Consultant, auditor and GBTA-Australia & New Zealand deputy director Tony O’Connor raises interesting questions for corporate travel buyers as suppliers build a new basis for business travel commerce.
The supply side is driving the personalization of online booking tools. I have never heard a travel buyer advocating for it. Perhaps it’s worth asking why suppliers are spending big money to develop it. Is it just the workings of a competitive marketplace with OBT developers competing with new capabilities, or are there other forces at play? Should we be asking whether personalization within booking systems is a way for suppliers to increase their revenue?
First and foremost, personalization is a marketing strategy whereby promotional content is delivered on a more individualized basis.
For travel, it involves automated background selection, prioritization, structuring and filtering of content in online travel menus and quotes based on what is known about the travel booker. Background algorithms process the booker’s previous activity to analyze the individual’s behavior and apply his or her apparent preferences and likely needs. But there are also algorithms that learn from larger, general data sets, matching specific product demand with demographic factors such as age, gender, location and other attributes.
Repeat-use online shopping sites gather demographic information and record buying behavior, apply algorithms for both and tailor their product offerings. OBTs also record both these data sets.
I can summarize my concern with one word: “upselling.” Two other words that come to mind are “Trojan” and “horse.” Personalization can increase travel prices by putting in front of the traveler airfares and hotel rates that are higher than other options but likely to be selected anyway because of some point of attraction that the algorithms figured out. You might like hotels near Newton Circus. The OBT has figured this out. You might like Boeing Dreamliners. The OBT will know.
Surveys perennially show that one of the largest concerns for travel managers is policy compliance. The basic marketing principle of personalization is to promote higher-priced products that individuals would pay for or buy more of. If this happens in an OBT, the travel manager would face an unreasonable compliance management burden.
(Let’s assume that tailored recommendations and product placement are the only personalization practices that corporate OBTs engage in. Let’s assume that none of the others, such as tailored emails, social media offers and text-based messages — the mainstays of online retail marketing — are kept away from corporate bookings. And let’s also assume that the personal data built up by the algorithms stays within the OBT and is not sold to suppliers.)
What Can Personalization Really Add To Corporate Bookings Anyway?
There seems to be little real value that personalization could add to managed corporate bookings anyway, because so much of what is needed is already known and stored in the TMC’s mid-office. That includes personal details in traveler profiles and travel policies stored in company profiles. Surely making OBTs even better than they are at managing business bookings can best be achieved by increasing capability in these two areas, not by applying retail marketing algorithms.
Personalized tailoring based on an individual’s demographics and past behavior can be very useful for retail travel shopping where choices and alternatives are potentially vast. Often the retail booker won’t even have an exact destination or time in mind at the start of the process. That is not the case with the business traveler. The destination and dates are usually set. The choice of airlines and hotels should be determined by preferred relationships and contracts, travel policy and value. What can personalization add in this situation? What do these new algorithms do for the travel manager and the traveler?
Commissions And The Basic In-Principle Concern
TMCs earn the large majority of their income from commissions, other payments and other benefits from travel suppliers. Commission revenue is roughly double the revenue from client fees. This is the cause of the main conflict of interest that ticks away at the heart of the supply chain.
Overwhelmingly, the main clients of OBTs are TMCs. An OBT provider might realize a competitive edge by offering a booking system that maximizes commissions for the TMC. With the growing majority of bookings going through OBTs, OBT providers are starting to recognize their power. We can expect them to engage in more direct selling to corporates. Then they can start claiming the commissions themselves. This creates an even stronger incentive to maximize commissions through the booking system.
There is an overarching in-principle concern about anything that introduces rules and processes that might act against the interests of the travel buyer, especially if the details of those processes are unknowable. Perceived or real, systematic conflicts of interest built into any part of the travel booking channel from GDSs through TMCs to OBTs long have been an issue in this industry.
For example, software is available that allows travel agents to tailor offers as a means to maximize commission income and apply hidden mark-ups. These are common practices among retail agencies but should not be used by TMCs and OBTs. If we allow a new, obscure layer of software to present and prioritize fares and rates based on “personalization,” with new rules set by someone (or something) other than the buyer, might we lose control of pricing completely? Is it goodbye to best-fare-of-the-day?
This has been a fairly dark depiction of personalization, but I think the possible dangers and issues warrant attention if only to balance out the supplier driven “up-talk.” Together with NDC, the march of OBTs will transform the supply chain over the next decade. It would be a pity for buyers to miss the opportunity to recast it in their interests.
• Tony O’Connor On Why Fare Markups Are Bad For Airlines And TMCs
• Tony O’Connor On The OBT Obstacle Course
• Far Off For Business Travel Channels, Attribute-Based Shopping To Be A Hotel Website Reality This Year
• NDC’s Upshot: Altered TMCs, Evolved Deals
• Louise Miller On Considerations For Online Booking Tool Selection