22 March 2018 | Andrew Sanders
Frictionless Commerce in Travel and Hospitality – Can It Be Achieved?
We hear a great deal about the “frictionless travel experience” and how it may be a lofty goal, but every day we are getting closer and closer to this reality. Industry leaders agree that low-tech travel experiences are a thing of the past and consumer demand is driving innovation.
We are now able to book our air, hotel and rental car all via a mobile device. We can then use this same device to check-in at airports, hotels, and car rental sites. Many of us even assume that our smartphones should be used to open our hotel room door. All of these conveniences would have been impossible on such a scale five years ago. Though some were individually achievable from a technology standpoint - all of it combined was a reality still waiting in the wings of the future.
There are still some essential elements lagging in the modernized travel ecosystem. The tours and activities space is one that remains cluttered with paper transactions instead of mobile or digital experiences. The good news is that there are many exciting advancements on the cusp of disrupting both air travel and hotel stays over the next few years.
Frictionless commerce, on the other hand, has still proven elusive for the travel industry. All of the back-end processes to ensure that payment is seamless between the travelers, intermediaries, and suppliers is still disjointed.
The hotel industry has been especially challenged when it comes to implementing an effective commerce experience that serves both the guests and the hotel. This was a hot topic at the HEDNA Conference in Austin that I attended last month. Hotel Electronic Distribution Networking Association (HEDNA) developed a whitepaper via their Payment Working Group that tries to tackle this issue head-on. I would highly suggest that you download the whitepaper so here’s the LINK.
This comes directly from their whitepaper:
While most hotels have a centralized room reservation system, they do not have a centralized payment processing solution. When the guest reserves a room, payment information is captured during the booking process but then gets forwarded to the individual property where the guest will stay. That individual property is the merchant of record, which has its own acquiring relationship to manage and process the payment.
When you think about this situation, it is disturbing on many levels. There is so much money being left on the table via payment commissions which really may not be warranted. The report goes on to state that there are four major hurdles that impact the process of frictionless commerce:
- Payment Acceptance
- Operational Inefficiency
- PCI Compliance and Security
When it comes to achieving frictionless commerce, there are several areas where hotels are failing to retain revenue via these four major areas of concern.
By simply moving away from a property by property payment model to a centralized model, hotels will save an enormous amount of money (1). Also, displaying prices upfront to guests in their relevant currency will lead to increased conversions and sales (2).
Operational efficiencies (3) are somewhat in line with payment acceptance whereby if the process is done centrally, the brand can optimize the number of relationships it has with service providers/payment gateways. Then there is the matter of PCI compliance (4). I believe that we, as an industry, are well on our way to having a very good handle on this issue. Unfortunately, data breaches and hacks to platforms will likely continue, so we must stay vigilant.
In a landscape of ever-increasing technology and business model disruption, pull from consumers and profitability will be the catalysts for frictionless commerce. Trust, convenience, and perceived value are the ingredients that will propel these changes in order to lower the fee structures while enhancing the travel journey at every touchpoint. Essentially, if it makes travelers’ lives easier and boosts the bottom line, then there is a huge opportunity just waiting to be taken advantage of.