The travel industry has been one of the worst-hit by the pandemic. The industry came to a complete standstill during the peak of the pandemic as countries across the globe were demanding their citizens stayed at home as lockdowns became the norm. As these measures are eased and countries give the green light for tourists to visit again, different companies in the travel sector are looking at ways to optimise revenue, outside of the traditional means (accommodations, airfare, tours, cruises and cars, all with added fees and services) that would benefit both the company and customer.
According to estimates, if all travel distribution channels offered fintech, it could increase the total consumer spend for the sector by nearly $80billion annually. One company looking to implement change to reach this figure is Hopper. Hopper is a mobile app that combines trillions of data points and powerful machine learning to save users time, money, and anxiety in their quest to book the perfect trip.
Driven by pandemic uncertainty, consumer preferences and a desire to innovate the market, Hopper utilised its proprietary technology to develop several new fintech products that offer customers peace-of-mind, ultimate flexibility and a product that would not financially cripple them. Despite the pandemic, these products led Hopper to +100% YoY revenue growth. One of these includes Hopper’s Cloud B2B offering: Hopper is providing all companies that sell travel a new way to give customers the best deals and the most flexibility.
Hopper’s CEO and co-founder, Frederic Lalonde, has extensive knowledge of the travel industry having previously co-founded Newtrade Technologies, which was acquired by Expedia in 2002. As a VP at Expedia, Lalonde was responsible for developing the Direct Connect product strategy and signing up over 10,000 hotels to the Expedia platform, including major brands such as Marriott, Hilton, Hyatt, Carlson, Cendant and Choice Hotels. He later moved on to participate in various Expedia M&A activities, including the acquisition of Hotels.com, TripAdvisor and eLong.
Lalonde noted the same products that improved customer experience also created new opportunities for travel companies to monetise the planning, booking and trip-taking process – leading to a quicker post-pandemic recovery for the travel industry. Here he gives his views on how paytech can reignite the travel industry:
In March 2020 the world shutdown and all travel stopped, leaving the once steady travel industry in turmoil and uncertainty. A year later and the impacts are substantial – according to the US Travel Association, the travel industry lost nearly $500billion in revenue during the pandemic.
The good news for the travel industry is that as vaccine rollouts continue, travellers are starting to board flights again – in fact, after the news that the EU might allow vaccinated travellers, Hopper saw a 47% spike in airfare searches from the US to Europe. However, the gradual return of leisure travel will not suffice when it comes to recouping last year’s losses. Instead of recovering based on static airfare margins alone, some in the travel industry are looking to create new revenue streams that offer increased profit margins while prioritising customer preferences. One new revenue stream utilises innovative payment technology to monetise a new sector of the travel industry.
Modernising Travel Payments
Traditional revenue streams in the travel industry consist of accommodations, airfare, tours, cruises and cars, and while travel companies have attempted to add new monetisation models through added fees and services, this approach has often come at the customers’ expense. Instead, AI-driven dynamically priced ancillaries have the potential to revolutionise the traditional travel payment models. Specifically, with AI-powered fintech and prediction technology that enables travellers to purchase flexibility during the planning and booking process, travel brands are monetising the top-of-funnel – even before customers pay for their tickets.
Hopper is one company putting this technology into practice. From its Price Freeze, which allows customers to freeze prices for up to 14 days, to Flexible Date Plans, which gives customers the ability to instantly change the date, time, and even airline of the flight for any reason up to 24 hours prior to departure, customers are willing to pay for peace-of-mind and flexibility. As a result of the pandemic, travellers are more keenly aware of the risks that come with booking travel, and solutions to this stress are increasingly valuable. According to Hopper, on average travellers are willing to spend 15% more upfront on their tickets for flexible options. The product-market fit is clear – this paytech technology increased Hopper’s revenue 100% year-over-year despite the pandemic, and today 70% of the company’s revenue comes from these fintech products alone.
Driving Travel’s Recovery
Fintech margins could have significant implications for the travel industry more broadly. In fact, according to estimates, if all travel distribution channels (banks, GDS, OTA, Metas, etc.) offered fintech products based on dynamic pricing, it could increase the total consumer spend for the sector by billions annually. And while travel brands look to increase bookings as travel resurges, some brands are also looking to get a piece of a new pie driven by fintech.
The key to fintech success in the travel industry is speed, relying on the cloud for scalability over the next year will help companies start to see their share of this new revenue stream. Launching later this year, Capital One and Hopper announced a new travel portal that will utilise Hopper Cloud, a new B2B offering that enables companies to scale fintech with ease. The portal will leverage Hopper’s AI-powered price prediction and alert technology, unique products and servicing capabilities to help customers easily change or cancel their reservations, as well as provide an integrated rewards ecosystem.
Improving the Booking Experience
What will these fintech deployments mean for the average customer? For the leisure traveller, the planning and booking options will start to look more personalised with options for different scenarios. Flexible payment options, like buy-now-pay-later that have become common in the retail industry, have set higher expectations for the level of control customers want while purchasing all goods and services online. The added stress and tension around purchasing airfare, especially during this time, requires even more in-depth and tailored paytech offerings.
Travellers should also become more accustomed to transparency in pricing. With the help of AI, we now know when and to what extent airfare prices will drop. This insight will make for more savvy travellers, who are confident that they are receiving the best deal with the least risk.
As the industry rebounds after a detrimental year, new emerging technologies will define the modern travel experience that customers now expect. In a recent survey of Hopper users, 43% ranked flexibility, or the ability to change plans without penalty, as the most important factor when booking a trip. If brands are able to serve these needs while also creating opportunities for incremental spend, there is the potential of industry growth worth billions of dollars. Paytech is uniquely positioned to both redefine the traveller’s journey and significantly aid in the industry’s recovery – an example of payment innovation that could set the tone for other industries.