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950 days ago
 

Time for the travel industry to move beyond its anti-consumer past

When I was a kid, my mother used to take me along on special shopping trips to 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.

I’ll admit that as a child, I didn’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. That’s not being consumer-friendly and solving a consumer problem, that’s revenue maximizing and solving the supplier problem at the consumer’s expense.

It’s all about filling seats and rooms, not providing customers’ 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.

It’s not hard to come up with examples, even ignoring the obvious such as paying for bags or decent seats on a plane:

1. Gaming

Delta Air Lines now asks you to “bid” on how much you are willing to take for being bumped. They’ve even gamified what happens when they screw you over.

Asking you to input what you’re willing to take to get bumped is not consumer-friendly, it’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).

3. Dilemma

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.

4. Opaque

Priceline and Hotwire offer opaque models that give you a discount in exchange for not choosing your specific hotel, flights, or car rental agency.

They are tools that help the suppliers sell distressed inventory by placing an inconvenience and annoyance on the consumer.

These sites don’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 isn’t anti-consumer.

Some consumers benefit, others are frustrated by it.

Worth noting here that I like Priceline/Hotwire myself, but still, don’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.

Moving forward…

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.

I’d even add Jetsetter and LivingSocial to this mix, companies that are getting you transparent, specific deals – the popularity of which force suppliers to play ball.

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 that’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 they’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 Leonard’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. It’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.

NB: Forehead barcode image via Shutterstock.

 
 
Evan Konwiser

About the Writer :: Evan Konwiser

Evan Konwiser is a contributing Node to Tnooz and was co-founder of FlightCaster, which was acquired by Next Jump in December 2010.

Currently, he works with travel start-ups and consults on new technology and trends in the travel industry. He started FlightCaster in 2009 to provide better tools for travelers using advanced technology.

After the acquisition, he managed Next Jump's travel distribution business, which includes employee discount programs for Fortune 500 companies.

Prior to FlightCaster, Evan was a consultant at Bain & Company and he also spent time at Kayak. He's an industry blogger and speaker on both consumer and corporate travel topics, a recipient of PhoCusWright's first ever Young Leadership Award and a member of the critics circle for the Travel Innovation Summit.

 

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  1. Tim

    Sorry, but the customer is always right rule is nonsense and always has been. So, when the customer lies to you about something, the customer is right? When the customer claims you promised one price even though you did not, the customer is right? When the customer tries to get you to agree to accept an amount much lower than the agreed price (and an amount that won’t even cover your costs, so you will LOSE money), the customer is right? Sorry, absolute BS and a good way to ensure your business goes out of business in no time. Treat the customer with respect? Yes. Honor promises you made to the customer? Yes. Do whatever the hell the customer says and accept whatever amount the customer agrees to pay you even though you have a signed contract or verbal contract that states otherwise? Hell no! Stupid, stupid, stupid nonsense rule. Sorry, the customer is NOT always right.

     
    • Dan

      Tim, come on, this is not meant to be taken literally. Of course the customer is not always right, but good customer service means treating customers as though they were right. To take one of your examples, if a customer claims you promised a certain price when in fact you both know that you had quoted a higher figure, what are you going to do, call your customer a bloody liar? It’s much better to treat your customer as though s/he were right, as in, “I’m sorry i expressed myself in a way that gave you this impression; let me explain to you how this price is actually calculated.” Good customer service is never confrontational and always diplomatic. That’s what is meant when one says that the customer is always right.

       
  2. Other | Pearltrees

    [...] Asking you to input what you’re willing to take to get bumped is not consumer-friendly, it’s cost optimization. They are asking you to compete against each other, while they play auctioneer. 2. Smoke and mirrors Delta Air Lines now asks you to “bid” on how much you are willing to take for being bumped. Time for the travel industry to move beyond its anti-consumer past | Tnooz [...]

