Will Bachman: Whit, it is really fantastic to have you on the show.
Whit Pidot: Happy to be here, Will.
Will Bachman: Whit, the last time that you and I actually worked together was in a conference room, about an hour north of New York City. I think you remember that one day I was … If you came in, and I was …
Whit Pidot: Found you asleep and sick on the floor. I remember it well.
Will Bachman: Yeah, that was the highlight of my [McKinsey 00:00:26] experience. You insisted that I go home. So, thank you for sending me home that day.
Whit Pidot: I think we even let you take a car and didn’t put you on the bus.
Will Bachman: There we go. So, we go back a ways. You are a former McKinsey partner in the travel [inaudible 00:00:45] practice, and been serving the industry for a while, so I thought we could start with some of the fun stuff of … talk to us about some tips and tricks of someone who serves the industry, knows the industry … What are some tips and tricks on how to travel smarter?
Whit Pidot: Sure, and I’ve got a bunch of thoughts across the different travel sub-sectors too, and there’s a handful of completely legitimate travel hacks that I think some folks are on to, and then others it takes longer times to figure out. Just to run through a handful of them by industry, the first one where I spent some time in the last couple years where I’ve been out consulting on my own, is in the rental car industry. And one reasonably well-publicized, but not as well-publicized as it should be benefit, is that the rental car companies now frequently give their elevated or highest status to both high-level credit card holders and to the frequent flyers of their airline partners.
So for example, at Hertz I know they were giving both Delta and United top two tier members the president’s circle free membership, which leads to some really good upgrades at the time of pickup, similar to the [Emerald Aisle National 00:02:01]. And then National by comparison, and Hertz the same way, if you earn your way into one of their elevated rental car programs then the other one will almost immediately match you when you send them copies of your electronic credentials.
And I’ve heard some folks going as far as to match back and forth between the two programs, even though they never have the volume to merit it. I would assume that is not a trick that will be around for long, nor that will be smiled upon by those who run the programs, but it’s what I’ve heard and it is a legitimate benefit for top tier fliers on most of the big airlines.
Of course, these days the benefits of a rental car vary dramatically based on where you’re traveling. I think everyone in our universe is going to be more than familiar with the Lyft and Uber referral code opportunities that are out there. Certainly don’t want to miss a wasted opportunity and not use someone’s referral when you sign up. There are other tricks on Uber and Lyft as I’m sure you’ve heard that are out there right now.
Lyft has a frequent flyer partnership with Delta where they’re the fastest transactions to post in all of the SkyMiles program. Quite literally a passenger can take Lyft to the airport these days, earn free Delta miles per dollar, and the points are literally already posted before the passenger sits down on the flight at the airport that afternoon. So there are lots of bits and pieces there to be had, if you know where to sign up for them and make sure you’re registered for all of these. And the pennies add up to dollars pretty fast.
Will Bachman: What’s the best way to find the good prices on a rental car, if you are not someone who’s committed to one particular program?
Whit Pidot: There is a terrific website that’s popped up in the rental car industry in the last 18 months or so, called Autoslash.com. I have no affiliation with it, but I have used it routinely, and even when I have folks come ask me … as you know I’ve run a travel agency as a hobby for 20 something years, even when they ask me, I’ll often use Autoslash.com to check my work and see what else is out there.
They check most of the major sites, in fact I think they check all of the major sites, both for direct bookings through the car rental companies and through intermediated bookings through the OTAs. Cleverly at the time of the request, when you put in your itinerary, they ask with a list of about 20 possible organizations. When you use AutoSlash and request an itinerary, it asks for about 20 different organizations you might be affiliated with that could generate good discounts. And they range from the obvious major U.S. frequent flyer programs, to the slightly less obvious programs that can sometimes get you an unexpected discount that beats anywhere else.
Sometimes those come from programs like Canada’s WestJet Airlines frequent flyer programs. They ask about Costco, BJ’s, and notably USAA. And USAA is an organization that I was somewhat familiar with but I’ve become much more familiar with in the last several years. Historically, for most of their products, and most of their good products, you have to be a legitimate military affiliate of some sorts. And they have relatively generous definitions of what military affiliation is required. Now to open some financial products at USAA, and just to become a USAA member, there’s no military affiliation required at all.
