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Well, colour me surprised. It turns out that the online travel agents have been using questionable business tactics to encourage purchases without delivering the incredible value they suggest they will. Turns out, we’re made to believe we’ve negotiated or received a good deal, when in reality, we have not.
This is easy for them to do because we’re human. Let’s use an example. They say “40 people are looking at this hotel right now, 4 rooms remaining for your dates” to create a sense of urgency, so that you think “bloody hell, if I don’t move fast, I’ll lose this opportunity”. Problem is, what they meant to say, was “40 people are looking at this hotel, but actually they’re all looking at different, non-overlapping dates and you’ve got nothing to worry about”. Couple this with forgetting to mention who’d paid the margin-eroding “bribes” to be featured on the list or comparing a room the size of a box to a suite when displaying a discount and, well, it was felt by the Competition and Markets Authority that this wasn’t cricket. Now that all this has happened, of course, the apologetic travel sites will work tirelessly to ensure that it never happens again because history shows that one incident is always enough for the lessons to be learnt.
“I love travelling, full stop — so while I’ve had some harrowing instances, I never look at them negatively. Memories are made when you’re travelling — not when you’re chained to your desk.”
- Richard Branson on why travel is so important. If only it was easier to do.
Creating the sense of urgency by suggesting that what we see in front of us is an outstanding or time-limited deal that cannot be missed is key: it pushes us into making a decision faster and with less oversight than we would normally choose. We are, it turns out, dead easy to manipulate in this way. 50% off? Great! I’ll take three. The fact that the price was artificially inflated for the legal minimum period in order to make the normal price seem like it’s a bargain is, well, naughty. You, as a human, can’t remember what the normal price is for every product in the supermarket, so sooner or later, you’ll fall for it. I do, regularly, and don’t even realise it most of the time: it’s like coming out of Furniture Village having negotiated paying full price for a sofa and being proud of your achievement.
Just one wafer thin margin
As I have mentioned before, it’s not unfair to say that these online travel agents are creating intermediaries where no intermediaries previously existed. They force themselves between the service provider and consumer in order to deliver a better service, to provide easy access to a broader range of options, and ultimately to make the experience for you and I nicer than it would otherwise be if we had to chase each and every opportunity individually. The “killer” part of the experience is being able to provide us with better value by being able to compare all our choices with less effort, through a consistent user interface and in a way that doesn’t require nervous people to speak an unfamiliar language or negotiate themselves.
On the surface, the added value online travel agents provide seems great, and from the user’s immediate perspective, it certainly is. Dig deeper, though, and start from the other side of the fence and it is less rosy. Firstly, the hotel business in particular operates on razor thin margins and they have to give a surprising percentage to these travel aggregators. Secondly, they can’t negotiate with the customer directly any more: their relationship is with the web sites, not the people who stay with them. Thirdly, their personality is squeezed into a standard set of expensive boxes which reduces selling opportunities and fourthly, they are not allowed to offer cheaper deals on their own web sites (but can, and will, offer better deals on the phone, should you call them). Hotels then find all sorts of ways of clawing back this loss of margin, because a thin slice of thin is darn close to nothing at all. If you’re a member of a hotel loyalty scheme, for example, you may find that booking your favourite hotel on, say, hotels.com means you turn up to discover you get zero reward points. Same with flights. Book on a travel site and suddenly, your miles earned are so small you can’t see them with a state-of-the-art laboratory’s worth of electron tunnelling microscope.
The hotels business, globally, is worth… wait for it… half a trillion dollars a year. This is an astonishing amount of money. Travel aggregators¹ work because they act as a context sensitive search and presentation engine that adds obvious value: you type in where, when, how many and they present everything for you neatly and tidily. All you have to do is click yes, and, oh my! Ten other people are looking at this hotel and there’s one room left at this price, you’d better be quick. So what happens when Google, for example, thinks “Hey, we can get in on this. Why don’t we intercept this stuff at the search stage and present the options to the user directly before they get to the aggregators? After all, we’re the gateway to the Internet”. Yup. Indeed. And then, ten become one.
