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Buy Cheap, Buy Twice

The Cost of Hidden Costs

Jen Catto

Chief Marketing Officer

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When something seems too good to be true, it usually is. Unfortunately, this is all too often the case in travel. And as my grandmother used to say, ‘buy cheap, buy twice’.

Hidden costs were once a tolerable irritation for travelers. But more recently, they’ve become a real threat to consumer trust. To tackle this, we need more transparency and less trickery during booking. This will be central to both accelerating recovery and modernizing travel retailing.

The Cost of Hidden Costs

Booking a trip is one of the most exciting purchases to make. But excitement fades when you reach the end of a buying process only to realize that an amazing deal isn’t quite what it seemed. Common frustrations include fare-only prices that don’t cover seat selection, checked luggage, or even a carry-on bag. Hotel rates that exclude the cost of breakfast, resort fees, or tourist taxes. Or arbitrary rental-car charges imposed upon its return.

But it’s been this way for years. So why change things now?

When travelers had less to contend with, they may have had more patience with hidden costs. But times have changed. When things are uncertain, hidden charges and frustrating booking experiences do greater damage to trust. They also create a feeling of suspicion — especially in the era of misinformation, fake news, scams, and so on.

At the same time, retailers must remember that travel is incurring new costs that never existed before — like PCR tests, mandatory quarantining, travel insurance, premium-rate flexi-fares. Plus, there’s a risk of losing out entirely if you can’t travel.

It stands to reason then, that people want to know what things cost up-front, without any nasty surprises. Price transparency is now the most important factor impacting consumer trust. 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 what they don’t.

Transparency Determines Trust

Our research results said it loud and clear: consumers are tired of having their pockets shaken or feeling like they’ve been baited-and-switched. And nowhere were trust issues more apparent than in New Zealand and Australia, where the study revealed a huge chasm between expectation and performance. The takeaway is: our industry cannot view pent-up demand as a guarantee of bums-on-seats.

Price transparency is 16% more important than long-term safety records.

– Travelport Trust in Travel research 2021

Overall, price transparency and fully flexible or refundable tickets were ranked as the top two most influential factors in deciding whether to trust a travel firm. In fact, respondents ranked it 16% more important than a long-term safety record. Yep, you read that right — more important than safety. This indicates that price transparency may be the next big battleground for retailers as travel resumes.

But Everyone Else is Doing it

For travel businesses, the irony of giving customers complete price transparency is that it leaves them at a direct disadvantage. That’s because ‘everyone else is doing it’ (hiding fees), and therefore retailers who don’t will appear less attractive at that all-important first glance.

Higher prices up front mean appearing further down in search results, which means lower chances for conversion (even if the overall cost is lower at the end of the day). 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, our data proves that’s not the case. Restoring and maintaining strong trust is easier than people think. It starts with better merchandising and retailing. That 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.

The risk if you don’t? Some travel businesses have started to actively promote their ‘no hidden costs’ policy as a USP. They will use this as an advantage to grow customer trust and improve their brand perception of ‘doing the right thing’. The topic of hidden costs and travel horror stories are fodder for media too. Right now, no travel company can afford to have it’s brand tarnished by association.

People Can’t Afford to Buy Twice

Travelers are itching to get away. There’s no doubt that owing to pent-up demand, some are prepared to pay extra for the privilege of doing so, particularly for features they value. But people still have limits, and they don’t appreciate being duped or wasting their time during booking.

Yet almost always, the product the customer needs is not the cheapest one, especially when you take customer value into account. Airlines have proven this in the past and now incorporate that thinking into their retailing strategies. It’s time for travel agencies to follow suit. This means upselling carefully, cross-selling relevant extras at the right time, without breaking trust or appearing to lead the customer towards a pricier shopping cart simply for their own gain. And, it means allowing the customer to still see the cheapest offer, even if they aren’t going to buy it.

The takeaway is: with successful retailing, passengers tend to buy something better than just the basics. This represents an opportunity for OTAs if they are willing to invest in air merchandising and see not only the cheapest offer, but also the best offer, and from multiple carriers. But the industry needs new technology that has the right capabilities to do this. Progress must be genuine and consumer centric. The days of price trickery are numbered, and anyone wondering if we should just make that trickery more sophisticated needs to think again.

Retailers 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.

The appearance of affordability is misleading, and the illusion is starting to wear thin.

 

Basic fares should be accompanied by restriction disclosures, so travelers can manage expectations about what is and isn't included.
Jen Catto
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