OTAs can no longer focus on conversion at the expense of customer service, says Steve Endacott
Wikipedia defines Web 5.0 as when humans interact with computers emotionally. For the travel sector, I define Web 5.0 as when humans interact with online travel agents (OTAs) to cancel or amend bookings, as well as make bookings via their front-end websites.
Until Covid-19 devastated the travel industry, virtually all OTA platforms were designed to cater to the 95% user case which was ‘making bookings’ and not dealing with the 5% of cancellations.
For years, the focus has been on A/B testing to improve booking user interfaces and suppliers’ APIs were focused only on making bookings, with scant regard to cancellation, amendment or refunds.
Customer service departments across the travel sector were staffed to deal with the industry-standard 5% cancellation rate and adopted manual processes that were never designed for wholescale amendments.
Covid-19 swamped most businesses, leading to enormously long wait times to contact service centres and that damaged many a well-known brand.
Companies with a relatively simple booking process like Booking.com adjusted quickly to provide self-service amendment, but other OTAs, tour operators and low-cost airlines’ tour operations have struggled to follow suit.
Many have blamed legacy systems, but just as companies built API connections to flexible front-end systems, they now need to focus IT resource on building self-service customer portals.
The same supplier APIs can often be used to power customer portals, but there are some interesting complications.
Flight supply: rebooking limited to the same airline
During Covid-19 most airlines introduced flexible booking rules allowing the amendment of flight times, dates and even destinations, but had a slow and manual process for cancellation and refund.
Screen scraping obviously removes the possibility of automated cancellation or amendment support, but also some low-cost airline APIs do not support this function requiring manual intervention via customer service teams or booking portals. However, there is a clear move towards automated support.
Interestingly, when OTAs do allow self-service amendment or rebooking they will need to restrict their back-end holiday searches to only offer the original airline the flight was booked with, which massively restricts flight choice compared to booking a new holiday.
Potentially, this could be unpopular with customers but is a better commercial choice than taking a cash-flow hit or asking customers to pay again while the OTA awaits an airline refund.
Hotel cancellation terms
For years, hotels have fought with bed banks to impose sliding scales of cancellation charges based on how close to departure an amendment occurred.
They were beginning to win this battle. However, the need during Covid for OTAs to cancel and rebook quickly has thrown this out of the window with all hotel bookings deemed cancellable before departure.
This has allowed OTAs to offer a full range of hotel products for customers to re-book but has also triggered a structural change within the hotel supply chain.
Rise of the channel manager
Bed banks historically operated using a semi-manual process for booking hotels. They would ‘free-sale’ hotels, updating prices via emailed rates notices and confirming bookings back to hotels via email with implanted ‘acceptance’ buttons which the hotels press to confirm the booking once they load it on to their reservation system.
Although hotels could not control stock levels via this method, a crude mechanism of ‘stop sell’ emails prevented most overbookings and allowed the system to work.
However, the system was never designed to deal with wholesale cancellations and amendments, with many bed banks now facing major financial disputes when trying to reconcile billing with their hotel partners.
Channel managers were rising in popularity pre-Covid because they allow hotels to hold their stock centrally and push out daily price amendments based on actual occupancies. They also deal much better with cancellation and amendment.
A large number of channel managers initially protected bed banks as OTAs preferred one integration with a bed bank over multiple channel managers. However, Covid-19 has seen the channel manager marketplace consolidate substantially and bed banks now risk being removed from the distribution chain as hotels can connect directly to OTAs.
Transfers and insurance
Having owned businesses in both sectors, I know transfers and insurance businesses have quickly developed connections into customer portals so that if customers amend holidays, their transfers and insurance policies are automatically updated via API links, avoiding the need for either the agent or customer to ring to make an amendment.
Cross-selling ancillaries
OTAs have historically been hesitant to add ancillary products like foreign exchange into the booking process in case they slowed the booking and damaged conversion. However, the growth of customer portals provides the perfect cross-sell environment for ancillaries.
My own Canny Finance business has developed a ‘one-click’ card order via a simple API integration into customer portals that sucks out all the customer details required and removes a lot of customer order friction.
Is the investment worth it? Nobody knows if another Covid-19 variant will cause the havoc Omicron did or whether the war in Ukraine will have unforeseen consequences.
However, I do know that if customers are faced with two-hour wait times to make amendments, cancel holidays or claim refunds they will be looking to book with somebody else next year.