APEX Insight: Airlines are entering the accommodations space – either through big money investments or expanded booking platforms – in a bid to meet passengers’ evolving needs, and to alleviate the strain of otherwise too narrow profit margins.
Despite seeing its fifth consecutive year of improved profits, the airline industry continues to lag behind other industries when it comes to net revenue. Lower fuel costs and fuller planes account for the profit spike, but according to the International Air Transport Association’s director general and CEO, Tony Tyler, “It will take a longer run of profits before balance sheets are returned to full health.” It comes as no surprise then that airlines and aerospace companies are veering their attention toward vertical integration and product differentiation.
Reserve Rooms With Ryanair
“More and more customers are looking to Ryanair for products other than flights, and we see this as a natural progression towards Ryanair.com becoming the Amazon of air travel,” said Kenny Jacobs, Ryanair’s chief marketing officer, in an online press release for Ryanair Rooms. The low-cost carrier (LCC) officially stepped into the online travel agency (OTA) sphere last month with a digital hotel booking platform stocked with low-cost listings.
“More and more customers are looking to Ryanair for products other than flights.” – Kenny Jacobs, Ryanair
According to TravelMole, the airline’s ambition for vertical integration is only expected to continue with the eventual introduction of a comprehensive service that incorporates all of its product offerings – flight, hotel, car hire, and soon excursion and restaurant bookings. As with the LCC’s unbundled onboard add-ons, customers will be able to tailor their vacations – mixing and matching price profiles and products – using the travel platform.
You Fly – and Stay – With U-FLY Holidays
Hong Kong-based low-cost carrier HK Express was at the helm of last month’s launch of U-FLY Holidays, a travel platform offering HK Express flights, hotels, tours and ground transportation. With an accommodations inventory already boasting over 500,000 properties in 21,000 cities, the budget alliance’s entry into the hospitality market was a significant one.
“Our vision is to empower everyone to explore Asia at an affordable price.” Andrew Cowen, HK Express
Explaining the impetus behind HK’s move into the OTA arena, Andrew Cowen, director and CEO of HK Express, said: “Our vision is to empower everyone to explore Asia at an affordable price and encourage guests to expand their horizons through travel.” Expansion plans for the platform include the incorporation of other U-Fly alliance member airlines, as well as additional hospitality offerings.
HNA Makes Its Stake in Hospitality
Chinese conglomerate HNA Group – owner of Hainan Airlines, Grand China Airlines and Lucky Air – last month announced that it had purchased a 25-percent stake, valued at $6.5 billon, in Hilton Worldwide Holdings, whose brands include Embassy Suites, Hampton Inn and Conrad. The deal makes HNA the hotelier’s largest shareholder, and is the aviation giant’s second foray into the hotel industry this year: In April, HNA bought Carlson Hotels for an undisclosed sum.
HNA’s expansion-through-absorption in the tourism industry took another leap early this month with its subsidiary Beijing Shareco Technologies making a $416-million stake in Global Eagle Entertainment to accelerate in-flight connectivity uptake in Chinese air space. HNA recently reached deals to buy an aircraft-leasing business, an airline caterer and an airport luggage handler as well, ensuring its sway in the tourism industry ranges from end to end.