Southwest Airlines is the only scheduled US carrier that does not make its flights available via online travel agencies (OTAs) such as Expedia or Orbitz. They save money on fees, don’t have to compete side-by-side with all of the other carriers, but there is another cost too.
Southwest Won’t List on OTAs
Southwest only sells tickets through their website. At first, the carrier had two practical reasons for not listing with Online Travel Agencies like Expedia, Orbitz, Priceline, etc. while the rest of the industry moved towards the OTAs.
The first reason that Southwest avoided OTAs is that airlines previously paid commission or bounty for sold airfare to the services. Those costs have come down dramatically for carriers (less than $10 per sold booking now) but initially, the costs were higher. Further, even at $3-5/ticket sold, that’s a cost of doing business that Southwest didn’t want to pass on to their customers at a time when they were still a discount carrier.
The second reason was that their IT wasn’t really capable. For many years, all Southwest tickets had to be booked individually (each way) – they didn’t sell connections. Other limitations included the inability to book international destinations nor red-eye flights. Some of these restrictions remain in place today while others are a relic of the past.
Their Strategy Worked
Interestingly, Southwest’s strategy worked but perhaps not in the intended fashion. Instead of the initial reasons for avoiding fees and IT limitations, an unintended outcome is that customers had to come to Southwest.com to find their fares. When the carrier was an underdog serving few cities, not being on the OTAs was a detriment, but now it’s a strength.
Customers have been conditioned to first shop Southwest that some never comparison shop anywhere else. Southwest doesn’t have to compete as other carriers do on OTAs because their customers are not seeing the other prices alongside theirs. When Southwest’s fares began to creep up, their customers didn’t notice the change. Southwest, while still a great deal on some routes and sales, is within $5 of the other carriers 5% of the time and more expensive than the rest 60% of the time.
But It Costs Southwest Business Too
Southwest has changed their model over the years from being no frills to value carrier. Instead of flying to smaller airports passengers hadn’t heard of, they fly into the major airports now. While Houston Hobby, Dallas Love, and Chicago Midway remain mainstays of the Southwest model, they now fly into Boston Logan instead of only Manchester, NH, and New York LaGuardia instead of Long Island Islip.
However, until recently I hadn’t even thought to shop them for my business flights. They are more or less my holiday airline, and while business travelers have been using Southwest for years, I haven’t for a couple of reasons.
I don’t think about Southwest even when fares on other carriers are obscenely high. Perhaps I should be. When I run a search I am focused on cost, duration and flight times. I can see a beautiful array of options from United, American and Delta but Southwest doesn’t show up so it’s out of sight out of mind.
Will It Ever Change?
Southwest has adjusted so much of their business model to evolve with where the carrier finds themselves today. No longer the runt of the litter, Southwest is and has been the largest domestic carrier in the US for some time. They fly to Caribbean destinations as far south as Aruba and now out to the Hawaiian islands.
They fly into major cities and heavy airports, a category shift from their prior strategy of cheaper, smaller airports close to major metros. They sell connecting traffic, they are targeting business customers (heavily), and best of all for Southwest, costs of selling on OTAs are significantly lower than they once were.
However, they remain off the OTAs as a form of price protection and to control the booking process but as fewer cities are available for expansion, movement onto the OTAs may be the only way to capture those that shop there first. For example, I only shop Google.com/flights and rarely make it far enough down the list to see that anything is offered by Southwest, much less click to their website to see their price which is usually higher.
While I wouldn’t be surprised either that Southwest stayed their course or added OTA listings to their sales stream I do think they are losing revenue unnecessarily. The couple of dollars of savings are no longer felt by their customers, they compete on a much larger stage now, and while they would control less of the process, they might find new customers willing to try them out.
What do you think? Will Southwest ever go on the OTAs? Should they? Do you check Southwest.com if you usually fly another carrier anyway?