Setting aside the obvious impact to the industry created by COVID, what are some of the unique payments opportunities that travel and hospitality organizations have as it relates to payments?
The travel and hospitality industry has been one of the hardest hit during the COVID-19 pandemic. And we are by no means out of the woods yet. Even though companies in these verticals have entered this crisis phase a little over a year ago, not all of them are going to emerge at the same pace and at the same scale.
However, we do see signs that the travel industry has some spark and resilience. First of all, travel itself involves a lot of complexity when it comes to the payments process. It can be very straight forward, such as booking a flight or a hotel stay, all the way to a full holiday package with loyalty components, different timing for the flights or the hotel booking, rental cars, the experience of being on the holiday, and even multiple installment payments.
Secondly, after being in this significantly low volume stage for over a year, the expectations of customers are significantly different. We have been heavily influenced by a digital world, a seamless process and contactless offerings will need to be a part of the customer experience.
Thirdly, an important aspect that relates to the travel industry is flexibility. As we are far from being back to normal, this sector has been extremely flexible in the last year. It had to be. If reservations needed to be changed, funds needed to be refunded, and if individuals were booking trips three to nine months out, they still needed to be massively flexible.
This all boils down to travel companies reducing complexities wherever possible, so that they can minimise costs and improve the customer experience. This is a unique opportunity for them to build and rebuild customer loyalty after 12+ months of very limited to zero travel. We’ve seen this challenge across a good portion of our clients, platforms and marketplaces. Those teams had to really adapt to support not only the individual customer experience, but also their merchant partners.
Merchants need a way to easily integrate with specific gateways, payment service providers for fraud, loyalty or decline salvage capabilities.. Whatever the case may be, it’s even more complex for a travel platform or marketplace, and one of the things that we’ve seen payments orchestration really provide is the ability for them to be nimble and to unify all those integrations. That seems to be paying off and it is going to be key as the travel business starts to come back.
Can you help our readers understand how payments impacts the customer experience as it relates to the travel space and why this is such a critical area for organisations to focus on?
Those travel companies that adjusted over the course of this year will be the ones who will shine as re-emergence begins. I will tie this back to two words: scalability and flexibility.
We’re all looking forward to the day when we’re going to be able to safely travel. And as that happens, we are going to need both flexibility and scalability in this environment. I also think we are going to see a significant change in the way payments are handled. I don’t foresee cash along this process ramping up any time soon. ,Many travel related transactions were done without cash pre-COVID but an even larger increase in digital wallet usage and contactless payments - like QR codes - QR codes will become evident. Moreover, considering the help contactless provided in fighting against the pandemic, it’s now ingrained in the customer experience. First and foremost, for safety, but secondly, for convenience.
It seems that the travel industry has some of the more complicated payments integration challenges, how does payments orchestration help support the payments needs of the travel and hospitality industry?
Payments orchestration revolves around the idea of integrating and intelligently coordinating all the payment services into a single platform so that the payments strategy of the merchant matches their business needs and the experience that they expect. This is where merchants or marketplaces go to support the growth of their business as they are entering a new market, as they are aiming for a higher ROI, and, ultimately, to build loyalty with the customer.
At its core, the advantage of payments orchestration is simplicity. Organisations have a single API to connect to many payments services. Payment gateways, loyalty programmes, fraud protection services, BNPL, digital wallets – all of these components can be brought together through a unified interface versus the scenario where they have to build and maintain multiple integrations.
Another component that really drives the value through payments orchestration is success. In this context, transaction success as a metric is often obtained through smart routing – intelligently directing those transactions in real time to ensure the highest success rate for each customer.
It is worth noting the capability of tokenization and the new and emerging ability to have network tokens that are evergreen. As tourists book their travel arrangements across multiple transactions, the token is now evergreen and can be vaulted and passed along for that transaction -- across many providers in the payments ecosystem. This is how fraud can be reduced and higher success rates can be achieved while keeping the merchant PCI compliant.
Right now, most people are not travelling internationally, but as this becomes a more tangible possibility later in the year, the more global we get with the transactions, the more complexity we add to the whole process. This is where payments orchestration allows management of all those integrations.
I understand your team has been looking at some interesting stats related to payments in the travel industry — can you outline that research for our readers?
From the Spreedly vantage point, it is easier for us to be looking for early signals that the industry is slowly headed for a resurgence.
The Wall Street Journal published an article a couple of weeks ago about the US airports seeing increased traffic. This is obviously something to watch, as it means people are moving around, and the CDC is very concerned and telling us that we do need to hold on a little bit longer. Nevertheless, there was a significant rise in travel bookings. Over the last five weeks, we’ve registered a 37% increase in the number of revenue transactions related to travel, hospitality, and personal transportation. For those transactions, top line revenue grew by as much as 190%, reflecting a a higher ticket value. It leans into the trend of people wanting to get out, there being pent-up demand, and booking activity rising for the past couple of months.
These early signs can lead to increased growth in the months ahead. Even if you book your flight today, the hotel, the rental car, the tour, and other services will be paid for five, six months from now when you’re actually on that trip.
The early signals of what could be coming months down the line are starting to show in the decisions that businesses make as well, however. Some organisations were able to make improvements in their systems, business models and even take on funding. One of the recent examples emerging in the media is a Capital One investment in a company called Hopper, which happens to be a Spreedly customer.
Capital One invested USD 170 million in this company. After being a lead investor in this round, Capital One announced the launch of Capital One Travel powered by Hopper. This is basically a service for cardholders of Capital One for price prediction, alerting, and one of the core components of the offering was flexibility, allowing the customer to change or add services – all tied up to the loyalty programme of Capital One. This is a great example that hits at all of the points made insofar. They are preparing for something that we all hope will come later in the year. It’s very much a customer-centric view around pricing, alerting, and awareness, all the while being tied into building a loyal customer base and the best experience for them.
About Randy Guard
Randy Guard is the Chief Marketing Officer at Spreedly. He was previously executive vice president and chief marketing officer for SAS, a global provider of analytics and artificial intelligence software and services. After graduating from Duke University with a degree in electrical engineering, Randy began his career with Andersen Consulting.
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