Ryanair recently celebrated the opening of its third IT and innovation hub, its new Travel Labs, in Madrid, Spain; with a staff of 50 and plans to staff up to 250 people who will work on digital programs in support of the airline’s plan to become the Amazon of travel.
The airline already has more than 200 people working on digital programs at Ryanair’s Labs in Dublin, and a second development team growing in Wroclaw, Poland.
This raises questions of what Ryanair, which has succeeded on a lean operating model, would do with so many staff working on IT systems and digital initiatives.
Ryanair has said it plans to become the Amazon of travel, but is this more than a mere metaphor?
Tnooz spoke to Ryanair chief marketing officer Kenny Jacobs, who shares candid insights on what the growth of these three labs means, and what we can expect as Ryanair continues its Always Getting Better initiatives.
tnooz: Do you expect that development needs at Ryanair will warrant so many staff or do you think you might ultimately develop technologies which could serve the needs of travel partners?
Jacobs: We’re over 200 in Dublin. We will get to 250 in Spain, and will get to 150 in Wroclaw, Poland. We’ll be somewhere between 650-750 people across the three locations.
It’s a big number if you look at it in one way, but in another way 650 people across development, testing, digital, and data is not a lot—even compared to a lot of airlines that are much smaller than we are.
It doesn’t mean that we’re going to lose the Ryanair ethos of low-cost and keep it simple. We can probably take some airlines that are a quarter of our size that have more resources across those four areas than we will get to. When I look at their websites, apps, and what they are doing from a digital and data point of view, it’s not that exciting.
Yes, when we get 700 people, that’s a lot compared to where Ryanair was years ago, but I still think it’s quite an efficiently based model. In terms of what they do..where do I start?
There is loads for them to do. I don’t have 1% of worry or anxiety that we will run out of things that we want to implement, and we have been implementing in the past two years. We will have enough in the pipeline for the next two years, and there’s more coming in to that pipeline.
I don’t ever worry one iota that we will run out of things to do. This is a fast moving landscape and there will be new things happening from a regulatory point of view, from a digital point of view, and from an opportunity and threat point of view that we, like any other airline, will need to respond to. The landscape will keep changing and that will keep us busy.
We’re working on building up the platform. There’s still constant improvement to be done on the way we sell flights, on merchandising and the way we use customer data to better up-sell and cross-sell targeted products.
There are loads of opportunities and work to be done on the ancillary products area; particularly things like Ryanair Rooms, and travel credit, things like connecting flights to other areas, things like content, ground transportation and at-destination revenue opportunities. Those would be the big ones that I would highlight on top of running everything that we’re doing.
There’s still loads going on. We’ve made really good progress, that our investors have acknowledged, as judged by the conversion rates on ancillary products, and judged by the incremental revenue of profits that we’re making.
I don’t think the three teams, across the three locations will ever not be busy. I don’t think that we’ll ever be short of ideas. There’s still plenty of interesting things to look to implement.
If you take BA, I think BA has close to 1,000 today—that’s just working on BA, not IAG. Ryanair, in and out of the UK, is a bigger airline than BA now.
If I take Aer Lingus down the road, it will have more than 400 people on IT, and it is also working with significant numbers of outsource IT partners and implementation people. I think, by the time you look at internal resources, and you look at the Datalexes, the Accentures, the IBMs, the PWCs—and bear in mind we are not using any of these.
You need to look at it from the point of view that other airlines may have a smaller number than 700 but you could, in essence, double the number they have when you add-in external consultants.
It’s important to note that we are not using consultants for the reason of costs, for the reason of speed, and because we’re not basically saying, ‘We want the digital blue print of American Airlines. Please come in IBM and help us with that.’
You want to move quickly. Quite often we’re working from a blank piece of paper and moving quickly and moving in a low-cost way, and developing unique things. That just means that we do it ourselves.
tnooz: What makes each of these Travel Lab locations unique? Why did you choose these cities?
Kenny: Dublin is a proven centre in terms of general IT—from back-end development to front-end digital marketing optimization and the modern day digital marketing. Dublin does the A-Z quite well. It has resources. But it’s also—from an IT and digital point of view—it’s one of the hottest places in Europe in terms of demand for talent.
Then, we said let’s not put all of our eggs in one geographical basket. We started to look elsewhere.
With Wroclaw, the Polish education system has incredible rich foundations in engineering and more back-end IT functions. That’s what drove us to Wroclaw. There are other cities in Poland to look at, but generally we thought Wroclaw very good. And it’s also a Ryanair base. We have lots of flights there. There’s a good education system, lots of young talented people there. I would say Wroclaw is more back-end development and testing than front-end digital and data.
