In this piece, Filip Filipov, Director of Product at Skyscanner, examines the progress of payments in the travel sector, looking at challenges and opportunities for the future.
The travel industry was not first to start selling products online, albeit the back-end connectivity of the Global Distribution Systems (GDS) were arguably a precursor of search, comparison, and shopping over physical lines between travel agents and the computer reservation systems of the airlines. The first site to sell online was PizzaHut in 1994, enabled by Netscapes SSL standard for secure transactions over the net. A beautiful set up for a product that could have many options – from type and size of pizza to toppings and extras. Most importantly, it almost never could go out of stock, as the product was built to order.
Everything that can be invented has been invented.
~ attributed to Charles H. Duell, Commissioner, U.S. Office of Patents, 1899
Over the next few years, the giants in today’s e-commerce world would take shopping online to a new level – from Amazon and eBay to Expedia and Internet Travel Network, which claims to have sold the first flight online from San Francisco to Las Vegas on June 5th, 1995. Lonely Planet, Priceline, Lastminute and the rest followed suit enabling inspirational peer to peer lodging and accommodation, flight price and product comparison, tours and activities, and any other travel experience imaginable.
The development of the purchasing funnel wasn’t far behind. Add to basket functionality, late check-out and wish lists proliferated, and with them auctions, group buying and payments via installments as well. Travel, however, didn’t innovate in that area to the same extent. Amazon, Alibaba, and eBay led the way because the nature of their marketplaces allowed the buyers and the sellers to experiment with a myriad of models – some brave and others game-changing. In the travel space, we did see a bit of innovation – opaque packaging (Expedia, DeNa Travel), expiring deals (flash sales on airlines), group buying (Groupon), bidding (Priceline), and even all-you-can-fly passes (jetBlue).
"A table, a chair, a bowl of fruit and a violin; what else does a man need to be happy?"
Yet, the simple shopping cart functionality – whereby you can shop around, put your products in a basket, leave it there for a while and check out for the same price in a day or a week – hasn’t really materialized as yet. This may be partially due to the industry’s constraints in terms of inventory, and to some extent also because of the industry’s innovative pricing models which command a different price at any given time for essentially the same product.
Imagine if you wanted to buy a book and every time you searched, the price of the same book changed – sometimes it was available, other times it was given as ‘out of stock’. Or it was ultimately sold as two separate sections in two volumes (instead of one) and weirdly, even though you got more pages in total, you actually paid less for the inconvenience of carrying two items in your bag instead of one.
If this metaphor is too distant, think about air travel – direct flights or connecting services, changing in price and sometimes appearing cheaper because of the additional stop and wait time in the middle. Seems counter-intuitive, right? Well, it is.
Enter the Low-cost Carriers
Extending the literature metaphor, the introduction of low-cost carriers meant that the books were sold in a different way; now only the first chapter is sold to you for an insanely low price. If you want to get the cover, you needed to pay a little extra. Table of contents – a few more bucks. Maybe your font size was too small in the original booklet, so you needed to upgrade to extra-large font. The un-bundling of the fares allowed for the first shopping cart-like experience, where you can add or remove items at your choosing or even go back to the store (pre-flight) to top up any items you missed the first time around. The good news is that you can do all of this now on your computer or ideally phone – pretty much any airline or hotel chain will allow you to amend your booking over time. Same goes for OTAs – in both cases for a fee.
However, the flexibility of the shopping price is still limited. Usually, it involves one store or one brand (airline.com or ota.com), where you don’t have all the available inventory – the way you would at Amazon. The product prices change too – yes, some airlines introduced ‘hold the fare’ functionality, whereby you can put a sum of money and lock the price for, in some cases, up to 72 hours – if you book, the price remains the same. If you don’t, the small amount of money is deducted from your card.
Yet, your ability to mull over a purchase, even a luxury one that costs sometimes thousands of dollars, is limited. You lock the fare on the airline site, go and find a hotel that suits you, check out rental cars – potentially reserve with free cancellation, then talk to your travel companions to verify the purchases. Throughout this process you probably have multiple different places where you store the information just to know what your shopping cart is – in most cases, screenshots of your mobile phone or email confirmations, printed out and ordered on the desk. If you want to make small amendments or substitute one product for another, you need to go to the various sites and do the transactions again – most likely at a higher price than before, if the product still exists. The solution could be to use an agency that offers all these products, but the fees and the limited inventory might make your a-la carte shopping pricier than expected.
‘Any fool can make something complicated. It takes a genius to make it simple.’
~ Woody Gurthie
We as an industry need to consider how to enhance this experience. There’s an entire generation that will spend a lifetime with a thumb against the glass of their screens. That generation shops shoes online and returns them after wearing them for a few days. They cancel orders at a whim. They rent the runway, rather than buy it. They build wish lists and watch video on demand. Yet the lack of shopping cart functionality akin to other industries doesn’t seem to chime with a field that in many other ways has been ahead of the curve when it comes to technology.
This same generation needs a shopping cart that matches the functionality and flexibility of the e-commerce giants which are part of their every day life – from wish lists, holding a price and instant prime delivery to gifting a trip or selecting their vendor, all within the same experience. No change of your cart or check-out to ensure the ultimate one-click shopping experience, yet, all inventory needs to be available and all vendors of the inventory need to be included.
To enable this experience, we have to consider together, as partners, what shopping cart functionality we could introduce across the board. Standardized shopping schemas to ensure add-ons are already in motion via IATA’s NDC and accelerating their spread would only benefit the user and the provider. Simplification of the payment methods by relying on alternative forms of payments that work internationally and across providers – Paypal, virtual card providers like eNett or even Alipay, will prove essential to support this vision of a single shopping experience via one-click checkout across all travel products. Our focus on innovation should be around making things simpler for the user by standardizing critical parts of the purchasing experience – from shopping and comparison to booking multiple products.
Travel has led the field in online comparison and booking. It's essential that our industry does not fall behind when it comes to instant payment - something that consumers will increasingly come to expect.
 Internet Travel Network later becomes the foundation of GetThere, which was bought by Sabre in 2000 for $757M.