How travel businesses make money with ancillary services in tourism

Undoubtedly, the travel industry tends to be the main earning of many countries that ancillary services in tourism indicate a profound benefit for travel firms.

The application of technology in the travel and tourism industry came up with both benefits and drawbacks to companies in the market. Accordingly, it posed a disruption that many novel business models have risen to take over the profit margin. On the other hand, the rapid increase in numbers of firms offering travel-related services is hitting up the fierce competition among companies. Hence, it forces companies with constant innovation to survive.

The typical representatives of technology-driven travel business are online travel agencies, online booking platform, and travel portal platform. Those models have dramatically changed the way customers adopting and planning their trips. Besides, since most bookings and orders are placed online, it enhances the development of ancillary services in tourism. Most business owners believed that by outstanding ancillary services, they could capture better customer experiences that add value to their competitive advantage.

Related article: Future of travel portal development – How it makes tourism business shine

From the customer point of view, they enjoy the conveniences of ancillary services in tourism, especially in cutting waiting time in transportations and procedures. In this article, we will give details on how ancillary services in tourism held travel companies boost their revenue and capture efficient customer relationship management.

An introduction of ancillary services travel and tourism

In the modern travel industry, the ancillary services meaning in the context of travel and tourism, refer to the extra value-added on a travel package that customers can book along with their trips. The fundamental purpose of ancillary services travel aims to provide travelers more enjoyment and satisfaction. Accordingly, the online travel agencies OTA are seemingly the leader in the market, which benefits the most from selling ancillary services.

What is ancillary service?  

Basically, the ancillary services meanings in the context of business specialize in tangible or intangible products, which are supplement parts added on the customer journey. In the beginning, ancillary services travel and tourism limited in the term of airline ancillary services that the large portions of revenue in this industry came from ancillary activities. In practice, businesses have focused on strategies of the lower ticket price to sell more ancillary in the airports, including airport souvenir shops, luxury products, food and beverage, airport hotel, airport transfers, etc.

Currently, offering ancillary services remains a lucrative opportunity despite the fact that it is facing a tremendous risk of uncertainty. In fact, some countries in Europe, in which the majority parts of GDP came from travels, are witnessing the revolution among ancillary services. Expressly, Sweden and Switzerland are two typical examples of benefiting from ancillary services in tourism. In those countries, revenue from ancillary services is accounted for 50% of the total from the airline industry. 

Related article: How digital transformation affect the travel and tourism industry – Mobile apps and technological innovation

Take a significant economic downturn in 2008 as an example since many financial empires fell down, people did not spend their money on travel and hospitality, leading to the collapsing of most ancillary businesses. Similarly, in 2020, COVID19 had knockdown the travel and tourism industry, the ancillary services in tourism also fall into the red. We had witnessed a series of central airports in America being empty for several months. Fortunately, the demand for travel and tourism is predicted to restore shortly in 2021.

Ancillary services in tourism meaning

Obviously, the ancillary services of travel and tourism consist of a diverse ecosystem with tons of different businesses. In this article, we would mention some ancillary services examples travel tourism, that we believe would be significantly developed.

• Car rental: Car hire might not be a novel business model in the market that took place many years ago. As a typical representative of ancillary services in tourism, users could handily hire a car locally by coming to the office of car rental services. In many places that have a high cost of transportation, car rental was seemingly booming as cost-saving and convenience services. However, along with the development of technology, tradigital car hire services are no longer survive. Instead, the car rental platform tends to become the norm in the market since the sharing economy dominates the whole business. In fact, the demand for developing a custom car rental marketplace or travel portal development for car hire has seen a dramatic increase of 80% these years. Whereby Europe and America are believed to be the dominant markets.
• Direct transfer services: If you are struggling with dozens of baggage you want to bring during travel, direct transfer services might be the life-saving solution. Many transfer businesses offer direct transfers for travel luggage from customers’ homes to their hotel. Accordingly, travelers could enjoy their journey without carrying a heavy load. In fact, when many airlines charge much amount for overweight bags, direct transfer services tend to be money-savers and convenient at the same time.
• Travel insurances: Travelling abroad had been a big problem in the last decade that it requires travel insurance for each passenger. Especially in Europe, where the strict regulation has imposed on travelers, going to the office to buy travel insurance might be annoying. Hence, most insurance brands have transferred their business to online. Customers currently prefer to buy lenience on the website, place a payment, and get certificate confirmation by email.
• Online tour operators: in practice, this type of ancillary services commonly offers locally. It means, based on conditions of tourist attraction, customers could be suggested custom tours, which can be pre-booked by tour operator system. Accordingly, theme parks, theater, and concerts are three popular ancillary services travel.

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Ancillary services in tourism: A beneficial sectors for company

In the beginning, ancillary services in tourism might not be taken seriously as a minor part of the travel booking package. At this time, ancillary services were an add-on option, wrapped into huge packages. It means ancillary services providers had to lean on other services to survive instead of independent models. In the past, travel by air was significantly expensive, which seemingly served the wealthy class.

Currently, along with the revolution of ancillary services overtime, the concept of budget airline allows airline brands to lowers their ticket price. Customers could book the ticket with the low started price and pay for extra options if they want. Not limited from the fairs, ancillary services are broadening the horizon of the whole travel and tourism business by the stunning benefit it provides:

• Cutting down the travel budget then boost the travel demand  
• Allowing better travel planning experience by allowing pre-departure planning tools  
• Offering custom travel experience tailored to each passenger  
• Better customer relationship management by an automated system and data collection online  

Travel software development meaning in ancillary services

Besides capturing benefits from selling products or services, businesses have more profit models than that. Expressly, online businesses are not only selling their own products that they also offer a virtual store for hire, make money from loyalty program or cross-advertising. Instead of limited production capacity, online ancillary services could cut down the cost of operation and labor cost by leveraging software solutions. We, as a software development company, have done several projects for ancillary businesses in adopting their custom mobile app or web application development. Accordingly, from our perspective, it would be four ways of making benefit by delivering online ancillary services:

1. Revenue from selling products or services: it is the fundamental profit model that ancillary businesses would directly offer their product to customers and get a profit margin. In this model, brand offices for services and payment gateway for the online platform are required in capturing customer’s demand. The typical example of trading ancillary services tends to be airport services, online travel market, and luggage transport.
2. Revenue from providing platform or marketplace to several ancillary service providers: the booming of sharing economy and term of travel saving are two fundamentals of this model. In which the key players could be airline or hotel booking platforms like Airbnb, Booking.com, and Kayak.com. Those businesses built a marketplace where providers could approach their customers. They charge 1-5% value of transactions as permission for the platform. With massive transactions daily, it is believed to be a lucrative area.
3. Revenue from offering advertising opportunities: Some of the online platforms only focus on providing information like TripAdvisor or other review platforms, which do not direct selling ancillary services. Instead, they allow customers to write about those services. Massive visitors on the platform nurture potentials for advertisers to book ad places.
4. Revenue from selling subscription plan: If you hate advertising and want to browse without disruptions, you can pay a mall fee to the platform to ad-free users.

Related article: How IoT application reshare the travel software development 

In conclusion, ancillary services in tourism are predicted to stand in a central position in the picture of travel and hospitality development. The future market would be hitting up by competitors and players that you should keep an eye on trends to hold the opportunities.