Then, Madrid is fast becoming a center of excellence, with more of the focus in Madrid being on digital and data. You really are talking content people, social media people, UX/UI people and some of the more front-end parts of that ecosystem. Those skills are very rich in Madrid. I’ve been down there almost every week for the past month, and I’ve been really impressed by the caliber of people. What’s really interesting in Madrid is that we have nearly 75 people there now and of those 75 people, half are Spanish half are everything else; so it’s culturally very rich.
So, Dublin, Wroclaw, Madrid there’s nothing similar about those cities from a cultural point of view. I also think that makes it quite interesting.
tnooz: Is there a possibility that Ryanair might one day evolve into a virtual airline, with flight operations managed separately and Ryanair transitioning more towards an OTA that offers a suite of products from other carriers, hotels, car services and events?
Kenny: Could this team, in theory, start to do things for other airlines or other travel businesses? In theory, yes. We’ve been asked by several other airlines already, ‘Could you share your thinking, your approach, or your solution that you’ve developed on some particular areas?’
Now, we’re not going down that road yet because we’re too busy doing our own things. We don’t want to take our heads up yet and lose site of what we’re doing on Ryanair.com.
We’ve still got to prove more of that and still fill out more of that opportunity. Other people are looking at what we’re doing and saying, ‘Wow, could we have a piece of that.’
I do think we’re building a digital ecosystem that others could replicate, buy parts of it, and plug into it. That’s an exciting opportunity at some point in the future, but to be honest I don’t want us getting too distracted chasing a beach ball on the beach. We’re still building sand castles, as far as I’m concerned, in terms of working on the products that we sell today and increasing the conversion rate on these.
tnooz: Are you pursuing developments which might become revenue sources themselves, perhaps IT solutions that could be sold-on or leased out to other companies in the travel sector?
It’s not that long ago, if you go back, the Amazon website that we know today looks like the Amazon website ten years ago, and now books and CDs is a big category—CDs aren’t what they were—but they’re selling pretty much everything else. That’s the second part of what the phrase means for Ryanair.
It is about Ryanair becoming a digital platform where you will have shops within shops, marketplaces within that platform, and Ryanair selling all types of travel products to all parts of the world—not just flights and the immediate flight-related ancillary products to Europeans traveling. That’s still the strategy.
Am I worried and do I care how people interpret it? No. We’re just getting on with it and doing it.
I think we’ve done a very good job on the first part of that statement, in terms of making the buying experience much more data driven and seamless. I think you can see the fact that we are now selling the long-haul flights of Air Europa to South America from the Ryanair website, the fact that we’re going to add connecting flights, the fact we have added and will add more products. You can see the range of products we sell getting bigger. You already see us selling outside of Europe, and that will continue.
But we’re not vain and worried about people seeing that and believing that. I want them to believe it when they actually see more of it, and they will see more of it over time.
Back to us becoming a virtual OTA, that has an airline attached, it’s a hypothetical and we could get to a version of that, but it’s too early to say that. It’s especially too early to get too distracted by that. It takes up a little bit of the bandwidth in terms of our thinking of how this ends up.
We’re very, very focused. I don’t want to sound boring, but it’s pretty much about improving the conversion rate on the products that we have today. Where it ends up is where it will end up.
It’s such a rapidly changing and fascinating landscape involving us, other airlines, other travel companies, Amazon, Alibaba and Google.
I still have my own prediction that you’re going to be left with a couple of digital superpowers, globally. We have ambitions to become one.
Ultimately, that takes us in the right part of the territory, in terms of where this all goes. We are precious about having low-cost direct business and bookings on the Ryanair platform. We are precious about customer data. We are precious about getting people signed up to My Ryanair and getting them to install the app.
That’s really about us wanting to own the customer, and I think we’ve made really incredible progress there. Now, where all of this ends up, let’s wait and see.
What will always be true—if you and I are talking in five years time—the shopping experience will be more data-driven and more seamless, and we will be selling more things to more customers in more geographies outside of Europe. That’s why I say, “The Amazon of Travel.” It is the simplest way to describe the digital strategy in one sentence.
tnooz: What’s your view on Google’s continued activities in travel? Do you believe that they will ultimately develop enough reach to sever airline’s direct ties to their customers? Are you planning to circumvent that possibility by driving more customers towards your mobile app thus restricting the access Google may have to your customer data?
Kenny: No. I think if I look at the progress they’ve made in the past three years—and the progress Google make when they apply themselves to a project over a three year period of time—it’s not really turning the dial.
I don’t see it turning the dial because Google says that it wants all flights globally to be booked on Google, and that airlines ultimately won’t have their websites. I don’t see this happening because I think the airlines and travel brands that own the product have woken up to digital and are developing out their own platforms.
I think Google doesn’t want to eat its own young in terms of the revenue that it makes from travel companies spending on PPC, which is a massive part of its revenue.
