Introduction to Ancillary Service Providers
When you book a holiday, you're not just buying flights and accommodation. There's a whole network of additional services that make your trip possible and enjoyable. These are called ancillary services and they're provided by companies that support the main tourism businesses.
Key Definitions:
- Ancillary Service Providers: Businesses that offer supplementary services to support the main tourism product.
- Ancillary Services: Additional services that complement the core tourism product, such as travel insurance, car hire, or airport transfers.
- Upselling: The practice of encouraging customers to purchase a higher-end product or add-on services.
💰 Why Ancillary Services Matter
Ancillary services are vital to the tourism industry for several reasons:
- They enhance the overall travel experience
- They provide additional revenue streams for tourism businesses
- They offer solutions to common travel problems
- They create employment opportunities in the tourism sector
- They can differentiate one tourism provider from another
📈 Economic Impact
Ancillary services contribute significantly to tourism revenue:
- Airlines earn up to 40% of their revenue from ancillary services
- The global ancillary service market is worth billions of pounds
- They create jobs across various sectors
- They support local economies at destinations
- They can be more profitable than core services
Types of Ancillary Service Providers
Ancillary service providers come in many forms, each offering specific services that enhance the travel experience. Let's explore the main categories:
Financial Service Providers
These providers help tourists manage their money and protect their investments while travelling.
💳 Travel Insurance
Companies like AXA and Allianz offer insurance that covers:
- Medical emergencies
- Trip cancellations
- Lost luggage
- Travel delays
💱 Foreign Exchange
Services like Travelex and Post Office provide:
- Currency exchange
- Travellers cheques
- Prepaid travel cards
- Online currency ordering
💶 Payment Services
Companies like Visa, Mastercard and PayPal offer:
- International payment processing
- Mobile payment solutions
- Currency conversion
- Fraud protection
Transportation-Related Services
These providers help tourists move around at their destination or enhance their journey.
🚘 Car Hire
Companies like Hertz, Avis and Enterprise offer rental vehicles that give tourists freedom to explore at their own pace. Services typically include:
- Various vehicle types from economy to luxury
- Optional insurance coverage
- GPS navigation systems
- Child seats and other accessories
- One-way rentals between different locations
🚌 Airport Transfers
Companies like Hoppa and Welcome Pickups provide transport between airports and accommodations:
- Shared shuttle services
- Private transfers
- Meet-and-greet services
- 24-hour availability
- Pre-booked and guaranteed prices
Administrative Support Services
These providers help with the paperwork and documentation needed for international travel.
🗎 Visa Services
Companies like VFS Global and CIBT visas assist with:
- Visa application processing
- Document verification
- Appointment scheduling
- Expedited processing
- Visa requirement information
📄 Travel Documentation
Services that help with:
- Passport renewals and applications
- International driving permits
- Travel health certificates
- Document translation
- Notarisation services
Technology and Ancillary Services
Technology has revolutionised how ancillary services are delivered and sold to tourists.
📱 Mobile Apps
Apps allow tourists to:
- Book services on the go
- Access digital travel documents
- Receive real-time updates
- Make contactless payments
🌐 Online Platforms
Websites like Skyscanner and Expedia:
- Compare ancillary service options
- Bundle services for discounts
- Provide user reviews
- Offer 24/7 booking capability
📊 Data Analytics
Companies use customer data to:
- Personalise service offerings
- Target marketing efforts
- Predict customer needs
- Optimise pricing strategies
Case Study Focus: Ryanair's Ancillary Revenue Strategy
Ryanair, Europe's largest low-cost carrier, has mastered the art of ancillary revenue generation. In 2019, the airline earned over €2.4 billion from ancillary services, representing 35% of its total revenue.
Ryanair offers a wide range of ancillary services including:
- Priority boarding (€5-€10)
- Reserved seating (€3-€15)
- Checked baggage fees (€20-€35)
- In-flight food and beverages
- Car hire through partnerships
- Hotel bookings
- Travel insurance
The airline's website and app are designed to guide customers through a series of ancillary service options during the booking process, using techniques like pre-selected options and limited-time offers to encourage purchases.
This strategy has allowed Ryanair to offer extremely low base fares while maintaining profitability through ancillary revenue streams.
The Future of Ancillary Services
The ancillary service sector continues to evolve, with several trends shaping its future:
💡 Emerging Trends
- Personalisation: Using data to offer tailored ancillary services based on customer preferences and past behaviour
- Subscription models: Annual fees for packages of ancillary services (like Amazon Prime for travel)
- Contactless services: Accelerated by COVID-19, these include digital room keys and virtual queuing systems
- Sustainability focus: Carbon offset programs and eco-friendly transport options
🚀 Innovation Examples
- Airbnb Experiences: Local-led activities and tours as ancillary services to accommodation
- Grab's super app: Combining ride-hailing with food delivery, payments and other services
- Airline chatbots: AI assistants that sell ancillary services during the customer journey
- Virtual reality previews: Allowing tourists to "try before they buy" additional experiences
How Ancillary Services Support the Tourism Industry
Ancillary services play a crucial role in supporting the wider tourism ecosystem:
- Revenue generation: They provide additional income streams for tourism businesses, helping them remain profitable even when selling core products at competitive prices
- Customer satisfaction: They enhance the overall travel experience by addressing specific needs and pain points
- Differentiation: They help tourism providers stand out in a crowded marketplace
- Risk management: Services like insurance help manage uncertainties associated with travel
- Local economic impact: Many ancillary services create jobs and business opportunities at destinations
Case Study Focus: TUI's Integrated Ancillary Service Model
TUI Group, the world's largest tourism company, has developed a highly integrated approach to ancillary services. Rather than relying on third-party providers, TUI owns many of its ancillary service operations, including:
- TUI Airlines (6 airlines with 150+ aircraft)
- TUI Cruises (16 cruise ships)
- TUI Musement (excursions and activities platform)
- TUI Blue, Robinson and other hotel brands (400+ hotels)
This vertical integration allows TUI to control the entire customer journey and capture revenue at each stage. When a customer books a TUI package holiday, they're encouraged to add excursions, special dining experiences, premium cabin upgrades and other ancillary services all provided by TUI-owned businesses.
The strategy has proven successful, with ancillary services contributing significantly to TUI's annual revenue of €18.9 billion (pre-pandemic) and helping the company weather industry downturns.
Summary: The Value of Ancillary Service Providers
Ancillary service providers are essential components of the tourism industry that:
- Enhance the tourist experience by providing complementary services
- Generate significant revenue for tourism businesses
- Create employment opportunities across various sectors
- Help manage risks associated with travel
- Contribute to destination development and local economies
- Drive innovation in the tourism industry
As a tourism professional, understanding the role and importance of ancillary services will help you recognise opportunities to improve customer experiences and increase revenue through strategic partnerships and service offerings.