So literally by going to their website, anyone can qualify for the USAA rental car discounts. Sites like Autoslash.com check to see or ask if you have USAA eligibility, and their rates can routinely be half or a third of the going rate, particularly on peak business travel days and on peak holidays. So it’s a very good fallback if you use AutoSlash, you don’t need to remember to check the USAA discount codes. If you do go directly to sites, it’s certainly worth a look.
Both National and Hertz routinely have opportunities to stack corporate discounts with additional electronic coupon offers where you could, for example, get the USAA rate and get three weekend days for the price of two, both of those deals on top of each other. So it ends up to be very price effective. There are some other benefits of USAA offered by some of the rental car organizations where they reduce your out of pocket exposure for damage to the car to several thousand dollars, which is better than tens of thousands of dollars. And in some cases, they even offer primary liability insurance up to the state minimums, which again isn’t a ton of money, but it’s a good free feature that comes along with booking through that channel.
There are also small business programs offered by virtually of the rental car brands or brand families these days. They award generally certificates or some alternative loyalty currency that can be redeemed towards free rentals in addition to the points earned by the renter through their normal membership programs. Those are generally not a terrific deal. Sometimes in some markets they can be very competitive, although for the most part, you would do better with a civilian or more leisure-focused discount program.
Will Bachman: Why do some of the companies ask you, “Is this trip for business or pleasure?” Do they change the pricing based on that, or is it just they’re just curious?
Whit Pidot: That is a terrific question. The relevance of the question is not terribly significant. There are some organizations where the corporate negotiated benefits only apply if you’re coming in through a business purpose rental. And that’s true with some of the business credit cards as well, where the primary collision damage waiver, for example, on some credit cards applies that you use the business credit card for business travel, if you use it for leisure travel then that coverage is waived for that rental. So behooves you to be honest.
The rental car sites I know continue to have the question sometimes even when you’re not using a corporate discount code. No, there should be no difference in the rate anymore, and I’ve asked this question on the other side of the fence as well, and I’m told it should make no difference. Some sites continue to track this for marketing and advertising purposes to better understand who their audiences are. I’ve seen some travel booking sites like Upside, which is much more relevant for high-ticket hotel in particular, but even flight offerings, where they go so far as to tell you when they ask, not to worry that it will have no influence on the nature of the deal that they’re offering.
But these resellers can use the information they gather from their customers to better position themselves with the travel suppliers as delivering a type of customer that that travel supplier wouldn’t ordinarily see. Back when Hotwire and Priceline first popped up, and this is now 15 plus years ago, part of their value proposition to the suppliers was, don’t worry, these customers won’t dilute your normal business. Customers who come in through your normal channels or for your normal commercial booking purposes, will likely never look here. Needless to say, that didn’t last for very long, and now-
Will Bachman: About five minutes.
Whit Pidot: Channels like that are fully recognized by the suppliers as a rather costly but transparent way of doing business. So if an intermediary can successfully and legitimately persuade a supplier that they’re delivering incremental traffic and not stealing traffic from the normal channels, displacing or diluting business that they get already, sometimes they’re able to negotiate better deals.
Will Bachman: Talk about hotels.
Whit Pidot: So hotels, probably the best two places to look right now, and I’m talking about intermediaries again, for a second. We’ll talk about Hotel Direct in a moment. Probably the best two places are Upside.com and Rocketmiles.com, both of which offer some hefty customer rebates or incentives for bringing your business through them.
The hotel industry, unlike the airline industry, and now even the car industry, has continued to pay very high commissions over the last decade. The airlines cap their base commissions down to $20, and then sometimes even lower amounts, $10. About a decade ago the airlines got rid of their base commissions completely. Hotels still routinely pay brick and mortar travel agents and online agencies 10% or more, and hotels pay the OTAs well in excess of 10%.
Will Bachman: I’m sorry, what’s the OTA?
Whit Pidot: Sorry, OTA, online travel agency.
Will Bachman: Ah, there we go.
