News for the Hospitality Executive
| By Ken Smith
The travel industry is putting entirely too much faith and energy into online social networking when there is little demonstrable positive return on investment. There is another issue that should be moved to the top of the agenda. That issue is payment systems, which is the real driver for online sales. Says Feature writer Ken Smith.
In the past two months alone there have been several major problems with systems for consumers to pay for travel. These problems have caused more collateral damage to the travel industry than could possibly be balanced with several armies of Facebook and Twitter posters, or the most positive user generated content, or even massive branding campaigns on every social networking site.
Europe is the world's greatest travel market. Yet, much of Europe -- especially Eastern Europe -- has a very low penetration of credit card and debit card usage. Even in those European countries that have a relatively high percentage of card holders, such as Germany, there is a fairly low rate of online purchases for travel. There are many cultural reasons for not embracing online commerce, but it boils down to a lack of trust in the system.
All travel related companies in Europe, and the rest of the world for that matter, should consider conducting key analyses of payment capabilities as expansion plans are developed. Hits from links on Facebook and Twitter are not worth much if that referral traffic cannot be converted into sales, and to close the sale a trusted and efficient payment system is necessary.
The current fuss with FlyGlobespan going under because payments were not forwarded by E-Clear has severely damaged the entire European travel industry. Bookings are bad enough with dips in the global economy. The negative publicity regarding FlyGlobespan's failure will infect to some degree other European airlines. The consumer is now more distrusting of all travel companies. The details of who said what, when and to whom, and who has the £35 million, is lost on the consumer.
Somewhere between E-Clear and FlyGlobespan, more than £35 million has fallen into a dark hole. What resonates with the travelling public are the news accounts that more than 15,000 people paid for travel they will never get to use and for which they have little hope of ever recovering their money. This damages the entire travel industry by undermining the level of confidence that had been built.
The bad news is not limited to a Scottish charter airline and a credit card processing company that few people knew about until the recent news reports.
Last month in Bremen, Germany, a police raid on Flyline, a British Airways booking centre, found significant fraudulent activity. As many as 300 British Airways employees were suspected of using passengers' credit card details to steal millions of euros. German police said anyone who booked a BA flight through the telesales centre in the last 12 months is at risk. One senior British Airways official was quoted as saying, in what may qualify as the understatement of the decade, "The shocking fact is that BA's computerised payment browser was not protected. Corrupt staff were able to pilfer the accounts of passengers as they saw fit."
Problems in trusting online payment are not limited to Europe. Two months ago, the US Senate held a hearing on credit card practices by controversial marketing companies that allegedly trick customers into paying monthly fees to join online loyalty programs. During the hearing, the normally reserved senators were using words such as "scam", "fraud" and "arrest" as they blasted many big name companies, including Orbitz, Priceline, Continental Airlines and US Airways. These travel companies may welcome the new ancillary income, but at what cost to themselves and the loss of consumer trust in the entire travel industry?
"What's happening is many online merchants have decided to betray their customers' trust," said Senator John Rockefeller, chairman of the Senate Commerce Committee. "When people shop online, they have the right to expect that the stores they entrust with their credit card and other personal information will not share it."
So, what's the solution? To start with, the airline industry and tour operators should develop standards for processing payments by consumers -- standards that put the consumer first. Then, governments and the financial community should be lobbied, forced, harangued, whatever, to recognize and honor these standards. It should be made clear to all that the health and future of the travel industry is at stake.
While working on these standards, the travel industry should develop alternative payment methods to complement credit card payment systems. David Hunter, CEO of Prepaid Services Company Ltd., has spoken at travel technology conferences trying to dispel some myths about the travel consumer. Hunter says it is simply not true that credit and debit cards already cover 90% of the potential online market in Europe. And, it's a false assumption that people are no longer afraid to give out their personal financial details online.
Hunter suggests that alternative payment methods permitting the travel consumer to pay cash deserve serious consideration by the travel industry. One such company, he says, is Cash-Ticket that combines online booking and offline payment.
In conclusion travel companies need to reassess their
priorities. Whilst social media can drive traffic you need to
understand the quality of the traffic and assess their ability to pay
for your product. That is the cornerstone for the online industry. If
your customer can’t pay your product won’t sell.
EyeforTravel will be hosting a debate about this topic during
Payment Conference Track at our Travel Distribution Summit, 17-18 June
EyeforTravel is a media company specialising in business intelligence for the travel and tourism industry. It was started by Tim Gunstone in 1997 as part of the FC group. The news website is one of the top three most visited travel trade websites globally and for over 11 years EyeforTravel has successfully held travel marketing and technology events on 6 continents, providing a networking platform for thousands of travel companies.
EyeforTravel also provides some of the most in depth research into global online travel markets and trends. Our research site at www.eyefortravelresearch.com is the information hub for the global travel and tourism industry and is an indispensable tool for anyone who is involved in online travel or travel distribution.