‘WELCOME TO MUNICH. Please take public transport to your hotel – it’s the best option.’ Your executive may receive this text the next time they land in Germany – it’s called a ‘nudge’. But why do we need these positive, yet indirect suggestions? Because they can influence our decision-making, which can potentially save businesses money.
Yet your traveller had an extremely stressful day and was intending to take an extortionate taxi into town. In fact, 70 per cent of business travellers head for the taxi queue as the easiest way to find their way round an unfamiliar city, according to a recent survey by Egencia of over 6,000 executives in 12 countries, from the UK to India, Australia to Canada.
Certainly decisions made under pressure or in ‘hot’ states are more irrational and completely different than those made in a more relaxed, or ‘cold’ state. We grossly misjudge how travellers will react in stressful, time-sensitive or urgent scenarios. And this can be observed in the higher levels of spending we see with executives’ last-minute arrangements, compared to those made weeks ago in a calm office.
That taxi is obviously not the cheapest option, but let’s face reality – it’s just human nature. Most executives are not rational robots who make cool calculations that are in their company’s best interests. The fact is we are wired to make irrational decisions time and time again, albeit in predictable ways.
This can certainly lead executives to go off-policy and blow travel budgets with unnerving regularity. “Travellers often choose carriers and vendors for emotional reasons, which can override rational decisions such as best value or proximity to the airport or to a meeting venue,” says Sean de Lacey, head of sales at Diversity Travel.
BEHAVIOURAL ECONOMICS
Why do executives park in the short-stay, when the long-stay is better value? Why do travellers feel the need to bust the budget and book that off-plan, boutique hotel when they’ve had a particularly stressful trip? These questions can be answered by understanding ‘behavioural economics’ – the study of how our emotions and psychology effect the economic decisions we make.
“Yet in our opinion, few organisations are consciously employing behavioural economic principals or nudges,” says Nigel Turner, senior director of business services at Carlson Wagonlit Travel (CWT). This appears to be the broad consensus. If travel managers are employing it, they are doing it in simple ways.
However, the science is evolving rapidly. We can now not only monitor the choices we make, but we can influence them, too. Blame Amazon, Netflix, even HSBC – and you can also point a finger at consumer travel websites. Stir in a heady cocktail of complicated algorithms, as well as ‘big data’ and you have an incredibly powerful new set of tools.
“Many corporations in the retail sector are increasingly using sophisticated behavioural economics to influence consumer choices and, over time, it will start to filter down to managed travel,” explains Torsten Kriedt, vice-president of corporate intelligence at BCD Travel.
For instance, global bank HSBC is now trialling a new smartphone app that tells customers when they’re spending too much on takeaways, coffee or drinking in a bar. Called HSBC Nudge, it analyses users’ account data to identify trends in spending habits. It also sends regular messages to make customers aware of the consequences that it will have on their finances. It’s not hard to imagine a tool like this coming to the business travel arena soon.
The techniques used follow the controversial so-called ‘Nudge Unit’ of the British government, which employed subconscious strategies to persuade the general public to pay taxes, fines and charges they had been avoiding.
Big players in this area are Amazon and Netflix, which are increasingly aware of your previous purchases. They generate default suggestions, which are meant specifically for you. It makes choosing less daunting. A number of consumer travel websites are in on the game, too, offering only a small selection for flights and hotels, therefore limiting choice.
Borne out of behavioural economics, nudges are now a tried-and-tested way to motivate people to change. The theory is that people can be coaxed into making better decisions when offered choices designed to elicit specific outcomes, whether indirectly in the form of nudges or sometimes directly – for example, by only offering limited choice.
American author and behavioural scientist Cass Sunstein says this is due to the fact that most of the time, humans choose not to choose – they are prone to inertia. So having a select set of default choices is the next best option. “Travellers also tend to make quicker decisions based on fewer, prioritised choices,” explains BCD’s Kreidt.
As anyone who has tried to book a holiday knows, you can spend hours wasting time when there are endless choices and no single option appears clearly superior. Providing too many options can lead many of us feeling helpless and uncertain.
Taxis in a number of cities globally have also installed credit card touchscreens that only offer three specific tips, made simple for travellers to tap and choose. In New York, the amounts can be 20, 25 and 30 per cent. You can manually choose the amount, but it’s easiest just to touch one of the three advertised on the screen.
Already some online managed travel programmes offer limited options for hotels and air travel to influence executives, keeping them on-plan and in budget, yet this still gives the impression that they are in control of the decision-making process.
INCREASED SOPHISTICATION
However, not many companies can dig deep with the data and manage travel behaviour or create nudges. Most of our experience to date is anecdotal. Kreidt says that nudges are only just beginning. “We are learning where the hotspots are though and measure them. The industry is becoming more sophisticated and travel managers are learning from this.”
Other behavioural economic tools are used by travel managers. Leader boards are big in North America (see panel, p107), to try and persuade executives to comply with policy and plans, and stick within budget, while corporate citizenship and reward programmes are more important in Europe. CWT’s Turner explains: “League tables of good behaviour are not used as much as they could be – it has to be the way forward to really drive behavioural change.”
Karen Jackson is head of account management at ATPI and explains how gamification is increasingly being used to change behaviour. “One softer, or non-prize-giving, approach involves creating a more competitive booking environment,” she says. “This involves publishing a list of the most compliant travellers on the company’s travel page. It certainly influences behaviour.”
MOBILE TECHNOLOGY
Technology, especially mobile technology, is now playing a significant role. Not just text alerts to elicit nudges, but information on pricing that empowers travellers to behave more responsibly. Fare-forecasting for flights and hotels helps – for example, graphs on ticket prices over a period marked out on a daily basis gives executives a gauge on what days are the cheapest. The hope is that the traveller clicks the lowest price on the graph, and you are then taken to the booking engine. These tools can also be easily accessed via mobile phones.
“This technology puts power back into the hands of the traveller, enabling them to make informed decisions,” says Wayne Lappage, business manager at Chambers-CTM. “This actually reverses how travel was traditionally booked and will lead naturally to better buying behaviour, booking early and achieving the keenest prices in the market.”
Certainly the era of big data – where, like consumer shopping, business travel habits are collected en masse, analysed and then acted upon to generate better behaviour – is progressing. The issue is that a lot of data exists in silos, whether at the company or travel management level, and best practices are not shared.
‘Adaptive search’ is one tool that is increasingly used. This limits or adapts future travel-booking patterns based on past habits. It can provide streamlined, anchor choices or corporate preferred rates that are within policy and also make the booking process quicker. “When a business traveller books the same trip three times per quarter, it makes sense that the booking tool remembers their preferences and serves them up when it’s time to book the next trip,” explains Graham Kingsmill, UK managing director at Egencia.
There is also the issue that a lot of off-plan behaviour isn’t logged, making any analysis difficult. “Sometimes travellers book their trip in policy and then, when they reach the hotel, upgrade their room and expense it back on their return,” says Spencer Allen, key account manager at Hillgate Travel. “This is hard to monitor but it can be controlled by consolidating travel management company and expense data.”
Buying business travel may not have reached the heady heights of retail online shopping when it comes to employing behavioural economics or nudges, but some of the best techniques are filtering down. BCD’s Kreidt says: “It’s all about simplifying travel in the future. The fact is, endless options can be exhausting.”