     
  3. Dennis Schaal

    Dennis Schaal

    Joe: Price isn’t the end-all and be-all of being consumer-friendly, but it sure is part of it. Ask the consumers — they’ll tell you:)

    In reaction to what you wrote, I can say for too long too many in the industry — intermediaries AND suppliers — have viewed rivals who enable consumers to get a deal as reactionary or heretics.

    That is anti-consumer:)

     
  4. Joe Buhler

    For too long too many in the industry – especially intermediaries – have mistakenly considered offering the lowest price as being consumer friendly.

     
    • Craig Parmerlee

      Thank you. When you look at the companies that are recognized for customer service, they are rarely the very lowest price. They may not be the highest price either. A couple of weeks ago, JD Power and Associates named their 2012 customer service champions. The travel companies they honored are:

      ACE Rent A Car
      Drury Inn & Suites
      Enterprise Rent-A-Car
      Hampton Hotels
      JetBlue Airways
      Southwest Airlines
      The Ritz-Carlton

      Other than Jet Blue, none of the others are known for being the lowest price. You have identified a fundamental disconnect between the intermediaries and the suppliers. Almost all of the intermediaries are selling nothing but price, and that is fundamentally out of step with the interests and the strategies of the suppliers. That is the most fundamental reason why suppliers are deciding in many cases to stop working with intermediaries. Autoslash.com is a case in point. It appears their strategy is to be adversaries to the travel suppliers rather than partners.

      Frankly the world just doesn’t need the intermediaries that much anymore. All the travel suppliers are getting good at booking directly. I suggest all the folks on the intermediary side take a good hard look at their business model and ask themselves whether they are really adding any value as a partner to the travel suppliers or are they just getting in the way. If the answer is the latter, their days are numbered. We will always need companies that provide hotel rooms, put planes in the sky and rent vehicles. We don’t necessarily need yet another travel website.

      The “Next great new idea” folks would be well served to look seriously at real travel agents. They never sold price. They have always been about making the travel experience meet their clients’ needs. That is the only future really. Some of the websites are getting that concept now, and they will do well. The other 95%? Good riddance.

       
  5. Marianna Marcucci

    Thank you, Evan, a very interesting article.
    I run a three star hotel in Tuscany, Italy, and I can’t compete with the great chains in terms of low rates but I can with my hospitality, a great staff, great service, informations on the city and every other things that make a guest’s stay pleasant. I don’t like restrictions when I travel and so I don’t apply restrictions on my guest’s rates.
    Marianna

     
    • Ryan C Haynes - RateTiger

      Marianna – this is the reason why me and my family search for local independent properties when we travel somewhere new – and if we return we often go back to the same place – because the service here is superb, friendly and personal. Keep up the good work :-)

       
  6. Dan

    You’re probably too young to know this, but guess what: airlines used to compete on service. Then came deregulation, and suddenly they were forced to compete on price. Travelers used to fly the airline that offered the best service; now they choose the cheapest price. In fact, travelers will put up with just about anything to fly for less money. It’s what keeps low class, uh, sorry, low cost airlines like Ryanair in business.

    Consumers are rewarding those providers who offer the cheapest price, even if it means getting lousy service. Travelers happily pay ridiculous ancillary fees, including for check-in (yes, even do-it-yourself on-line check-in), and you want the airlines to be service-oriented? Man, why should they?

    Comparing a company that runs 4 (four!) grocery stores in the NY metropolitan area to the travel industry and claim that if only airlines were managed like Stew Leonard’s they would be better off is naive to the point of straining credulity.

    If you want service in the travel industry that doesn’t cost you an arm and a leg, find a good travel agent. This is not that difficult: most not-so-good ones have gone out of business because of people who prefer to save money by providing the service themselves and then complain that the service stinks. With a travel agent, you might well end up on the same crappy flight, but you will get options you never knew existed and you’ll be presented with choices you never knew you had.

    Dan

    PS No, I’m not a travel agent, though I’ve been one some thirty-five years ago.