Ultimately, it’s not what the consumer wants. Yes, some Californians I know will want to use Google to search for everything, but I think ultimately people want to shop around and people will want to say, ‘I’ll make my own mind up. I don’t trust any one brand—be that Google, or Yahoo, or anybody—that they’ve got everything I’m looking for and will show me the best opportunities for me, as opposed to the best commercial opportunity for them.’
I’m not knocking Google. I’m just basically describing what is its strategy. It has made some progress for Google Flights search, but it’s not the category killer that people thought it would be four or five years ago when it was launched.
It’s a tiny part of our traffic and bookings. When I look at the progress made year-on-year, it’s not that significant. Skyscanner, for European airlines, is still more significant than Google flight search.
But Google is Google. It has changed our lives—and generally for the better—and it has a certain dominance. There are certain trust issues that come with that, but it doesn’t have everything to itself.
tnooz: What else are we missing in terms of your long-term vision and potential in the growth of your labs?
Kenny: For me, it’s really interesting, as a former retailer, to see Amazon go from being a virtual-only store to their acquisition of Whole Foods. It’s interesting to see Alibaba’s similar parallel acquisition of a Chinese supermarket. It’s an interesting landscape in travel, and it’s also interesting in retail.
Yes, Google is one of the big animals. Amazon and Alibaba are two of the other big animals in the space, and everybody needs to be look at what’s going to change there.
A couple of further things. In terms of generally, touching on mobile, we are now nearly at 30 million Europeans who have downloaded and used the app. I think that’s incredible, given that we didn’t have an app four years ago. Well over 90% of our bookings are still direct bookings on the Ryanair platform. That’s non-dependent on PPC, GDS, or travel comparison traffic.
It’s really significant. We have the distribution shape that others are trying to get to. If I look at the year-on-year of where our website traffic is coming from, and where our flight bookings are coming from, email is getting bigger and bigger, and is up significantly year on year. Social is getting bigger and is up significantly. But I don’t see any decline in the old direct traffic and bookings that are happening on the platform.
Traffic from travel comparison sites—be it Google, Skyscanner or any other travel comparison site, be they white hat or black hat—hasn’t increased year-on-year.
For me, that’s quite significant. I think three years ago, when I started here, lots of articles written and lots of digital commentary would have been, ‘How are the airlines going to compete with all of these travel comparison sites, be they small Mickey Mouse ones, or the big superpowers?’
Really, year-on-year, I see no difference in the percentage of our digital bookings from travel comparison sites. When I see the difference that we’re getting in the old levers of CRM, and social being much more significant, that’s interesting for me.
With content, we’re going to go from having the off-site content being hosted on the Ryanair blogs, to being hosted as part of shopping experience on the website, and the app, and very much so in the emails. You’ll see that just before Christmas and from the New Year.
I think that’s going to be and continues to be an exciting opportunity; for the simple fact that people love travel, they love to talk about travel, and they love to read and see what other people have to say about their travel.
Ryanair Rooms is probably the most exciting revenue stream in the business. We now have five partners giving us their inventory.
We launched a better website four weeks ago and there are more developments, new and interesting things to come on the website and it will be able to hold its own compared to a Booking.com.
Travel credits will be live in the new year. Simply, if you’re looking at staying at the Marriott Hotel in Barcelona on Ryanair Rooms—compared to Booking.com—it will give you the exact same hotel brand, they will probably be at the same price, but if you book on Ryanair Rooms, you will get 10% of the value of the hotel booking back in vouchers that you can use on Ryanair flights.
I think that’s going to be a game changer because you’ll say simply, “It’s the same hotel and I’m just going to get money off Ryanair flights.’ I think that’s a strong proposition to consumers.
I think transportation—beyond car hire—would be one of the exciting ones for 2018.
Ultimately, at-destination activities and revenue stream; be that theatre tickets, which we are now selling in London, to restaurants and things that you can book and do when you are at the destination. So, booking before you travel but also booking these while you travel, on the Ryanair platform, becomes an exciting opportunity.
Then, connecting flights. We hoped to do it this calendar year. We’ve done it so far with Air Europa in terms of selling their long-haul inventory. In 2018, I expect to see us do this with Aer Lingus, to begin with, and then with other airlines; in terms of a product that connects you from a Ryanair short-haul flight into a transatlantic flight with another carrier.
I think all low-cost carriers are describing doing this. EasyJet is doing it, and we’ll be doing it. It’s a cherry on the icing on the cake. I don’t think it’s a game changer.
It’s a natural evolution within the category of low cost airlines sticking to short haul and legacy carriers focusing more on long-haul, and the two starting to work together in terms of feeding short-haul low-cost traffic into legacy long-haul traffic.