GUEST: The Cost Of Hidden Costs

The European Commission late last month gave Google two months to improve transparency in flight and hotel pricing. Travelport chief marketing officer Jen Catto writes that the internet giant isn’t the only one under pressure to do so.

Few things in life are as exciting as planning a trip. Even fewer things are as frustrating as getting to the end of the booking process and realizing the deal you thought you were getting has vanished into the cosmos. In its place are a long list of hidden costs of which you weren't aware.

It could be that you discover the too-good-to-be-true fare you saw requires additional costs to select a seat, check a bag or even carry a bag onboard. Perhaps your hotel rate doesn’t include breakfast, and there is a resort fee that is only disclosed when you are checking out of the hotel. I recently read about car rental companies with cleaning fee policies that could mean an unexpected charge for a returned vehicle which they judged to be too dirty. (Not even my kids and I can agree on what "too dirty" really means.)

While it will hardly come as a shock to learn people loathe these clandestine charges, what is perhaps surprising is just how much travelers hate them. So much so, in fact, winning over consumers' trust now hinges more on price transparency than even long-term safety records. You read that right: Right now, travelers care about price transparency more than safety.

This is what we discovered when we surveyed 10,000 travelers around the world to find out what they trust about the travel industry, and—importantly—what they don't. The research results were overwhelming: Consumers are tired of having their pockets shaken or feeling like they've been baited-and-switched. This is a message echoed by antitrust regulators in Europe, who are heaping pressure on Google to be transparent about hotel and flight pricing in its Google Flights and Google Hotels travel search engines.

Nowhere were trust issues more apparent in our research than in New Zealand and Australia, where the study revealed a huge chasm between expectation and performance. Price transparency and fully flexible or refundable tickets were ranked as the top two most influential factors over whether to trust a travel firm. However, the same travelers rated industry performance in these areas 40 percent lower than the score they gave our industry for the things we need to do to win their trust.

Seventy-five percent of those surveyed globally also told us they felt their trust had been broken more than once by a travel business. The takeaway is clear: Our industry cannot view pent-up demand as a guarantee of bums-on-seats. Pricing transparency may soon replace Covid health and safety measures as the next big battleground for retailers as travel resumes. The appearance of affordability is misleading, and the illusion is starting to wear thin.

Part of the ongoing issue with hidden fees is everyone is doing it, leaving retailers who maintain complete transparency at a distinct disadvantage. Higher prices up front mean appearing further down in search results, which means lower chances for conversion (even if the overall cost is lower than those less-transparent results that rank high in the search). And, given how impactful we know search rankings are on revenue, broken trust tends to be written off as an unfortunate, but unavoidable cost of doing business.

However, the data prove it is not.

Restoring trust is often far simpler than people think. It starts with better merchandising and retailing. It doesn't mean discontinuing basic fares, but they must be accompanied by restriction disclosures, so travelers can manage expectations about what is and isn't included. Make it clear a rate is non-refundable, seat selection is extra or no bags are included. And above all, get the right product to the right customer.

Four out of five times the product the customer needs is not the cheapest. This means travel businesses must master the upsell effectively and cross-sell relevant extras at the right time (without breaking trust).   

Technology must be upgraded for the industry to be able to do this. Progress must be genuine and consumer-centric. Upselling and cross-selling must demonstrate immediate, relevant value—not only to the seller, but also to the buyer. And those wondering if they can simply build a more sophisticated form of trickery should think again.

Travelers are itching to get away. Some are prepared to pay extra for the privilege of doing so, particularly for features they value. However, trust is earned, like a penny saved. Companies that continue to squeeze consumers' hard-earned pennies via hidden costs are playing the short game. These companies will eventually struggle to engage those seeking a value exchange that better reflects the realities of a post-pandemic world.

Finally, the adage my grandmother used to say—"buy cheap, buy twice”—has been resurrected in the coronavirus pandemic, and many consumers simply cannot afford to buy twice. And why should they?