Ryanair’s recent shift in perspective, from being anti-OTA, a stance they often referred to as battling ‘Pirates,’ to now viewing OTAs as strategic distribution partners, has pleasantly surprised many in the travel industry.
Love Holidays deserves recognition for being the trailblazer in bringing Ryanair to the table. However, the initial deal, with variable booking fees of between £30-50 per couple, seemed steep and posed a potential price disadvantage against other OTAs, such as On the Beach (OTB), if they continued to ‘screen scrape’ and avoid these fees. Strategically, Love needed the deal to prove to potential new investors that they had long-term access to cheap flight seats departing the UK, which is the lifeblood of their business.
On the Beach then entered negotiations and would appear to have improved the terms of the deal.
On the Beach’s site boldly tells customers that their Ryanair flight prices now include pre-booked seats with Ryanair and, at the same time, having monitored Love’s Ryanair prices since January, in March, Ryanair’s extra fees on the Love site suddenly changed to a fixed £32.00 return per couple or £8.00 per flight sector to match those on the On the Beach site.
Connecting these two pieces of information, it is now clear that Ryanair is not charging an API fee but is making it compulsory for people booking holidays to pre-book their seats at a fixed cost of £8.00 per flight, which is probably the average pre-booked seat price across their network.
This compulsory addition seems odd for a business that prides itself on breaking down the price to create the cheapest possible lead price and then charging separately for extras, as it makes their prices appear less competitive. However, suppose you had not planned for a massive increase in third-party trade distribution. In that case, it is unlikely that your third-party APIs would be geared up for complexities such as allowing customers to choose and pre-book individual seats.
I would expect Ryanair to resolve this over the next few months, allowing them to return to supplying stripped-down prices with no booking fees that will dominate the OTA’s search results. This will boost volumes further and put pressure on EasyJet and Jet2.com to consider the size of their API fees.
EasyJet currently charges around £6.00 per sector or £24 per couple, while Jet2.com takes a much more tactical approach, charging zero fees on weaker selling routes.
As I said when the deal was announced, “On the Beach are no mugs,” but their Ryanair deal looks better by the day because it not only delivers a guaranteed supply of cheap seats but also puts pressure on other low-cost airlines to become more OTA-friendly.
The deal will also remove a massive element of back-office cost because OTB will no longer have to hide from Ryanair using virtual credit cards, roving IP addresses, and doing lots of manual work to notify customers of Ryanair schedule changes and cancellations. I’d estimate this cost saving will run into the millions and could lead to a substantial profit boost.
The “Ryanair War on OTA’s” is over, and the only question is, why did it take so long?
Nobody outside of Ryanair’s inner circle will ever know, but ironically, the change of heart seems to have stemmed from Ryanair’s success in the Irish courts in declaring the “screen scraping” of their flights illegal. Although technically unenforceable in other source markets, this emboldened them to massively tighten up all their tools to stop OTA sales in November 2023, including the highly contentious extra facial recognition steps for “illegal” OTA customers.
This suddenly closed all their OTA distribution and forced Ryanair to announce to the city that this was impacting their load factors by 1-2% and reducing average flight prices. It does not take a genius to guess that the city might have asked, “What on earth are you doing?”
We will never know the answer, but the attitude reversal has been dramatic. Now that all parties see the benefits of working together, it’s hard to see why this would ever reverse for packaging OTAs’, but I am far less convinced Ryanair will embrace flight-focused OTAs as they have never liked direct pricing comparisons and will question their added value over customers booking on their own website.
For homeworkers and high street agents, dynamic packaging fell out of favour during COVID-19 because of the heavy administration burden caused by flight disruption. Many agents preferred to take lower margins but less hassle from selling third-party bonded agents. Still, it will be interesting to see what impact a trade-friendly Ryanair could have on reviving this market if, as expected, Ryanair look for further trade deals on the back of its early success with OTAs.
We may never like Ryanair, but a peaceful coexistence offers many upsides and will increase price competition for the benefit of all holidaymakers.
The War is over and long may it remain that way.