acquisition of the Points business in 2022.

“We analyze various aspects of loyalty program members, including their tier, points balance, redemption history, and overall behavior within the loyalty program,” explains Brown, adding: “As a result, the allocation and presentation of loyalty points are entirely tailored to each individual, ensuring a fully customized experience.”

The quality of this customization for both ancillary and loyalty program marketing is helped by Plusgrade’s broad client base, which provides a wealth of data points. While information about a client’s passengers is never shared, broad patterns of consumer behavior can be picked out and used to refine the company’s modeling.

“We have over 200 partners across the travel industry we’re continually refining the models we build and deepening our understanding of travelers' behavior,” says Brown. “This means that when we get a new partner, we already instinctively know how this stuff works and who's most likely to respond to what offers.”

Such understanding translates into tangible gains: Typically, a company’s loyalty sales triple within a year of Plusgrade taking them on.

Brown also sees massive potential for travel operators to integrate their ancillary and loyalty businesses beyond the entertainment options that prevail today, so customers can use points to pay for services such as car hire, insurance, and baggage as well.

“The companies that are fastest at breaking down the silos between loyalty and ancillaries will win – there is a huge opportunity there to earn more revenue and create more engagement and retention with travelers.”

This opportunity exists partly because of growing customer acceptance of ancillaries and the unbundling of fares, with travelers now more appreciative of the option to select only the services they require.

“It’s the democratization of being able to pay only for what's important to you,” concludes Brown.