New York Hospitality by Vijay Dandapani

Hidden fees: theft in plain sight?

With the summer travel season a couple of weeks away the menace of hidden fees gets more attention in the press leading to the somewhat misleading notion that the add-ons are merely a summer practice.  Instead, less light is shone on the nebulous extractions as business folks, who do the bulk of the traveling the rest of the year are less inclined to pay heed and object to them. An example of that is this booking with Hertz US for a rental in Italy where the local office added a mysterious "local"  charge of €100 and doubled the charge for a child's seat besides slapping on a charge for an additional driver without disclosing it.

Fees of the foregoing kind recently prompted a UK based car rental specialist, 121carhire.com to put out a press release entitled "How to Avoid Hidden Car Hire Costs this Summer". The company notes that "on arrival to pick up the vehicle many holidaymakers are finding that the price wasn't all inclusive and are hit with hidden charges, some compulsory and some not. In a number of cases, these charges have been found to double the original quoted cost. The latter was the case mentioned above with Hertz Italia.

Airlines, however, have made hay out of the now fully disclosed baggage fees. USA Today's recent report on figures provided by the US Dept of Transportation  shows U.S. airlines earned $3.5 billion in fees for checked luggage.  They earned a further $2.6 billion on another item that they have taken to "disclosing":  fees charged for changing a reservation.

While hidden fees remain a problem for car renters hotels have gone the other way. Other than a few "resorts" most have not only taken to abandoning the practice but also given up on "ancillary" revenue with some upscale hotels offering free WiFi and local calls. One area, rightly in the eyes of all operators, that has seen a tightening of standards is the cancellation fee with some vacation resorts requiring a full cancellation fee of a day's charge as many as 3+ days in advance of arrival.  

Add-ons would elicit far less customer opprobrium if fully disclosed. No travel provider is as comprehensive about breaking out and publicizing its list of ever-expanding add-ons as Ryan Air. As last week's article lauding Ryan Air's boss Michael O'Leary  in the Irish Independent points out no one forces passengers to fly his airline. That is particularly true as they have more than one choice. The latter point is made clear in a recent survey put out by JD Power where airline satisfaction levels are on the rise barring gripes stemming from baggage fees which are disclosed in the booking process .

Customers' conscience: An avenue for boosting sales or a deadend?

Online purveyors of the "disruptive technology" model espoused by the likes of airbnb and onefinestay have taken to suggesting that their enterprises serve a social purpose beyond their brazenly illegal (in New York and Amsterdam) conduct. 

Lobbyists seeking to overturn or at least water down New York's laws against selling rooms in homes have begun to tout the (specious) fact that listers on their website are New Yorkers whose ability to make ends meet is dependent on income from the illegal hotel room revenue absent which many are likely to be turfed out of their homes. Unsurprisingly, Airbnb offered a self-serving self-commissioned survey in support of its dodgy claim.

Academic suggestions to the contrary notwithstanding, the foregoing appeal to customers' conscience, whether genuine or not, has thus far failed to make inroads into customer sales. Conscience keepers for the retail industry have striven mightily and long to make customers aware of sweatshops that put together garments peddled by retailers across the clothing spectrum.  For instance, the Seattle based Network for Business Innovation and Sustainability (NBIS) has since 2007 touted a certification for corporations that have a formalized system of generating positive impact for society somewhat oddly called a "Certified B Corporation". 

NBIS's  drive for corporate social responsibility included Seattle area big box retailers where in 2007 picketers lined the outsides of a store to  "underscore the fact that companies importing supplies and products from overseas have to pay a lot more attention to the working conditions and environmental rules in those countries -- or risk the wrath of consumers and negative publicity." Nearly six years later, the tragedy in Bangladesh seemed to underscore just how unsuccessful these efforts have been.

A recent Reuters report documents just how intractable the problem is as customers remain oblivious and even distinterested in the issue. Similarly, several years ago customers' conscience  underpinned the efforts to label the coffee bean trade with the coveted and allegedly virtuous "fair trade" label for growers.  The effort has done little for the growers and even less for the customer as fair trade coffee put out by higher end outlets is always more expensive with no evidence of the surplus going to the growers.

Evidence from the field points to what economists have long pointed out: that both customers and merchants maximize their respective utilities with a focus on price almost to the exclusion of all else. Social conscience rarely if ever enters the picture. Were it not the case real hotels, particularly in New York City, would have done better by merely pointing to the fact that tens of thousands of hotel employees, all from the greater NYC area, benefit from their patronage.

Not so paradoxically, illegal hotel rooms are often listed by the well-off and the prominent seeking to make extra bucks from illegal hotel room sales with nary a thought for either the law or one's conscience.

Cross platform selling: Helicopter advertising?

Cross platform marketing whereby marketers track consumers over multiple platforms across the digital space seems to have arrived. The Wall Street Journal has a somewhat ominously headlined report "Online Ads Can Now Follow You Home." The holy grail for digital advertisers is the ability to convert consumer intent into a buy regardless of where they are on the digital landscape. As the Journal reports "advertisers already know what people are up to on their personal computers. But understanding their online whereabouts on smartphones or tablets has remained elusive."

The idea behind cross platform marketing is not too distinct from its cousin, cross channel marketing, where the goal is the seamless pursuit of customers across touchpoints with maximum continuity.In the travel space, Expedia, seems to be leading the charge of trying to figure out cross-platform activities by "harvesting cross-screen identities, the ad industry could serve ads to mobile phones based on the interests people express when surfing the Web on their PCs."