     
  7. Ture Strange Nilsson

    Apart from all the other by now questionable reason for good hotels to be on OTA’s, one of the silliest things in my opinion is the fact that by selling your rooms through 3rd parties online, you are also outsourcing your customer service, which is where, as a good hotel, you can really make an ourstanding customer relations and differentiate yourself. In our industry this is alpha and omega, and even Stew gets it! However in my experience the amount of guest arrivals who booked through OTA’s and expect the same kind of service from the agent as from the 5 star hotel where they booked the room, very often arrives at the hotel already somewhat disenchanted with their experience, leaving it to front desk to patch things up. Not to mention if something has gone wrong in the booking (which also does happen, you know) and the guest arrives lets say friday evening without a confirmed booking to a full hotel. This scenario has two losers; the guest and the hotel, who essentially becomes the faulty one (according to Stew’s two rules) and loses a returning customer and who know what by word of mouth.
    Ever tried getting in touch with yourOTAnamehere.com on a friday night? Not happening.
    Its time for hotels to wake up and realise that what they do best is what THEY do best. Focus on the main thing; great, professional customer service, that will keep your guests coming back and telling their friends and collegues.

     
  8. Tim Russell

    An interesting article, certainly from my point of view (running a small inbound tour operator specialising in private, tailor made tours).

    But I don’t think you can entirely blame the airlines or the booking sites for the present situation. Consumers are partly to blame, in our (I say our because I’m often as guilty of this as anyone else) constant desire for “deals”. I get emails every day asking me for my company’s latest “deals”; I also get clients asking me to discount the price of their quotation, and being baffled when I say “sure, what do you want me to take out?” If you constantly want the cheapest, the industry is going to respond in kind and treat you cheaply.

    Also, great customer service costs money. Here in Vietnam I can hire a tour operator for as little as $200 per month if I want. But if I want someone who understands overseas tourists and knows what great service is all about, I have to pay 2-3 times that. It also means using more expensive transportation/accommodation suppliers, and the best tour guides, who can charge a bit more as they know they’re in demand.

    In an online context, building a booking website whose user interface matches the kind of personal service you’d get from an agent is next to impossible at the moment.

     
  9. Larry Smith

    The New York Post just reported the Port Authority plans to go after disruptive passengers for the money they cost the airline. Last year, the cost averaged $5,867 an hour for US carriers.

    http://www.nypost.com/p/news/local/bad_fliers_get_boot_bill_S1h7vZaitMIVISsiz9u1uI

    What an awesome revenue stream idea, think of the possibilities!

    - Airline holds you hostage for 8 hours on the runway, then claims you were disruptive because you left your seat for the toilet. You’re now enrolled in their payment plan.
    - Quarterly earnings are looking down, so instructions go out to cry foul at any and all passagers who talk back or raise their voice.
    - JetBlue flight attendant Steven Slater jumps out of the plane and now the airline can sue the passengers instead of him.

    The unintended consequence will probably be the lessening of authority by the flight crew.

     
  10. william

    Nowadays, you have to face two main kinds of customers :
    - the ones that want low cost, low service offer. They want the basics, no more. But low cost does not mean low efficiency. Not at all.
    - The ones that consider travel as important and want confort and choice. They are ready to pay for it. And a good travel agent could be a great solution for the ones not willing to spend time on Internet. For some, the trip planning phase is part of their trip, one of the most interesting and inspiring part.

    Hipmunk was a great first attempt to offer a way to measure traveler “agony” … More informed the customers could act accordingly.

    As you said, the client is always right, and the client now is informed. So the only issue is to create the right tool to the right customers segment. Not that easy …

     
  11. Scott

    I agree it would be great if travel suppliers could invest in providing better product and service and be able to charge higher prices as a result (as apparently Stew Leonard is able to do). Maybe it works ok in the hotel space, but is there much evidence of it working with airlines?

    See Virgin America, where I think it’s undisputed that they provide a better product. Are they getting commensurately higher yields compared to legacy carriers?

     
  12. Valyn Perini

    It’s worth noting here that the argument forwarded by both airlines (in particular) and traditional distributors is that building the technology to make airlines more consumer-friendly is complex and expensive.

