Upgrade Bidding Industry Data
There is significant usage of bidding on upgrades in the Travel Industry, predominantly in the Airlines industry subset as a whole. However, Virgin as a pioneer has recently started upgrade bidding services with their railway operations in the UK. However, the Total Addressable Market for Seating Upgrade Bidding in the Airlines ancillary services space, in which this is a special feature, is approximately $20.55 billion.
Here, we attempt to provide as much precise data in relation to the Upgrade Bidding industry.
Seat upgrading, as a feature, has, until recently been exclusive to the Airline industry and is offered as a premium feature in most leading airlines. This feature also allows airlines to increase their revenue per customer with the allure of exclusivity to those who were willing to go for it.
Leading airline operators use this feature as part of their a-la-carte services, which are a key revenue driver for the airlines, the others being commission based revenues, frequent flyer programs and advertising revenues.
UPGRADE BIDDING- INDUSTRY SPLIT
As mentioned, seat upgrade bidding had been exclusive to the Airlines industry until recently, when Virgin Trains began testing the waters with seat upgrade options with their railway operations in the East Coast of UK. Considering the fact that this is still in its initial stages and the scale is minuscule, we assume the seat upgrade bidding industry is confined to airlines at the moment.
SEAT UPGRADE APPS- QUIRKY DIMENSION
Any unique feature in a high volume transaction-based industry like airlines is sure to be supported with considerable technology that enables ease of access.
For example, apps like Pogoseat, Seatfrog and Gigaom offer sports companies the opportunities for their fans to successfully bid on seat upgrades when they are flying to watch their favorites' games. This offers a quirky perspective to the entire seat upgrading industry. It is, however, uncertain as to the incremental impact of this specific feature to the success of the process as a whole.
REVENUE IMPACT AND SUCCESS
Of the reported annual revenue of the airlines industry in 2017 of $824 billion, the airlines ancillary revenue in the same period was an estimated $82.2 billion, a solid 10% of the reported annual revenues of the industry as a whole.
Out of the 4 primary classifications of airlines ancillary services, a-la-carte services are pegged at 25%. So it is safe to assume that the market for airlines ancillary services, of which seat upgrading is a part of, is as follows:
$82.2 billion * 25% = $20.55 billion
As data for seat bidding alone is not available, we assume data from websites and apps that allow access to these services are factored into this market share as well.
However, previous trends indicate that leading airline operators like United and Delta make anywhere between 16-25% of their ancillary services revenues from up selling/seat upgrading. It is hard to pinpoint the impact of this feature on the overall revenues of airlines at this point. However, as with available resources, seat upgrading remains a vital factor that drives revenues in the airline ancillary services space within the airlines industry as a whole.
It is safe to assume that of the contribution of a-la-carte services amongst the airlines ancillary services landscape, to the tune of an estimated $20.55 billion, seat upgrading services and bidding procedures assumes a significant part of revenue generation. It would still need to be ascertained as to what proportion amongst the a-la-carte services would these services contribute.