Whit Pidot: The likes of Expedia or Priceline. And the OTA commissions, like I said, often well over 10%. The traditional travel agency commission, 10%. So groups like Upside and Rocketmiles are out there to effectively split the commission that they earn on hotels back with the customer who’s doing the booking. The number of airline frequent flier miles you can get by booking a hotel through Rocketmiles, is extraordinary. I think typically it’s on the order of about 5% of the face value of the room that you’re booking. So it looks like Rocketmiles is sharing probably about half of the commissions that they’re getting with you.
Some hotel resellers in Rocketmiles could be among them earn even better rates of commission than the industry standard 10%, which gives them even more wiggle room to share generously with the customers who are making the bookings. Routinely now Rocketmiles does seem to have promotional offers with some of the major airlines, United and American included to promote first time use of their product.
But if you’re not staying enough at a hotel or even a hotel brand family to earn status or meaningful rewards in their own program, you can get very sizeable rewards or rebates in the form of airline frequent flyer miles, in the case of Rocketmiles, Amazon gift cards, and everything else in between, in the case of Upside. If you have enough volume that you can earn status in the hotel’s own program, there are many merits to that, we can talk about those in a moment, but if you’re below the radar in terms of earning useful elite status with the hotel program, you can do very nicely with some of these resellers.
Will Bachman: And certainly some people will get status just from having a credit card. When I started at McKinsey about a year in, all the business analysts were getting the Amex Starbucks card, and that was very popular, and I think still is among some people. So those kind of credit cards, another way to get [crosstalk 00:13:20]
Whit Pidot: Yes, for hotel status, there are quite a few ways to do that now, and some of the chains have gone even further. I know in the case of Hilton, where you can actually earn your way up to some of the higher levels of elite status, by getting some of the higher annual fee co-brand cards with those hotel chains.
Now there is a big caveat for using hotel resellers, it doesn’t really apply for traditional travel agencies who are booking through the global distribution systems. Generally hotels will still give full benefits, and even let you earn the hotel’s own currency when you book through a traditional travel agent. However, when you book through an online travel agent, and even if it’s not an opaque travel agency that doesn’t tell you the property until after you’ve committed to the specific amount, and committed to a nonrefundable booking, many hotels now will refuse all loyalty benefits if you’ve come in through one of these resellers.
And have to be very careful about that, but if you’re looking for rewards in the hotel’s own program, or any benefits based on the status that you’ve either earned or picked up through your credit card, often a reseller hotel booking is going to be completely cut out of all of that. So you won’t get a view upgrade, you won’t get late checkout, you won’t get any points in the hotel’s own program. Very important to watch that when booking through a hotel reseller. If you don’t care about the hotel’s own program, it can be sometimes a pretty easy call.
Most of the hotel players, most of the hotel suppliers have rolled out the equivalent of some sort of member rate over the course of the last couple years. Historically, the airlines and other travel suppliers made deals with the online agencies that they would offer their same best rates to everyone, and that means all of the resellers and all of their direct channels. Hotels don’t make those deals anymore, or many hotels don’t make those deals anymore. And if you go to the hotel’s own direct website, often there will be a member rate which is two to five, sometimes even more than 5% off of the publicly available rate.
There’s another easy travel hack on this one, which is to buy a triple A membership for your membership, and virtually anyone in your organization that you’re sponsoring travel for. In my case, when I was at McKinsey, there were teams where I literally required everyone on the team to buy a triple A membership. The hotel savings paid for themselves, easily in one or two nights. We were in some expensive markets like LA, and the triple A rate was substantially better than what the firm had negotiated, which I’m sure did not leave the firm very happy.
But it was also commissionable to the firm travel agencies, so when a firm earns a percentage of their hotel bookings back through whatever outsource travel agent they might use, the triple A products both had huge discounts and were commissionable back to the agency, or back to the business if they were the ones who were getting a rebate on that. Often it’s on the order of 10% but it is still better generally than the so-called member rate discount. And often with very competitive terms, in terms of cancellation policy and all of the other trappings like that.
