When I was a kid, my mother used to take me along on special shopping trips toÂ Stew Leonoard’s, an iconic, mega-grocery store with now four locations in Connecticut and New York.
I remember that as you walk in, there is this rock with their credo engraved into it. They call it the “Rock of Commitment”, and it has two rules:
- Rule 1: The customer is always right.
- Rule 2: If the customer is ever wrong, re-read Rule 1.
Iâ€™ll admit that as a child, I didnâ€™t quite get it. But a few decades later, as a travel industry junkie, I find it prescient. Leonard really knew what he was doing.
So why do so many of us in the travel industry have it so wrong?
For most travel businesses, the foundation of technology is centered on distribution and revenue management.
Initial airline distribution tools were aimed at collusion and favoring certain carriers, regardless of price or convenience. Initial revenue management systems made travel more expensive, segmenting travelers to pay closer to their limit, but even more so making pricing and availability opaque and confusing.
Fundamentally, we pay to fly or stay what the market will bear, without any regard whatsoever to how much it costs. Thatâ€™s not being consumer-friendly and solving a consumer problem, thatâ€™s revenue maximizing and solving the supplier problem at the consumerâ€™s expense.
Itâ€™s all about filling seats and rooms, not providing customersâ€™ with a quality experience.
While there might be good reasons for some of this, much of the innovation in our industry has carried these core notions forward, increasing their sophistication to the point of mania.
Itâ€™s not hard to come up with examples, even ignoring the obvious such as paying for bags or decent seats on a plane:
Delta Air Lines now asks you to “bid” on how much you are willing to take for being bumped. Theyâ€™ve even gamified what happens when they screw you over.
Asking you to input what youâ€™re willing to take to get bumped is not consumer-friendly, itâ€™s cost optimization. They are asking you to compete against each other, while they play auctioneer.
2. Smoke and mirrors
Continental launched Fare Lock in 2010 to make you pay so that they do not raise their fare on you. You are now paying for the right not to be revenue managed.
United has kept Fare Lock post-merger (you can read what I really feel about it here: When peace of mind is worth betting against the house).
Car rentals and hotels are trying to move towards more non-refundable purchases. The good old days of being able to make changes without penalty are long gone for most discounted hotel rates.
Car rental experiments in the US have mostly failed, but not for lack of trying. The basic idea: can suppliers put more restrictions on consumers without lowering their prices.
They are tools that help the suppliers sell distressed inventory by placing an inconvenience and annoyance on the consumer.
These sites donâ€™t even pretend to try to get you the hotel or flight you want, they are first and foremost solving a supplier problem, and hopefully in a way that isnâ€™t anti-consumer.
Some consumers benefit, others are frustrated by it.
Worth noting here that I like Priceline/Hotwire myself, but still, donâ€™t you feel a little sketchy using it?
Even when you get a decent deal, you still feel like you are a lonely pawn attempting to get something from the big powerful suppliers. Sometimes you get away with it, sometimes you get the Radisson in the middle of its first renovation since 1983.
Fortunately, new companies have emerged in recent years to combat some of this anti-consumer behavior.
First was Kayak, the first major metasearch engine. It may not have manipulated prices on your behalf, but at least it made it easy to compare and find the lowest price available.
Now there is also Yapta, Backbid, AutoSlash, and most recently, Tingo, all consumer-friendly approaches to counteract supplier revenue management by using their own sophisticated systems against them.
As technology advances and democratizes access to content, more startups have the ability to create business models serving the consumer, like Tingo.
This is an accelerating trend thatâ€™s, in the long run, good for everyone. But in the meantime, are we going to see hotel companies start blocking discounted rates into Tingo to prevent them from catching on?
Will we see car rental and hotel companies continue trying to make most rates non-refundable? Will we see airlines further the fees and then additionally insult us by claiming theyâ€™re just “unbundling”?
Those who get it will understand that the consumer truly is always right. And the second you think you have an easy way to raise revenue, refer to Rule 1.
To prove the point, Stew Leonardâ€™s is not a price leader. They win on quality and service (and for anyone who has been at one on a Saturday, they win big).
Being consumer friendly is about how you do things, not what you charge. Itâ€™s time to change the travel industry tune and focus maniacally on solving the consumer problem of high-quality, reasonable-cost transportation and hospitality.
That always has been, and always will be, the only sustainable path to long-term profits.