The WSJ report notes that Expedia began a trial last summer "with mobile ad technology provider Drawbridge Inc., which uses a "triangulation" method to try to figure out when a mobile user is the same person as a desktop user." By recognizing  similarities in ad viewership across devices the travel company is able to determine who the user is and targets ads on the user's mobile device at the appropriate time and place in the hope that it will spur the buy decision.  It did so by sending travel offers to people viewing travel guides at night in certain cities on mobile devices associated with the desktop that was originally used to view their site. If the user clicked on the ad it would prompt them to use the Expedia app to book the transaction.

Ad tools of the foreoging nature are what enabled Facebook's revenue for the recently annnounced quarter to be better than expected as a mere 12 months ago the company had no revenue from mobile ads. For instance, ads from mobile app developers urged FB users to download their apps enabling a follow through from desktop to a smartphone.

Apropos the foregoing, Expedia's VP of mobile and online partner marketing noted that they "have seen a direct positive relationship between spending on app downloads and someone consummating a transaction." Whether that level of hovering over a consumer leads to a backlash that stills what looks like a promising way to put pay to the old adage that "fifty percent of advertising works and fifty does not, the questions is which fifty?" is a matter of time.

An(other) Orwellian tax on consumers

That the US Congress' penchant for unintended irony is inexhaustible can be seen from its choice of names for bills. A recent entrant to that pantheon of hypocrisy is the "Marketplace Fairness Act" which seeks to "grant states the authority to compel online and catalog retailers ("remote sellers"), no matter where they are located, to collect sales tax at the time of a transaction - exactly like local retailers are already required to do."

In terms of fairness to consumers, it falls miserably short while, as is typical of almost anything congress puts out, it panders to a group (in this case of largely brick and mortar retailers) in the name of fairness. Apart from laying unfair burdens on online (particularly smaller) retailers as it would require them to keep records and verify tax rates in jurisdictions beyond their physical location it displays a classic "sock-it-to-them-they-are-from-elsewhere" approach that is a favorite of jurisdictions. The latter use that distressingly often while seeking to implement ncreases in hotel occupancy taxes.

A segue to the foregoing by way of ill-conceived ideas and laws is the decade long battle in courts around the US by jurisdictions to force OTAs to pay the "full amount" of occupancy taxes. Judicial outcomes thus far have fallen on either of side of the divide although largely with the OTAs. That outcome may be unpalatable to hotels but rightly lays bare the money grab at the heart of the action on behalf of tax jurisdictions. 

Among the recent court decisions in favor of the latter is one made by a Texas District Judge where a ruling on a class-action case said "Expedia, Priceline, Orbitz and Travelocity are among OTAs that owe 172 Texas cities — including Dallas, Austin and San Antonio — more than $55 million in back taxes." Close on the heels of that decision was one in California that is more typical of the outcomes over the years. In the Golden state ruling, a Superior Court judge, hearing claims from the cities of Los Angeles, Anaheim, Santa Monica, San Diego and San Francisco, issued a summary judgment, holding that the defendants are not hotel operators and are not subject to hotel occupancy taxes."

While hotel owners and operators have long sought to use a "level the playing field" metaphor to curb the growing hold of OTAs on their inventories the battle ignores some basic notions of the agency agreement that underpins these commercial transactions. Few hoteliers disagree with the view that OTAs do not operate hotels nor resell rooms as "wholesalers" as in the pre-internet era.  What is not in doubt for anyone involved in the fracas is that taxing of services is not the norm.  A cursory look at the websites of any of the OTAs leaves little doubt that they offer a service.  To suggest that they are, principally, a purveyor of rooms is disingenous on the part of municipalities and hotel companies and injurious to commerce.

The technology dividend: a gift that keep on giving

A slew of new apps in the travel sphere look to ensure that the high watermark for the industry will remain a moving target. That is an outcome that almost always will accrue to the benefit of consumers and travel businesses alike. While Google's mass-market computer, Google Glass, is one that slots into the "disruptive technology" category considering the potential depth and breath of its promise, relatively more mundane apps are already making the travel dimension more usable and profitable.

Among the foregoing are Grokr a "predictive search and discovery service" built for specially for iPhones. Grokr claims to "remember and give relevant information and recommendations based on personal preferences. Grokr continually understands users' likes, interests, location and brings the right content as needed." By way of example the app says that "when you search for Taj Mahal you’ll get the restaurant reviews if you like Indian, and the musical artist if you like blues." Much of that is due to its ability to dig into social networking profiles sites like Facebook, Twitter and LinkedIn. For a frequent traveler it can quickly drill down to the preferred airline and hotel company as well as the cheapest option.

Google Now does some of that but is not only llimited to android OS but looks positively inelegant compared to Grokr. Also Google Now's output is courtesy of a trawl of its seemingly inexhaustive resources via google search. Among the neat features though is its ability to pick up personal data and alert users to upcoming appointments via 1 of 25 (to be expanded) "cards". 

Along the lines of the foregoing is another quality of life enhancer in the form of Kaggle which appears to be a real quality of life innovation particularly in the work sphere. Kaggle provides "cutting-edge data science results to companies of all sizes. We have a proven track-record of solving real-world problems across a diverse array of industries" from financial services to retail including hospitality although no hotel company was listed on the company's site.The company touts its proprietary "Kaggle Connect" as a whiz-kid tool by which companies can solve complex problems using the best minds in the business by providing a platform.

For hospitality, Kaggle's solutions span areas from inventory optimization, tourism forecasting, dynamic pricing and customer complaint resolution. A hospitality company executive merely has to purchase a "pool of hours" and "post" the data from the firm's CRM database (for example) onto Kaggle connect.  Picking one of several top-flight data scientists who compete to complete the task at hand ensures an optimal outcome. Applied across multiple disciplines it could lead to a revolutionary change that maximizes customer satisfaction and profits.