Triple A products almost always earn the full elite benefits, and hotel-owned loyalty program points and benefits as any other product or channel. So it’s always worth a look, and I kid you not, when I was doing travel procurement consulting at McKinsey for a handful of clients, one easy day one benchmark to how much better could we be doing on our hotel programs in particular, was take a look at the tripe A products that were out there.
Needless to say, the hotels are not surprised when customers who are negotiating for room discounts point to the triple A offer as something that’s easily attainable for anyone. So pretty easy, but well worth doing, and I think although I certainly had to jump through the hoops to get accounting to approve reimbursements for all those triple A memberships at McKinsey, it certainly is very cost effective.
Will Bachman: Okay. So those are super great tips that I’m going to be following up on. For hotels, you see some sites and apps out there that are really focused on the, get a hotel tonight or tomorrow night, kind of market. Is there a different set of good tools for that? You just happen to be in a city and need a place to stay that particular evening.
Whit Pidot: Generally when the hotels go into distressed inventory mode, they’re pushing out their distressed products through most of the channels. So no those often for the online deals aren’t routinely better. There are some where their agreements with the travel suppliers say they can’t publish their pricing online. And as a result, they will have a fallback where to get our very best rates, you have to call for the phone offer of the day, for the hotels that are really having the greatest inventory problems for that night. I found it almost is never worth the effort to try to hunt down the ones where you have to call and then, if not negotiate, certainly listen through many options that would be much faster to just sort out on your own through one of the more traditional sites.
Will Bachman: So then for finding the closing on hotels, it sounds like if you care about the hotel points, you might want to go directly to that hotel website, and if you are part of their loyalty program, get your member discount, or even get the triple A discount, whereas if you’re looking for some cool frequent flyer miles, or other benefits, you might want to go to Upside.com or Rocketmiles.com.
Whit Pidot: Exactly.
Will Bachman: All right. Let’s talk about airlines, flights.
Whit Pidot: So the airline world certainly has changed dramatically multiple times over the last couple decades. As I mentioned, they took their base commissions to zero or virtually zero, which made most travel agencies much less excited about selling or reselling airline tickets for a while. Some even imposed fees to do that. And for a while many of the airline call centers were imposing fees to buy a ticket over the phone, even with the airline directly. So there’s less markup on airline tickets that’s left for resellers to share back with the buyers, but there still are plenty of tricks.
The most frustrating, as a passenger, introduction in the last couple years, has been the basic economy fair, which is generally for a business traveler, something to be very wary of, as you might have bumped into some of these already. The restrictions often include use it or lose it. So not just the $200 change penalty, if something comes up and zero waivers in the event of sickness or any other generally tolerable excuse that might extinct you out of a change fee.
Generally these products also have no right to advanced seat assignment, which is almost a guarantee that you’re going to get the middle seat if it’s a busy travel day and a busy travel market, since it doesn’t get assigned until check-in or worse still at the gate. And on some airlines with the basic economy product, you’re now not allowed to use the overhead bin for a carry-on, it all has to go under your seat.
If you’re not careful, some travel reseller sites, and this is even very legitimate and reputable travel portals from some of the credit card providers, they will book you a basic economy ticket and not make it at all clear that that’s what you’ve just bought. It can be a nasty surprise when you show up or try to check in and discover there’s nothing left except middle seats or worse still, you’re assured you have a confirmed reservation, but politely told you’ll be given a seat at the gate, which is pretty tough.
The spread between these basic economy fares and the traditional economy fares started as about $25 each way, varied somewhat by market, length of market, competitiveness of the market. I’ve seen the basic economy discount or the regular economy premium sneaking up a bit, sometimes to 35, 40, sometimes even more dollars than that, each way. And it’s permeated into many more markets. So basic economy is certainly a way to save money.
My general experience has been that it is absolutely not worth it given the normal flexibility, which actually ties back to another air travel trick which probably a bunch of the listeners have come upon already, which is the same day confirmed change opportunities offered by most airlines. And each airline has a slightly different set of restrictions on when you can do this, how far in advance you can do it, what parameters have to be in place on that day for it to work, but in general if you buy a non-refundable ticket for a 6 PM flight next Tuesday for $300, next Tuesday comes around and you decide that you need to go at noon or you’d like to go at nine in the morning, something else the same day.
