Once upon a time, the world of travel in general – and exotic or adventure travel, specifically – was a very different place. As the second decade of the 21st century is drawing to a close, it is almost unimaginable that booking a flight or finding the right hotel room would present as a challenge. As the customer goes online and hits up the aggregator of their choice, they get a transparent list of everywhere they could stay and all the ways they could get there, laid out before them.
All of the old fuzziness dropped out of the process, and the aggregators had reset the entire travel industry. It was easy at the time to miss the payments implications of that, Flywire CEO Mike Massaro told Karen Webster in a recent conversation, because the models get so big, so fast.
By building the smooth booking process, the Pricelines, Expedias and Kayaks of the world were able to essentially control the economics of the process and front-run the airlines and hotels. There was no question of whether they wanted to work with these aggregators, Massaro noted – almost overnight, it was something they had to do to stay relevant, because the rhythm of the travel market had been fundamentally altered.
“They effectively created ways in which they booked tickets that effectively captured the consumer experience,” he said. “The airlines and hotels were behind the times in terms of how people wanted to interact, and it took someone willing to aggregate to give the right experience – and once the right experience was given, the whole industry had to adjust.”
But while it may have started with hotels and airlines, Massaro noted, the change is rippling through the vertical on the whole – particularly in the world of adventure and experience-driven travel. The customer doesn’t just need a flight and a place to stay – she is going to Africa and wants to go on a safari, or is traveling to a remote section of the Alps to heli-ski.
Now, Massaro said, it’s possible for these DTC, experience-driven brands to create end-to-end, luxury travel experiences for consumers, fully aggregated across every part of the trip.
The Challenges of Paying for Adventure Travel
Luxury is an adjective that tends to get thrown around a lot, attached to everything from pens to chocolate bars to toilet paper. And in travel, Webster noted, nailing down just what is luxury travel can be a bit tricky. For a family, that might be planning a pricey 10-day trip to Disney. For others, it could be a stay in an exclusive and secluded private island resort. For adventurous travelers, it may mean going on safari, jumping out of a helicopter or going skiing – and paying $50,000 for an afternoon-long experience.
As Webster wondered, is there a line – or, in some sense, do they all count?
As Massaro noted, in some sense, luxury is subjective – and there is sort of a “traditional” luxury approach that is somewhat familiar, like the five-star resort in the paradise-esque location. But the trends he sees popping up are more in the realm of adventure tourism, built around the rare and unique experience.
In some sense, they may not look like what many people would define as luxury travel, but they carry the cache of rarity and exclusivity typically associated with it.
“Often times, those unique experiences in places like the Grand Canyon aren’t all that luxurious, but wake up at 5:30 in the morning over the Grand Canyon, and that’s pretty unique,” Massaro said.
Those trips might be associated with extreme wealth, he noted, but not necessarily. There are often situations where the trip costs $25,000 on paper, he added – but closer inspection finds that it’s actually 10 college friends splitting it up to go on their annual trip together.
The ability to book these trips – to make it possible for consumers to really ride the experiential travel trend – is a massive opportunity for businesses, because the market is big and expanding, he noted. But it is not a simple opportunity to capitalize – this isn’t the traditional high-end travel transaction of the past, and the payments and commerce infrastructure has to be as modern as the use case it is facing.
“It’s not like this is a simple transaction where someone is going to take out a black Amex and run it for all $25K,” Massaro pointed out. “There will be 10 people who will individually have to pay for spots on this trip.”
Paying in – and Paying out
There is always a lot going on in travel payments, even on the simplest day. There are endemic fraud issues, there are cross-border payments issues around currency exchange and there are all kinds of challenges when a trip requires individual consumers to pay in.
And the way in, he noted, isn’t the only complicated part of funds flow for travel aggregators – there is also the complexity of disbursing those funds out again. Aggregated travel packages have a lot of moving parts. On average, Massaro said, travel vendors take in 100 percent of the funds, and then have to disburse 80 percent of them.
Moreover, travel is full of risk. The dream vacation booked in May could become impossible when December rolls around, due to unforeseen circumstances. A travel operator that takes a deposit has a pretty simple relationship with that deposit, he noted – though they might have to wade through the tangle of chargebacks in a worst-case scenario. An aggregator that is handling the flight, lodging, tours and dining has a much more complex bit of calculation ahead of them, with the need to figure out which deposits they must collect and hold in full upfront – and how they will be distributed.
It’s what attracted Flywire to the travel vertical, Massaro said, because it has all the truly great hallmarks of the complex payment type in which they specialize. The challenge is to take a complex process and make it simple for the payer and the receiver. And it is an area that requires expertise, he noted, because many travel firms – particularly the niche brands that focus on curated, aggregate experiences – are smaller, and are not payments experts.
But the trend lines are clear, Massaro pointed out, and the new shape of specialty and luxury travel is coming into focus. But, he noted, to get there, payments players have to be in the game, and must power the action behind the scenes.
“The reality is, you can’t curate a great experience if you can’t aggregate a really great payment experience,” he said.