All throughout this process, control over the value inside the components of this economy, such as the rooms in a hotel, seats on a plane, hire cars, etc. moves away from those that own the components towards fewer and fewer aggregators. Margins are shaved further and, in the end, what you get as an end-user gets worse and worse as it is dictated by fewer entities. These entities are motivated to make revenue not just from taking a hefty cut of everything that goes by, but also from pay-to-play listings. In the meanwhile, the ability for the value provider to sell directly to you with the unique details of what makes them special slowly erodes and the personality in life is taken away. If you try one thing this year, talk to an independent hotel owner and ask them what they think of, say, expedia.com. Don’t have children near you when you do this. It won’t be pretty. But it will be enlightening, if a touch confusing.
Emotion-proof digital workers doing it for you
Wouldn’t it be nice if it were possible to connect the value provider, e.g. the hotel, directly to the consumer without the individuals needing to do the footwork? If you could have a digital representative that could not be emotionally manipulated that could pop out into a “magical computer land” that arranged what was seen according to what was relevant. Looking for a hotel room in New York in mid-may 2019? Oh, look, rooms. In New York. Everywhere. Your representative could then quietly filter away all the ones that were not IHG group (because, you know, your loyalty account) and then remove the ones that are just too far away from the conference and then enter into a multi-party negotiation with the representatives of what is remaining to get a good deal for you.
Now there’s a lot to swallow in the above paragraph. Above all, I played the “magic” card: I talked about what happened without mentioning how. I think we can all agree that if it worked like that, it’d be great. Firstly, it hands the power back to the individuals and changes the role, cut and influence of intermediaries. Secondly, it organises what is important and discards what is not to make searching easier. Thirdly, and most importantly, it suggests a dynamic, self-organising environment for digital entities to do this work on behalf of what they represent: either you, or the thing you’re looking for. Combined, these are important shifts in how the world works. It’s a step towards a decentralised world where AIs can work to solve problems free of human intervention. It means that they collectively perform the work that is currently done by the aggregators, but do so directly with each other and with the knowledge necessary to make the decisions they need to in order to deliver optimal solutions, free of the emotional baggage caused by “just four seats remaining at this price” (and, oh, what’s that? You need four seats? Funny that.)
The multi-brained multi-tasking digital Travel Agent
Let’s introduce the digital travel agent. It’s an artificial entity that lives on your mobile device. It knows your preferences² and it is able to connect to the decentralised world in order to look for other agents that represent the things that you want. Those agents may be connected to intermediaries, such as “uber-agents” that represent all Hilton Group hotels, or ones that specialise in holiday hotels or luxury stays as opposed to business hotels, but there are also the agents owned by independents that plug into their channel management stage. The larger agents are incentivised to keep their margins low and provide substantial added value because otherwise they’ll be bypassed with direct connections. Furthermore, the underlying infrastructure is really tough to bribe financially and it absolutely can’t be influenced emotionally.
Needless to say, there are many ways of stacking cats, and there are also many ways in which digital entities can attempt to scam other digital entities so trust and identity are big parts of this and both are largely provided by the underlying cryptographic technology and, for want of a better phrase, “the self-service decentralised ledger of truth”. Entities are able to confirm a restaurant’s food hygiene rating, or a hotel’s star rating or its pictures and reviews using verifiable claims: some of which come with high trust, such as government ratings, and others less so as they are subject to opinion, creativity or easy manipulation (such as user reviews, unless the opinion can be supported by cryptographic proof the person did stay there). Together, all of this modulated by your risk profile provides unparalleled and largely automated control over your future travel plans.
We live in a time of great irony. The decentralised, open architecture and opportunities given to us by the Internet have ended up encouraging centralised control over knowledge and services alongside a reduction in margins, flexibility and individuality. Opening this up to an economic Internet where large populations of artificial digital entities, or, autonomous economic agents, can live, trade and work reasserts the advantages of decentralisation: scale, performance, self-service trust, individual ownership, flexibility and robustness.
But far more importantly, we can stop the personality of the world we live in from being stripped away layer by layer until all we have left is… well, Little Boxes.
[1] Online travel aggregators exist on several layers. There’s Online Travel Agents (OTAs) that focus on conversion to sales and earning commission by doing so. Metasearch companies are there to gather traffic and compare the OTAs and act as a layer above them, but not one that is built around taking commission (except for “premium services”). They add value through reviews and an additional aggregation layer above OTAs. Then, of course, we have the gateways: Google, Facebook, etc., who are — for most people these days — the entry point to the Internet.
[2] You may, for example, be prepared to pay a touch more or depart from a less convenient airport to fly on British Airways this one time as you’re a few tier points short of maintaining Silver status for another year. Your agent knows this and can work accordingly.
