Using payments to create predictable revenue (and a competitive edge) in the travel industry. An interview with Caravelo

Thursday 20 May 2021 09:58 CET | Editor: Stefana Ivan | Interview

Jess Evans, Product Marketing Manager for Caravelo, drills down on the most important ways in which airlines can keep and maximise revenue as the travel industry gets back on track after 2020

Can you tell our readers a bit about Caravelo? What gap are you filling in the travel space and what sets your organisation apart from others in this vertical?

At Caravelo, we make things simple for airlines. We want to modernise their revenue stream and cut through a lot of complexity in the industry. As I am sure it is known, the travel sector has older systems, so a big part of our goal is to enhance passenger journey – and we do that starting with the moment a passenger purchases a ticket, until they  fly with the airline. That is building revenue and hyper loyalty for airlines.

In terms of what gap we are filling in the travel space, we are trying to enhance customer experience. Caravelo is a Software-as-a-Service company. Our platform has three different products: Subscriptions, Upgrades (changing seats, maximising cabin space and so on), and the third – our chatbot technology, providing customer service technology for airlines,

We have been in this space for ten years and we are working with airlines of all sizes, activating in different markets. As it relates to payments and how they are tied into the revenue flow, we also support subscription payments. Subscriptions are currently one of our most sought-after and attractive offers for airlines. Last year, around this time, a lot of airlines stopped flying and revenues halted to zero, as this vertical is really focused on transactional, singular-ticket revenue. Even priority clubs and business clubs are typically single transactions. 

Loyalty is thus very difficult to maintain in the travel industry. The concept of subscriptions is neither new nor revolutionary. We are merely trying to hammer home how wecan help the airline travel industry through it. Subscriptions on our platform are customisable depending on the airline and the market it activates in: for instance, for a legacy airline, they might prioritise, business class, high ticket clients, the price for subscriptions would differ. These would target business passengers, maybe given one flight per month returns and so on. Whereas, on a low-cost carrier, you might offer lower prices with less flexibility. 

With a subscription, airlines,will get recurring, predictable revenue, including hyper loyalty that translates into the fact that passengers will not be flying with competitors. When a person sticks with an airline for a year on a subscription basis, they will not be flying with a new one the next year. They will continue with the plan they already paid. And the great thing for customers is that they are spreading their costs out. It’s a little bit like going to the gym: you don’t know how much you're paying for that service, because you’re paying a little bit every month. 

More and more signals are coming in that, after 2020, people are increasingly looking into travelling again. When thinking about payments, what are some of the unique opportunities that this niche offers as the world opens up again?

In the last year, passengers have lost a lot of trust in airlines and travel in general. It all started with the big fiasco created by not paying refunds on time and a lack of flexibility on behalf of the airlines. For us, in terms of payments, it’s really important to reduce risk, enforcing security when it comes to identity verification most of all, so we can make digital wallets usage a bit more of a day-to-day kind of thing, as they are becoming increasingly popular. 

For the airlines, the main priority is to bring back trust among their passengers. They need to update their payment method diversity and make the whole process as convenient as other retail experiences are for their customers.

With the number of airlines your organisation supports, as well as the amount of global integrations required for this process, how does Caravelo address these complexities employing payments orchestration?

The great thing about working with so many airlines globally is that weget to see how different cultures and regions use payments, but also what they viewas secure and what they trust. Our customers have a really clear understanding of their vision, of what they want from us, but a lot of them are not ready to make their own roadmap to these goals. This is where we need to provide a service that covers all scenarios, whether it relates to only one module or a full end-to-end scalable service. 

Our capacity to be flexible for the airlines, and allow them to bring to the table their current mix of payment services providers without needing to radically change their current processes, creates the possibility for them to be flexible for their customers in return. For example, issuing payments whenever they need. Companies such as Spreedly and their Payments Orchestration platform, offer this flexibility, but also compliance, which is an important factor in enabling payments in this context.

How does your payment process improve the customer experience for both your clients, as well as the passengers of the airlines you support?

As a B2B SaaS company, because you have lots of clients to look after. But it really makes you think about the wider picture of what we’re providing. We really want to enhance the infrastructure and systems of our clients, so we don’t leave any payment methods behind and we don’t disregard passengers that want to pay with certain payment methods in different countries. 

We want to always be offering a seamless experience from a user and a customer service perspective, so we make sure all our payments are tracked and that reconciliation works perfectly as well. The main thing we do to ensure all of this, in the end, is to reduce the complexity of the process by being flexible and adapting to our customer’s workflows and to their procedures. We get to see the insides of lots of different systems, which is really great for us, as it allows us to learn how airlines operate and what kind of language they use when it comes to payments.

What are some of the learnings you took from the last couple of months in terms of customer behaviour in the travel and hospitality industry? How did clients in the travel industry manage payments during the pandemic, when did travellers start expressing their desire to travel again and how does this translate in a payments context?

When the Coronavirus hit we could see a slight drop in new subscriptions. But what we didn’t see were mass cancelations in subscriptions. Because the key thing about subscriptions is that you get incremental revenue. This is a pivotal detail, as it still allows predictability in the income coming in. To us, this shows that customers didn’t want to cancel, as they knew they would get value further down the line. 

Even now the numbers are still stable. We even launched value products and offers last summer, when flights were completely grounded and a massive take-up of these promotions was registered. This all only shows just how much people wanted to get back to flying and travelling. It’s not just about holidays, there are also those customers travelling to see their families or for business.

Apart from this we saw a real uplift in the number of airlines that wanted to change strategies, such as improving the payment methods they are offering, innovating, and managing the uncertainty through some level of certainty, with subscriptions. Because apart from creating at least partial income predictability, subscriptions diversify the income flow and the business model as a whole, so a company is not solely reliant on a transactional revenue stream.

Overall, there was a positive response from airlines this year in terms of innovation, digitalisation, the openness to change their strategy. When it comes to loyalty, it feels at times that it’s like starting from scratch. But in reality, loyalty systems, as a broad concept, are something that has not been innovated or changed for decades. What we are doing is coming up with new loyalty programmes and adapting  successful models from other industries where subscriptions, for instance, have changed the vertical for the better. 

About Jess Evans

Jess Evans leads Product Marketing at Caravelo with over 7 years of experience in marketing and communications. After several years living in both Shanghai and London, she is currently based in sunny Barcelona.

About Caravelo

Caravelo makes it simple for airlines to modernise their revenue streams and cut through the complexity of the industry. They enhance the passenger journey from purchase to flight, building airlines revenue and hyper-loyalty. As the preferred solution in the industry, they bring passengers and airlines closer together. 

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Keywords: online payments, subscription payments, ecommerce, COVID-19
Categories: Payments & Commerce
Countries: World
This article is part of category

Payments & Commerce