Ancillaries could drive future of corporate travel negotiations

The inclusion of ancillary products and services could be a key factor in the future of negotiations between airlines and corporate travel buyers.

Delegates at the ACTE-CAPA Global Summit, which got underway in Amsterdam this week, heard that the evolution of corporate travel negotiations could see agreements defined not only by price, but also by ancillary sales and the improvement of the traveller experience.

In a session led by Caroline Strachan, former vice president of global consulting for American Express Global Business Travel and now of Festive Road, a marketing consultancy, and Shihaj Kutty, Qatar Airways’ vice president of corporate sales, joint research from the ACTE and Qatar Airways was presented that revealed travel buyers’ attitudes to the negotiation process.

Corporates, the research found, are still primarily driven by savings, but ancillaries are growing in importance.

In terms of what drives agreements, discounts are still the overwhelming factor (stated by 87% of respondents), but the ability to obtain cut-price ancillaries, such as baggage allowance and seat selection, was second (39%). Traveller comfort was stated by 26% of respondents, but this is “becoming more important”, according to the experts.

Kutty noted that “ancillaries are starting to shift the balance in airline negotiations”, and that corporate travel buyers are now more “open to value-add”, which he said was a “positive sign for airlines”.
The research found that seat selection (42%) and baggage (38%) were the most sought-after ancillaries among corporate travellers, followed by ground transportation (29%).

Delegates also heard that airlines, with their notoriously low profit margins, are increasingly trying to negotiate based on the overall quality of their service, rather than on price, but they find it difficult to quantify their value proposition. The ability to add ancillary services could be part of the solution.

With global airfares falling and ancillary revenues soaring, the ability to upsell is likely to become increasingly important for airlines in the coming years. And with the top five most profitable airlines all now classified as low-cost carriers, many legacy airlines are also now climbing aboard the ancillary train.

For both corporate travel buyers and airlines, negotiations based not only on price but on ancillary inclusions are likely to become increasingly common in the years ahead.