Thursday, May 24, 2012

Lessons From The Road.... Online Deals Are Not Always Such A Deal.....

Travel has been one of the premiere categories for online information and commerce since the Internet's nascent introduction to the public.... Those with long tech memories will recall utilizing the Sabre database (founded by American Airlines) through Compuserve back in the 1980s. Back then flights were almost always on time, O.J. (and myself) could sprint through an airport from car to cabin seat less than twenty minutes prior to departure and be cheered on by airline employees. (Today such antics will only land you in a TSA holding cell and you better have your attorney's number on speed dial! Of course OJ's legal problems extend far beyond "forgetting" to empty his pockets before surrendering to a full body scan.)

Travel Agents have survived and still provide valuable services for many. However, this is a classic industry which faced potential extinction or radically reinvent itself to coexist in today's connected world. Even an occasional, recreational, traveler, has a plethora of tools at their disposal to plan and design an itinerary. (In the first article of this series, I wrote about a great planning tool, TripIt. You may want to review this post if you missed it.)

It only seems fair that consumers can easily comparison shop. After all, airlines and hotels utilize all the technological resources they can muster to maximize the return of their inventory. Today it is rare indeed to fly any national airline, anywhere, which is under ninety-five percent (95%) of capacity. These seats have been sold to customers at a staggering number of retails over the months leading up to the travel date. It isn't uncommon for the price of a given seat to oscillate multiple times in an hour as a result of numerous factors. The rules governing this quixotic mix of pricing and demand are as closely guarded as the formula for Coca Cola and Google's ranking algorithms in many cases.

Hotels are generally less sophisticated than the airlines in their pricing models in most instances. This is a topic particularly near to my heart (myself and my family are invested and manage an independent hotel) and is a worthy discussion for a dedicated future post. Still, hotel inventory is every bit as static (each hotel has only so many rooms each night to "sell") and perishable (an empty room "tonight" can never be resold. Every hotel only has a finite number of room nights each year to sell). Like airlines, there is a marginal rate which is $1.00 more than the fixed and variable costs associated with caring for the room which economically justifies selling a room, rather than letting it go unused. The trick of course is accurately identifying this "magic number" and then finding outlets to sell inventory in an optimal mix of seats or occupancy and price. Clearly, getting the proper inputs requires a great deal of human effort, analyzing these factors in real time is a job uniquely suited to modern day computers.

Enter the mega players. Nearly everyone is familiar with the Juggernauts of this field-- Expedia; Orbitz;; and a handful of others have done much to develop and define the field. These primary tier intermediaries often have their founding (and ongoing ownership) in historic players (i.e. American Airlines; Delta). Each of these mega sites offer a wide range of travel booking but revenues are driven by the inventory cost made available from suppliers, "side deals," and site driven ad revenues. Ultimately, this tier of  companies steer you towards offerings intended to maximize their profits (and there is nothing wrong with good old capitalism!). As long as you understand the dynamics and don't rely on these companies to put your needs first, they can be very useful. Your experience may differ completely from mine, but I have had only marginal success using these services directly. Later I will share a very bad experience on my recent trip with a rental car booking through Expedia....

Then there are aggregation services such as Kayak (iPhone Pro Version; iPad Pro Version ) which aren't owned or based on legacy service providers but rely on the miracle of data mining to provide access to a wealth of pricing and availability options spanning most, but not all, primary providers. (As an example, Southwest Airlines routinely prohibits access to their pricing and data to these companies forcing you to visit their site to identify competitive flight information.) There are numerous competitors to Kayak, most providing some subtle twist to how they manipulate and present the results. I have found some great deals using this service. As a bonus, Kayak will optionally also search PricelineTravelocityOrbitz, and several other sites streamlining the quest for the "best deal" further. My history with Kayak has been very positive.

Uncertainty lingers even after finding what you think is a "fair deal" on a fare. Often airlines offer to provide a rebate if your ticket's price declines between the date of purchase and travel. There are of course often strings attached such as the fare must drop $XX or your reservation must fall into some specific class or category to qualify. But typically the biggest "gotcha" is the follow up. Airlines and hotels aren't known for timely notifiction of such declines; it is up to you dear traveler to unearth the price change and apply for a refund. Enter Yapta and a relatively new arrival Tingo (which is a subsidiary of well known Travelocity). These services "take the worry" out of booking by tracking your information and notifying you if you are eligible for any refunds. Tingo claims to go another step and actually provide any rebate to you without you lifting a finger! (Here is a link to the company's "How It Works" page.) Yapta is focused on airline reservations but offers services beyond this industry while Tingo is clearly targeted towards hotels at this juncture. I have used Yapta with good results (in one instance netting me a couple hundred dollars on a reservation which otherwise would have gone unnoticed by all but Delta Airlines shareholders). I haven't personally tried Tingo's service (the company is a rather new addition to the TripAdvisor "family"), but plan on booking my next out of town room through the site.

A third category of companies focus strictly on provider deals. These sites rely on hotels, airlines and rental companies to "sell" their open inventory to them for resale. Effectively, Priceline, Hotwire, and others serve as eBay-like auction houses of the internet travel services. Some of these companies require that you bid blind, knowing only general details about a property such as its "star rating," general location, and amenities. This can be rewarding, if you are slightly adventurous.

Newer companies focused on hotel and resort offerings such as Sniqueaway and Vacationist don't ask you to bid blind and often sell inventory from higher end, but lesser known, resorts at terrific discounts. These companies typically don't explicitly offer low price guarantees, but the heavily discounted pricing virtually guarantee you are buying into a terrific rate. I have used both of the above-mentioned services and generally have been pleased with the properties I have stayed in and the overall "value  proposition." Most of these services require you to "join" (which is free for the majority of travel discounters including Sniqueaway and Vacationist) and you will have to endure periodic (even daily) email notices. These package deals are offered for a very specific window of time, fueling the need to purchase (and making it all the more important to curb impulsive behavior). The trade off is discovering spots in locations which you almost certainly wouldn't find any other way (at least at the offered discounted rates).

If you haven't explored some of these sites, I encourage you to do so. Some combination of these services are sure to make your next stay away from home a bit more interesting and affordable..... And don't forget to download and use TripIt to keep track of all your well researched decisions! You won't regret it!

On my recent getaway, I used TripAdvisor to do some research, Kayak to determine optimal airfare and routing. (I would have purchased using links from Kayak-- typically you are directed to the carrier's actual site-- but I elected to call the airline directly so I could use frequent flyer miles in the most effective manner possible. While it is possible to secure seating using frequent flyer points online, this is one transaction I have always found is improved by calling the airline's membership arm directly.) Had I paid cash for airfare, I would have certainly once again used Yapta to monitor rate changes!

Sniqueaway offered a great package which I purchased for a portion of the time spent away (which was something of a mixed bag). My previous use of this site was a true home run. So I still recommend it, but this offering didn't quite live up to the billing, which I will elaborate on in the next post of this series. Oh yes, I also used Expedia to secure a rental car via Dollar and this is where technology first failed me on the journey..... If you are interested in the details, stay tuned for the next installment....! Until then, safe and happy trails!

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Companies: American Express;  Kayak; Expedia; Orbitz; Travelocity

This commentary is not meant as an endorsement of any company or to provide financial advice.  If the author has any financial interest in any company mentioned at the time of this article’s posting, it will be explicitly noted. I welcome feedback and comments. 

1 comment:

Thank you for sharing your thoughts with other Music Row Tech readers and subscribers.