Most airlines, instead of making you pay a change fee and potentially very substantial difference in fare, because now you have no advanced purchase as opposed to when you originally booked the ticket, many airlines will let you make that change for a flat fee that’s fairly modest, generally comfortably under $100. And for mid or high-tier reliefs, generally the airline will let you make that change within a day of departure for free. And they set [inaudible 00:23:16] in each of the program control how much of this you can do it.
But there’s certainly some gamesmanship opportunities to buy your way onto the cheapest flight of the day, and then same-day confirmed onto something that is more desirable. Again, you need to be careful here, because the airlines do have different provisions in place to try to make this less attractive, when you’re trying to buy your way from, or same day confirmed your way form a cheap flight onto an expensive one.
For example, they’ve put in a fairly strict restriction, that if you bought a connecting flight, you may not do a same-day confirmed change onto a nonstop flight for free. But certainly, to change from flying in the vampire hours to flying in something that most folks would find a little bit more palatable, often you can make that change within one day of departure for less than 100 bucks, and for nothing if you have the right status.
Will Bachman: Talk to me about your travel agency. I think, Whit, that you’re the only person I know that runs a travel agency as a hobby.
Whit Pidot: And it certainly is a much less profitable hobby than it used to be. Ironically, and I kid you not, when I was applying to be a business analyst at McKinsey out of college, and this was back I guess in the fall of ’95 or in the spring of ’96, I was asked a question about the economics of the travel agency industry, and one of my McKinsey case interviews on campus, and I started to rattle off a fairly detailed response based on my side business of running a travel agency.
I got a rather perplexed look from the interviewer who eventually cut me off, and asked where I was getting all the information for my answer. I didn’t put my travel agency on my resume since it was not allowed to run a business out of your dorm room in college. So officially that didn’t exist, but it certainly helped my chances of getting an offer at McKinsey that day.
The most practical piece of it is that for decades I’ve subscribed to Sabre, which is one of the commercial global distribution systems or GDSs that travel agents use to see and book air, car, hotel, train, inventory. It was a big, big deal 10 or 20 years ago to have the additional visibility of Sabre into what products, what fares, what rates the different suppliers were offering, what was sold out, what wasn’t, what the rules were at various fares that you had to follow or shoe horn your way into to get the best deal that they were publishing.
All of the transparency of the internet and direct distribution has made that less valuable, although it certainly is very helpful. As recently as this week, I had a polite, but half hour long debate with one of the airlines who insisted that the flight I was flying had nothing except for Y-inventory seats left. There were indeed four B class seats, why they wouldn’t admit there were B class seats when I could see them on the screen, I couldn’t tell you.
Half an hour later and finally fessing up that I was looking at it in the GDS, the airline relented and let me book the product. So it does help sometimes to fix the information, assymetry, when you run into a bad apple in a reservation center or at the airport, who isn’t being straightforward with you about what the inventory picture looks like. It’s a helpful hobby but it’s certainly less profitable than it used to be.
Will Bachman: So you do this for fun to some degree now, but you also actually will help people do what? Mainly friends and family buying airline tickets or- [crosstalk 00:27:14]
Whit Pidot: So at this point it is mainly friends and family, although it’s anything from airline tickets to cruises to safaris. Cruises continue to be a remarkably high-margin item for travel agents. A very heavily intermediated product where the commissions are even better than the 10-ish percent that I described for hotels. It’s generally time consuming enough that I don’t make a meaningful business of selling travel anymore, but certainly for folks who get caught in a pinch now.
There was more than one time when I was at McKinsey where I was called by other partners and senior partners from the road, saying that the travel desk couldn’t get them home, what could I do to find them back to their bed that night, and generally with reasonable success. Obviously I didn’t make any money on those, but it was nice to be able to help.
Will Bachman: But you negotiated they might help you write a letter proposal or take some pages off your plate or something.
Whit Pidot: Exactly.
Will Bachman: And how much does it cost to subscribe to this GDS? What’s the operating cost for you to run a travel agency?
