Travelocity to remove air ticket fees on 31 March: the razor blade model and online travel

Back in December 2002 Travelocity announced that it had joined the industry trend for fees on airline tickets by introducing a modest $5 fee (original CNET story). Six or so years later, the WSJ has the story that fees will be removed on airline tickets by Travelocity starting 31 March. As I mentioned in the post on Expedia's decision to do the same, the industry is changed forever by this move. The media model will get a boost from this decision and become more important. So do the produce efforts around cross sell.

I recall in the early days of airline commission reductions and online hotel sales (around 2000, 2001). The industry was a-buzz with analogies for describing the new models taking hold. Milk at the back of the store" and the "would you like fries & a coke with that" were being used by online travel strategists as we planned moves to following offline retailers into the world of cross sell and margin managementl. The message being that the low margin product (air/milk/burger) was the lure to sell the high margin product (hotel/candy/post mix soda).

Now I believe that the airline ticket business in online travel is more like the Razor Blade/Razor model. This is where component one of a product (razor/polaroid camera/game console/air ticket) is sold at a loss to drive sales of the second component of a product (razor blade/film/game/hotel). With this model change comes substantive industry change.

thanks to B Tal over at flickr for the gnome shot