    While perfectly true, that statement masks the divisive politics in play – airlines don’t want to share revenues with distributors, and distributors don’t want to invest capital dollars into building a consumer friendly selling infrastructure for which they may never see an ROI.

    New entrants may offer more modern technology, but if airlines, and other travel industry segments, are focused on driving consumers to their own sites to maximize revenues, it doesn’t matter how consumer-friendly the new entrants are.

     
    • Craig Parmerlee

      I think you have touched on the essential point. Many travel suppliers have made exceptional progress in creating private-brand websites that really do serve the consumer well. It is not ONLY about reducing distribution costs, although that is certainly an important point. But it is also about developing customer loyalty and a long-term relationship.

      At some point, the travel supplier must ask whether or not these intermediaries are actually adding any value to the process — value that justifies paying large commissions and giving up the customer relationship. More and more, the answer is that these new sites are a nuisance and far more trouble than they are worth.

      I mean, if you are an airline spending a billion bucks a year in new aircraft or a rental car company spending $100M a year on your fleet, and taking 100% of the risks of bad customers, accidents etc, why should you be eager to give up a big portion of the profits to a couple of guys with basic web programming skills and an idea, but absolutely no skin in the game?

      It is a political struggle, and it seems to be reaching a critical point.

       
    • Bob

      Correct me if I’m wrong, but I think Valyn was saying somewhat the opposite. Offering the best rates on the supplier’s own website (for example) does not benefit the consumer, because they are then forced to first go to an aggregator to find what is on offer in the market, then check the supplier website, adding an extra step in the process. Especially with hotels, the point of the aggregator is to create a marketplace. Believing the consumer is going to just book you directly without consulting other offers is pretty naive. Costs of these channels for some things are probably still too high, but zero commission from airlines for bookings over the OTAs? This has nothing to do with the best interests of the consumer, just the airlines exerting their collective muscle.

       
  13. Ryan C Haynes - RateTiger

    I love to travel, I love it so much I write and make videos from my trips. But there are two things I dislike doing:

    the first one is Booking my travel. I should just save myself the pain and go straight to the nearest high street store, get personal service and a good rate (it may never be the best compared to what can be found online – but at least I was given it with a smile and confidence that what I am booking is what I will get.

    the second is staying in hotels. No matter what you read from marketing gumpf and guest reviews I find it’s always a let down. The only hotels that have been better than expected were those I booked on price and photos alone. I didn’t read their impossible promises to the guest, nor the drivel of complaints from former guests – instead I arrived with an open mind – and have often been pleasantly surprised.

    What gets me about travel is the level of customer service, it really is dwindling. But as we move more online I find it impossible to get decent service from any industry. It’s not just an issue for the travel industry, it’s an issue with all of us – can we handle real-time, same-location, physical relationships?

     
    • Murray Harrold

      Music to the ears! Visit an agent … you may be surprised. I would like to explode the myth that traditional high street agents are more expensive … sure, they charge a fee but not megabucks. In the travel world, there are “net” fares (what we call CAT35 fares) these are the ones that you often see advertised. Now, it doesn’t matter if you are online, offline or any other line – you either have them … or you don’t. So, a traditional agent can supply these fares just as much as an online facility can.

      The trick, very often, is not what you book – but how you book it. There are many different ways of issuing tickets for anything other than simple there-and-back stuff (frankly, this simple sort of stuff you are better doing online anyway). there are no websites that can use certain “wrinkles” to make things better value.

      Apart from anything else, with an agent, once they know you and understand your likes and dislikes, all you have to do is ring up and say “Can you fix me a week in ….” or “Organise me some flights to…” and put the ‘phone down…. no websites can do that, either. Pretty good time-saving, eh?