Whit Pidot: It’s not that bad. It’s several hundred dollars a year for the GDS access, and then there are usage charges based on how much volume you actually push through. There’s also a Errors and Omissions insurance policy you have to buy that costs several hundred dollars a year. Then the learning curve of the syntax that one uses in Sabre to look for inventory priced tickets, heaven forbid to try to sell a ticket, very, very, very steep learning curve on a relatively archaic system which makes MS-DOS look positively high-tech. So I’m not sure it’s worth investing in a career in being a travel agent, but it does help to have someone you can ask when you’re curious for what’s going on under the hood.
Will Bachman: To what degree does running that inform your consulting business? And maybe that’s a way to transition is, actually having a foot in the industry and even if you’re dabbling in it, does that help give you a greater sense of what’s going on?
Whit Pidot: I actually find it extremely useful and have over the 20 years of my travel industry consulting career. Yes, you can see when new products tend to be introduced, you see it in the sales bulletins from the travel suppliers themselves. You see new tariffs pop up online and new price points. New frequencies loaded into the schedules for new cities. New classes of service, new products introduced for some of the suppliers. It definitely does open up the better window on what’s going on out there, what some of the issues facing the travel agencies are.There are travel agency consortia, and trade groups where I try to keep an eye on some of the hot topics that are flowing through those as well.
So yes, it is a good window into some of the happenings of the industry. It is a constant reminder as to why some of the travel sub-sectors continue to find agency intermediated transactions to be either a very low cost painless way of getting some support to put their product out in the market, or in other cases a phenomenally high cost way of getting products to customers which they would just assume bypass if they can.
There were several times at McKinsey where I would be in proposal meetings and various of the senior partners would stay, and for extra amusement and for fun and hobby, Whit is also a travel agent on the side. And that went fine until probably about three years before I left McKinsey when I got a call from the legal folks asking me about this side business, since you weren’t allowed to run a side business. I did inform them and offered them copies of my tax returns showing that I had actually made zero net profit in the several years preceding that, and that this was a purely loss making hobby, which seemed to satisfy them at the time.
Will Bachman: All right. No running a pharmaceutical business or accounting firm on the side?
Whit Pidot: No, it was definitely legitimately loss making. And one of the most frustrating aspects of running your own travel agency, is sometimes I do get a decent commission on my own travel, I never ever take commission on travel that’s reimbursed by my clients, but for personal travel and friends and family travel, sometimes I’ll earn a commission. When I’m the passenger and the commission is paid for my own travel, it’s taxable. I get a 1099 for that commission, and my accountant tells me there’s no way to deduct it. So it’s better if you can find somebody else to be the agent, to rebate you that commission than to earn it for yourself.
Will Bachman: Now there’s a limited number of folks, Whit, at your level who left McKinsey as a partner and are now independent consultants. And I’m curious to hear what it’s like as an independent consultant when you enter the space at a pretty senior level. Are you doing projects like five days a week for three months? Or is it more senior advisory? Talk to me a little bit about the types of work that you do.
Whit Pidot: It’s been a grab bag. I’ve had a couple of clients that I’ve focused on very heavily since I left. McKinsey of course had a non-compete for former partners, which I lived up to the letter and spirit of that agreement, obviously. So it makes it difficult to serve clients that you were actively serving in the later stages of your career at the firm. But I have been serving EVPs and CEOs on some of the top issues, and I’ve been serving SVPs and VPs and directors on some very pivotal issues as well. So in terms of exposure to levels of management, it’s run the gamut. They are generally topics of great significance to the clients, obviously. But it’s a broad range.
My personal practice has been mostly focused on loyalty, and partnerships, and pricing for the last several years. And the commercial side of travels where I was generally focused at McKinsey as well, but I certainly have spent some time in the more operational functions and enjoy those too. We spent a long long time looking at, this was during my time at McKinsey, at airline reliability and how airlines approached their reliability philosophy.
