Better is possible.

"Automate the ordinary, so you can?personalize the extraordinary."

If you work in travel, chances are you’ve heard this before. Travel’s current?tech stack dates back to the 60's—prior to fintech, certainly—and parallel with the invention of the GDS. If we were being generous, we might call it clumsy—so why are so many of us still using it today?

Efficiency wins.

For inspiration, let’s look at a few certified game-changers when it comes to efficiency; Uber, Airbnb, Amazon and Grubhub. Each one of these icons took?advantage of tech hacks that work in travel just as well. If their platforms feel?magical—that’s by design. Read on, and see exactly what they did.

Visible progress.

Transparency is a principle, not a technological?innovation. It is essential to build trust,?remove the noise, and allow everyone to focus on what matters.

Frictionless transactions begin with proper identification. Creating safe?and accurate user profiles with tokenized payment data transformed the way we interact with each other on the?internet forever. This is a clear example of safety unlocking speed.

Split payment technology is what allowed these companies to grow at an unprecedented scale, providing the tools and transparency for their partners (drivers, hosts, resellers) to get paid faster?and more reliably than ever before.

Ecosystems provide an integrated, elegant user experience. These platforms effectively created an end-to-end solution with transparent marketplaces that process payments and distribute funds automatically to the respective parties with zero human interaction.

So why does travel still require several apps? Why do we still have agents chasing commissions, and hotels writing checks?

Think about it. Without split payment technology alone, Uber, AirBnB and?the rest would be like hotels are today: manually reconciling transactions?and sending checks in the mail. Not only would this be impractical, imprecise,?and inefficient (as hotels and travel agents know all too well) it would make it?impossible for those brands to survive.

Automate everything.

So what can we learn? For hotels and travel agents to be truly competitive —everything that can be automated, must be automated. This frees hotels to do what they do best: create exceptional experiences. The opportunity cost of not doing so is just too high.

Hotels are under pressure.

The hotel industry is solid and continues to grow, with 2023 room revenues estimated at $838Bn, according to Skift Research's Global Travel Outlook 2023. But it is also complex, labor intensive businesses with high CapEx (usually followed by high leverage) and OpEx, balancing the combination of a real estate asset with an operating business and a multitude of stakeholders.

Some facts to consider:

1. Idle capacity. According to the American Hotel & Lodging Association, US hotels are expected to reach an average occupancy of 65.2% in 2023. That's 35% of potential losses (or unrealized gains) every year.
2. Customer retention. With low single digit guest return rates, the industry faces a continuous battle between attracting more heads in beds, and skyrocketing customer acquisition costs.
3. Customer acquisition costs. Hotels want more direct business, but OTAs are in an entirely different league when it comes to CAC budgets, making it borderline impossible to compete on performance marketing. Qualitative strategies such as loyalty programs and brand building offer the best ROI, but don't yield the necessary volume and speed.
4. Competition. According to STR, nearly 10,000 additional properties entered the U.S. hotel industry between 2000 and 2019, resulting in an inventory increase in excess of 1.1 million rooms. That only puts additional pressure on occupancy, CAC, LTV and NOI.
5. Labor shortage. At the peak of 2022, 97% of US hotels were unable to fill their job vacancies, according to the AHLA. Despite improvements, this issue is unlikely to be resolved anytime soon.
6. Labor costs. Often roughly 50% of a hotel’s operational costs, wages have grown 9.6% a year on average, since 2020. Compare that to a 6.7% annualized wage growth in the retail sector and an even smaller 5.3% average hourly earnings growth across all professions.

The case for Travel Agencies

Often eclipsed by OTAs (Online Travel Agencies), traditional travel agencies are in fact thriving, as evidenced by PhocuWire's estimate of a 20% increase in travel agency participation in US hotel's room revenues between 2018-22, and Expedia's TAAP $1.5Bn in B2B sales in 2021. More recently, Virtuoso announced that 2023 bookings across all sectors are up 52% from where they were for the same period in 2019 leading into 2020, which was considered the high-water mark for travel.

Travel advisors offer a level of service, knowledge and "insider's expertise" (i.e. "super strong relationships") that are no match for OTAs, known for offering subpar customer service and moving clients on a conveyor belt, all the while charging commissions between 50% to 200% higher than traditional travel agencies.

A cumbersome relationship.

Commission payment is the #1 problem, by far and large, for most travel agencies.?

Hotels process those commissions manually or semi-manually, losing track on average of 20% of commissions and usually sending checks by mail (yes, you read this correctly, we are not in 1980's anymore), which can take 90 days to arrive.

Incumbent 3rd parties used to reconcile and settle commissions have proven to be utterly ineffective, as these still require laborious manual adjustments, use hotels' funds as working capital for 60 days, and provide little to no transparency or customer service. #everybodyloses

This cumbersome settlement process destroys trust and impairs business volume, leading travel agents and intermediaries to stop working with perceived bad payers.

The future is here.

To land the metaphorical plane, as it were—allow me to pose a pertinent question. If one side (hotels) needs more heads in beds, and the other (travel agencies) needs?to sell more of those beds—why are things (echoing Avril Lavigne) so complicated?

Say it with me, “It’s time for the drama to end.”

In the next upcoming newsletters, we'll break this drama into pieces and have fun analyzing each of them individually. If you #care like we do, come back for more.