      Of course, someone can always -something- someone into investing a few million dollars into another hair-brained scheme to produce something that will tell you, in glorious technicolour, where you can get a cup of coffee at 0300 in Tashkent .. (Oh! Dear!… the place has since closed… never mind!…)

      Oh! Nearly forgot… and should things go pear-shaped (for whatever reason), you know where to get hold of someone to fix it – and it’s not going to be an ad nauseam button pressing call centre somewhere beyond nowhere that needs endless security, including the name of your maiden aunt’s cat … If you can find a telephone number, of course, which is invariably buried deep, deep in the site and written in roman numerals, backwards …

      I know this, because that’s what I and many other traditional agents have been doing for many years… and why trade is going in one direction… up.

       
    • Kevin Fliess

      100% agree with the premise that the consumer should come first and that transparency should rule the day. Finding the best rate and getting a better room? Sounds like an impossible proposition in this day and age. In reality that is exactly what Room 77 is working on. Providing comprehensive price search (including hotel direct rates), empowering the consumer with choice, and hooking them up with the best possible room prior to arrival.

       
  14. Bob

    Great piece. One thing I find a mystery is how hotel booking sites establish their sort order. Given that this is pretty much a ‘black box’ to consumers, it is highly likely that this is not done in the consumer’s best interests, either. More transparency needed here.

     
  15. Murray Harrold

    Hang on, hang on… “Initial airline distribution tools were aimed at collusion…. ” Rubbish. They were aimed at giving a neutral display, and even if they didn’t, any self resepcting agent was quite capable of seeing straight through anything that could have been deemed as manipulative. Prices, in times gone past were realistic – it’s just that nowadays people seem to beleive they have a fundamental right to cheap travel … which they don’t. Before online types tried to be clever any agent of worth could easilyt find the best way of doing something … and frankly all these new boys in the ring still can’t get even close to the abilities of a good travel agent.

    Making fares and prices realistic, does not mean making them unfriendly to the consumer. Indeed, I remember being able to answer a question by giving a simple answer – not saying it’s £50 plus this, plus that and plus the other. We have gone form being customer friendly to plain daft.

    It doesn’t matter how you present information … it doesn’t matter how well any online facility can answer a question… there is no online facility, anywhere, that can check to make sure that it is the correct *question* which has been asked in the first place. And there lies the rub, if one cannot make sure the right question has been asked…. garbage in, garbage out. All online services are good for, is for use as a cribsheet.

    Agents are consumer friendly – always have been. Mind you, we do get a good laugh from some options online services throw up, these days.

    This post is rather naive, I am sorry to say.

     
  16. Craig Parmerlee

    I see absolutely no problem with any of the “horrors” you have mentioned as long as the vendor has clear and full disclosure of the terms of the offer. And the “new consumer-friendly sites” are not all that. For example Backbid exploits any hotel that DOES offer consumer-friendly cancellation terms and then forces the customer to accept a non-calcelable reservation on Backbid. How is that more consumer-friendly?

    And regarding car rental companies, you seem to imply that they are charging an unfair price. In most markets on most days, car rental companies are charging less per day today than they charged on 1980, and that is with 30 years of inflation. Surely it is consumer-friendly to allow a customer with very little credit to walk in and take the keys to a $35,000 automobile with only a debit card and maybe a $200 deposit.

    I don’t get your definition of consumer-friendly unless you mean giving away product for free with no strings attached. No thank you.

     
  17. Luke F - Gunyah

    Nice one Evan. I think this says a lot for the wave of new trip planning websites like Tripbod… who put customer satisfaction and the experience as a priority to their business.

     
  18. Jim Kovarik

    This reminds of some research Michelle Peluso who as CEO of Travelocity at the time shared at a PhoCusWright conference many years ago. She shared that consumers rated online travel agencies lower than the IRS in terms of customer satisfaction.

    her point was that despite the innovations of Travel 1.0 there was still much, much room for improvement in the industry and I for one firmly believe this still to be the case.

    (those that remember this research, please correct any part if I’ve misquoted it as its been 6 or 7 years)

     
  19. Sceptical corporate traveller

    BUT…………… you are comparing a SMALL, (apparently) privately owned family business with a range of publicly owned corporate giants. Is this comparison really legitimate or illuminating, given those differences? (Maybe Wholefoods might be a similar but larger scale comparison?)

     
 
 

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