It’s interesting to see now the suppliers have differentiated themselves in reliability. It used to be a relatively undistinguished mix with most of the airlines flying 70 something percent of their flights within 15 minutes of schedule. Over the last couple years, Delta has really soared in terms of their on-time performance, and their completion rate, to the point where Delta now boasts about the number of days each quarter that it flew without a single cancellation. No cancellations for mechanical, weather, several other purposes. I’m not sure people find that useful when your flight is 14 hours delayed, so that the airline can claim that it didn’t cancel it. But it still is impressive that they’ve managed to crank up the reliability and it now is very legitimately an asset they can sell.
That actually raises another point that I had wanted to bring up, which is interlining. Historically, most of the major airlines would be able to endorse their tickets onto each other. If you had a paper ticket, once upon a time, you could march the ticket right over the next ticket counter and generally they could even accept it without endorsement. The rules have gotten a little bit different, the rules have changed somewhat in terms of how an airline can push your ticket to a different airline now, under what circumstances they will do so, and on what circumstances the airline will accept it.
Delta and United for example, for many, many years, if either airline has had an irregular operation and operational disruption, they have the ability on the backend to push your reservation, to push your ticket right over to the competitor, and have the competitor fly you from A to B potentially with some extra connection, potentially eliminating a connection. But when so inclined they can reroot you on the lines of the competitors. It saves a lot of time, it saves a lot of expense for folks who on day of departure there’s a major cancellation or disruption.
The airline has great discretion in terms of whether or not to do this in terms of delays of a particular cause. If it’s a weather issue and the customer has no status, very, very slim chance of being rerooted on a competitor. However if the issue is so called controllable by the airline, generally those would be maintenance issues or sometimes crew issues, they will, at least if asked, protect you on the competitor.
There are airlines that have not participated in these airline programs, or irregular operation protection programs. Southwest famously has not ever participated in any of those. If you’re on Southwest and they cancel, you will be accommodated on a different Southwest flight or you’ll be buying yourself a new ticket. On Delta and United, as I mentioned, go way back. American and United go way back. There was a lot of press last year about Delta and American, where they couldn’t reach a deal on how much to charge each other for carrying each other’s traffic in the event of operational disruptions.
Conventional wisdom is that Delta had positioned itself as a much more effective, more reliable machine, and therefore someone who commanded a premium for a product like this that protected other airlines in the event of irregularities. American and Delta dropped their airline agreement for probably about a year. Within the last month or so, Delta and American are back in each other’s good graces again, and if Delta cancels or delays, they can put you on American or vice versa. And that’s just another place where having the knowledge of a GDS or even ready access to an online agency can be quite helpful, if you know that one of the competitors with whom they do have an agreement has an alternative flight within a reasonable amount of time, you can be a little more proactive in what you ask them to rebook you on.
Will Bachman: What are you seeing is new and exciting in the area of loyalty? Anything interesting happening there that you find fascinating?
Whit Pidot: So I think quite a bit of what happens with the loyalty programs relates to the economic cycle, and from earnings. You can see that many of the travel suppliers, especially the airlines, are doing very well for themselves right now. You’ve seen the big transformation in loyalty programs to be much more based on revenue than they are on miles flown or nights stayed or anything of the sort. So they’re moving over towards a unit of currency that better reflects what you paid and what you’ve earned for the airline.
I would suspect that when the economy softens a little some of the takeaways that we’ve seen in recent years for travel suppliers to passengers, some of those will probably start flowing back somewhat to the members. There continues to be though, definitely an interest in getting, as the travel suppliers would put it, more than their so-called fair share. And the airlines quite literally compute a fair share, or they refer to it as QSI, Quality of Service Index, which is a percentage of business they expect to get, by virtue of their schedule and the competitiveness of their schedule between point A and B.
So for New York to Los Angeles, one airline might have a QSI of 20%, but has several nonstops. Another airline has several nonstops might have 25%. And then an airline that offers only connections, might have a QSI of 2%. And when airlines make deals with travel buyers, and this is somewhat true of agencies, but very true of corporate accounts, if you demonstrate that you can deliver an airline well in excess of their QSI then they will reward you with a disproportionate discount.
