Beyond sound bites: Ryanair’s Michael O’Leary on Personalization and Ancillary Revenue

Ryanair CEO Michael O’Leary has a well earned reputation as a loud-mouth blowhard who will say anything to get a rise from the crowd and get his name – and his crazy story – in print. He’s adopted the “all press is good press” strategy and executed on it nearly flawlessly over the years. But if you can get past the misogyny (I edited most of it out) and the sound bites to listen a bit longer there are very interesting insights to be had. Take in more than just the one-liners and real strategic ideas start to come through.

O’Leary recently spoke at the Future Travel Experience Europe conference in Dublin. During the 40ish minutes he spent on stage he delivered views on everything from ancillary sales to loyalty to in-flight internet connectivity to customer service. I’ve distilled the full performance down into a few clips that I believe do a great job of presenting his view for the future of aviation in Europe; some topics will have an impact beyond those borders as well.

In this four part series I take a look at Michael O’Leary’s views on:

Personalized Marketing & Ancillary Revenue

We’ve heard time and again how personalized marketing is going to revolutionize the travel industry. Thus far that mostly manifests itself in abandoned cart reminder emails (which work, but still not all that well) and some segmentation in promotion offers. Every airline expects to do better than that eventually and Ryanair is not sitting this one out. Ryanair Labs (what the company calls its internal IT development efforts) and the “My Ryanair” app are a two-pronged approach to addressing the personalization and targeted marketing and, if all goes to plan, will be paying for the air travel side of the business very soon according to O’Leary.

In the future…we’re going to know before you book when you’re going to book next. We’ll be sending you the travel package we know you want before you even think about it.

Right now O’Leary is talking mostly basic marketing stuff. If the company knows you book a holiday in March every year for family travel in August then it can tease you in February with a great deal and maybe lock in your purchase, even before you’ve started thinking about the trip. For an infrequent leisure traveler the patterns are a bit easier than for more frequent passengers or business travelers but such a system has to start somewhere and grow.

Key to success on this package marketing plan is hitting the right price point through targeted discounts.

One we know what every customer wants, what they’re actually doing we can discount everything along the way.

Some of those discounts will come from volume purchasing while others will come from various vendors paying to be included in the offerings. That’s where the real profit potential kicks in. And it is a type of business Ryanair is very, very familiar with already. The airline is notorious for negotiating concessions with airports or local marketing authorities to essentially pay for the flights to happen. Ryanair keeps the fare and ancillary revenue and the town/airport get increased tourism revenue. But if the cost subsidies dry up so can the service. Extending this to the package deals with hotels or tours paying to play shouldn’t be all that hard.

And while Ryanair builds up to the full package offers there are plenty of opportunities to hit the smaller items – some 3rd party and some internal to the airline – along the way. O’Leary called out parking, priority boarding, ground transportations, and event tickets as just a few of the examples that he expects to be pushing via My Ryanair in the near future. Of course, these are commonly chosen targets for such sales – he’s not doing anything revolutionary here – but they’re also very low cost to implement and relatively high yielding.

Why stop at travel? If you own all that space why don’t you widen it way beyond travel?

The part where O’Leary and Ryanair Labs are moving beyond what most others are talking about comes in his statements about expanding beyond just travel. As Ryanair gets better and better at targeting the travel stuff it can also adapt to sell more non-travel goods. Much of the data science around the targeting is similar, as evidenced by Amazon’s move beyond books into everything else retail. And once that happens the transportation side is just a little something extra Ryanair happens to provide.

My Ryanair and Ryanair Labs will become the business in the next 5-10 years. Ryanair the airline, with 200mm passengers, will be the ancillary business. Ryanair Labs will be the business.

It is a significant leap to get to this mentality and believe it can be done, but O’Leary seems strongly convinced that the next phase of his company’s growth will have much less to do with transportation than it will with just about anything else. Today something like 45% of passengers purchase an ancillary service along with their ticket (That was said in the Q&A but in a slightly confusing manner so could be that 55% do and 45% do not; either way, there’s room to grow). Increasing that number to something higher is one way for Ryanair to grow its revenue. But increasing the revenue that comes from wholly separate transactions is a completely different world, with WAY more potential.

And that’s precisely where O’Leary wants to go.

It is worth noting that while Ryanair is talking about increasing the non-core revenue portion of the business some other airlines presenting at the event were looking to move the opposite direction. JetStar suggested that moving away from its heavy dependence on ancillary fees to hit revenue targets would improve the passenger experience.

Beyond Sound Bites: The full series

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Seth Miller

I'm Seth, also known as the Wandering Aramean. I was bit by the travel bug 30 years ago and there's no sign of a cure. I fly ~200,000 miles annually; these are my stories. You can connect with me on Twitter, Facebook, and LinkedIn.