This is a viewpoint from Glenn Wallace, consulting technology and product expert and co-founder of the public safety technology startup Doxanto.
Very early one morning I visited a café on the way to my gate at the airport. This particular café has two lines: a coffee line and a food line. I discovered that in the food line you could order coffee, and while the coffee line snaked out into the concourse, the food line was relatively short.
I was hungry anyway, so happily grabbed a breakfast sandwich and picked up my coffee on the way out, ahead of the people still waiting in the coffee line.
What a great strategy to maximize the “share of wallet”: make the experience easier for those wanting to buy more than a coffee!
Better retailing and merchandising in travel
Great retailers like Amazon operate from similar principles. Offer the customer a very wide selection of offers with good value, make it easy and compelling to buy more items, and make the experience as easy as possible.
Suppliers like Samsung and Panasonic have their own online stores to sell televisions and Blu-ray players, but usually stock only their own brands. This is a contrast to Amazon, which offers a broader selection of devices plus media to suit, home theater seats and even popcorn!
Online travel agencies like Expedia, Travelocity, Priceline, and Orbitz follow the same model. A traveler heading from Seattle to Maui looking for a hotel probably needs a flight to get there, maybe a rental car and destination activities, as part of booking the complete trip.
These OTAs can offer this service because the supplier sees an upside as well.
According to a 2017 Expedia study, Average Daily Rates (ADRs) – a common performance metric for hotels – for package stays were higher versus standalone stays by an average of 20 percent. The ease at which these packages can be booked, coupled with longer stays and booking windows create a win-win for consumers and suppliers alike.
Flights deliver a lower margin per transaction to a travel agency than a hotel booking. But they are a critical component of getting travelers to their destinations and back home again and with the right user experience, are a great leader to a higher margin sale, like my coffee and breakfast sandwich.
Early tech investments at Expedia
Another theme that evolved in the early days of Expedia and continues to this day is that – just like on Amazon – selection wins every time.
Customers that see more choices are more likely to buy, so it's all about more brands, more SKUs, more options and more ways to buy. Sometimes you need to see the things that you don’t want, in order to figure out what you do want.
Imagine an experience where you were shown a single hotel and a single flight itinerary: without an inordinate amount of trust of foreknowledge, how would you know if it was the quickest option? The cheapest option? The right trip at the right price?
At Microsoft, in 1997, the founders of Expedia came to the conclusion that handful of itineraries returned by the then-current flight search systems on the GDS’s were not going to offer a broad enough selection of flights, nor allow Expedia to tailor the “best” assortment of flights for travelers. As a result, the Best Fare Search project was born. Recruited to the team were some of Microsoft’s most distinguished developers from the languages group, a handheld device project, and image processing experts.
At the time, the printed definitions for fares and rules filled two 4” thick black binders, and the actual fare and rule data was delivered to Expedia on magnetic tapes. Combining dates, flights, fares, rules, and “priceable units” creates an enormous “search space.”
This search space could easily be the poster child of complex computer science problems. The permutations of flight connections for a domestic round-trip flight exceed 19 quadrillion possible itinerary combinations. On top of that, the search must consider the complex fares and pricing rules.
This search problem is like navigation systems you use in your car to get from point A to point B. Some alternatives rank higher than others (higher average speed, less traffic), some are less convenient, but then there are rules you have to obey, like not going the wrong way down a one-way street. And there are many, many alternative routes.
Learning to do flight search quickly and without lag
Like your navigation system, flight search systems have to deal with the same problem: how to search enough of the space to rule out the least attractive options but search enough of it to feel confident that the solutions are “best” -- and do it quickly enough that the user doesn’t fall asleep waiting.
ITA Software released their demonstration web site for their flight search software, QPX, a few months before Expedia’s Best Fare Search was released on Expedia.com in 2000, and Orbitz.com launched in 2001, with its flight search powered by QPX. Those innovations forced the GDSs to reinvest and reinvent their flight search platforms, eventually building them into today’s competitive products.
With the acquisition of Orbitz and Travelocity and their migration to Expedia’s platform (BFS also powers Hotwire.com), BFS has become the number one flight search engine for online travel agency websites. ITA’s QPX, now owned by Google, dominates the airline website flight search engine marketplace.
Today, BFS nearly instantly processes more than 2000 customer air search requests a second with dozens of airline schedules and hundreds of prices being returned for each request.
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Expedia CEO Mark Okerstrom and IAC Chairman Barry Diller on-stage at Expedia Partner Conference 2017[/caption]
To deliver better value and encourage travelers to purchase more of the trip, another early innovation from Expedia was dynamic packaging. This involves taking flight and hotel inventory, and dynamically adjusting the total price based on a number of factors, to deliver a cheaper itinerary than the individual components.
But this is also a computationally intensive problem – as only some of the inventory has special pricing when sold as part of a flight and hotel package, but you also need the component prices to allow the customers to either buy them individually or compare the total component prices with the package price.
Another innovation in BFS was simultaneously shopping for the special package fares, and providing all the reference prices needed by the dynamic packaging algorithm in a single response. Expedia’s lodging shopping system also simultaneously delivers package net rates for the hotel options.
Evolving expectations of technology requires massive investments
Expedia continues to funnel a
sizable portion of its revenue into their technology platform. This investment funds experimentation and innovation in a variety of areas, such as machine learning and artificial intelligence.
Machine learning is being put to innovative uses like analyzing brain scans to spot indications that the patient may develop dementia. With the number of visitors to Expedia sites, machine learning and tapping into the big data that underlies all of the shopping systems are a logical next step to redefine what truly is the “best” set of search results.
Amazon is able to bring many new customers to buy and experience Samsung products, because they might be part of a larger inspiration and purchase. Expedia’s web and mobile applications rely on the huge long-term investment in search technology to create a bigger marketplace – more customers and more inventory options, which is good for everyone, especially local hoteliers, restaurants, event venues, state and local taxing authorities, and of course hospitality and tourism jobs.
But by far the biggest winner from that larger marketplace is the traveler – they get to plan and take the perfect trip!
Opinions and views expressed by all guest contributors do not necessarily reflect those of tnooz, its writers, or its partners.
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