Not terribly useful to small businesses and folks with consulting practices like ours. They won’t have the volume to merit it. Many of the airlines have small business programs, that it makes sense for small consulting practices to join. There is definitely a case of too small though, with Delta and their small business program. They recently implemented a minimum organization size of five travelers. And if you don’t have five travelers, traveling on the companies dime, Delta will kick you out of their small business program. Makes sense to join those in parallel with the regular frequent flyer programs though, because all of the benefits are purely additive, the company earns at the same time as the individual earns.
The other big trend on the loyalty side, and some of this actually started as long as 15 years ago, but as the introduction of the super early, semi-published, or unpublished tiers for the particularly valuable frequent flyers, frequent travelers within each of the major players programs. The three on the airline side were United’s Global Services, which actually started back in 2003. American’s Concierge Key, similar program. There are some hard benefits, but also very much a recognition program. And then Delta’s 360 program. Originally to earn your way into these programs, was tens of thousands of dollars of annual volume at a per passenger level. More recently, it depends somewhat on what market you live in. I’ve heard discussion of minimum spend levels as high as $100,000, if you’re in a hub of one of these airlines.
One of the places I keep tabs on, this sort of program, and these unpublished programs is with the website, FlyerTalk. You have to take what you see on FlyerTalk with a big grain of salt, because there are folks with a lot of motivations who are posting at FlyerTalk or less so Airliners.net. But FlyerTalk, generally if there’s a hot new unpublished product or a rumor, or over the masses are comparing notes on what it took to be invited to an airlines given product or promotion or program, it usually comes to light pretty quickly on FlyerTalk.
The travel suppliers now, absolutely watch FlyerTalk, carefully, to see what the discussion is of their product, both for a realtime pulse and feedback of the customer perception of their performance. Also obviously when there are shenanigans from customers who are doing truly prohibited and problematic things like selling frequent flyer rewards, or selling upgrades, they are of course quick to get those shut down, and I would not recommend doing that to anyone.
Will Bachman: Does it ever make sense for an independent professional to use a travel agent. Talk to me about if there are any services out there where its kind of a hassle out there if you’re booking a flight. Okay, I’ll go and book my hotel in Atlanta, and my flight, and my rental car. Some people might use a virtual assistant, but what are the options if someone wants to pay someone to do that for them?
Whit Pidot: So for a traditional multi-sector travel agent, most of the credit cards, especially most of the higher level credit cards, offer a concierge-like travel program, that will take care of the types of details and the types of itinerary integration that you’ve just been describing. Don’t expect any sort of goodies in terms of commission sharing or rebate or anything along the lines of what Upside or Rocketmiles might deliver for doing slightly more legwork on your own.
And then very perilously, most airlines now assess a outside agency takeover fee, not to mention some extra hassle when they are asked to intervene on a reservation that’s been created by an agent. So you might buy a relatively high fare unrestricted ticket from New York to LA for next Thursday, and then I’ll get to the airport, discover it’s canceled, call the reservation’s number to try to see if the airline can protect you on another flight, and if there’s been a serious disruption, generally they will waive the fee, although there still will be a hassle and if it’s a voluntary change they will explicitly charge you extra for the privilege of now serving your transaction that you initiated through a travel agency in the first place.
If you need the extra help and the extra hand-holding for something particularly complex, finding room access during a very high demand season, in a market that has very seasonal patterns, then again, it can make sense to call some of these travel credit card concierge programs, but generally it’s going to be worth the folk’s interest to either do it themselves or as you said, work through a virtual assistant or someone else who can still get you connected relatively directly to the supplier.
Will Bachman: Well, Whit, I want to ask you a final question, is what is the best way for anyone interested in what you’re talking about, potential clients, consultants who are interested in this, to find you online?
Whit Pidot: Well a handle full of places to track me down. Probably the best is my very easy to remember email address. It’s W-P-I-D-O-T at U-S-A dot net. And Whit Pidot, W-P-I-D-O-T at U-S-A dot net. And I’m also easy to find through the [Umbrex 00:46:05] community.
Will Bachman: Fantastic. Whit Pidot, I learned a lot about travel today. It was always fun talking with you. Thank you so much for joining.
Whit Pidot: Will, always a pleasure.