Confusing your way to profitability

Airbnb offers a master class in using fine print to create profits

This week Airbnb quietly introduced a new cancellation policy to "provide greater flexibility" for hosts and guests. But the real reason behind the change is clear to anyone who follows the home-sharing behemoth.

"We’ve heard from hosts and guests that they’d like better alternatives to some stricter policies," an Airbnb representative told me. "This new policy allows guests booking far in advance to cancel a booking for free, up to 30 days before check-in — in order to provide confidence for those booking trips further ahead and still protect hosts from last-minute cancellations and losses."

A closer look shows that the policy may do more than that.

On its site, Airbnb promises its new refund policy, called "firm," will increase "flexibility."

Under the new rule, it explains, guests booking far in advance can cancel a booking for "free," up to 30 days before check-in. In pilot tests of this policy, Airbnb's data showed that hosts who switched from "strict" to "firm" saw bookings increase by an average of 9 percent.

But check this out: Airbnb now has seven — count 'em, seven — cancellation policies. They include "flexible," "moderate," "strict," "firm," and three flavors of "long-term."

More choices can be good. But they can also be confusing.

Consumers are conditioned to ignore fine print. I know because every day I deal with consumers who have glossed over the rules. Heck, they even ignore the terms and conditions on my site when they ask for help, even though they’re written in plain English and normal-size print.

There are so many Airbnb rules that it even created a filter for consumers to search for properties by cancellation policy.

Confusion leads to profitability, as Gail McGovern and Youngme Moon showed in their groundbreaking 2007 Harvard Business Review article.

"Overly complex product and pricing options may have been designed to serve various segments," the researchers noted. "But in fact, they take advantage of how difficult it is for customers to predict their needs … and make it hard for them to choose the right product. Similarly, penalties and fees, which may have been instituted to offset the costs of undesirable customer behavior, like bouncing checks, turn out to be very profitable. As a result, companies have no incentive to help customers avoid them."

This complexity has fueled a cottage industry of blogs and websites that help consumers understand and exploit the rules to their advantage.

That's not the solution. A much better fix is to call out confusing policies and to hold companies accountable for trying to confuse their way to profitability.

Which is exactly what I'm doing now.

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Summer is here. So are the tourists!

Welcome to summer. Mind the crowds. That's the takeaway from Quicken's latest survey, which shows people are planning more summer travel this year.

Among the findings:

  • Over 75 percent of respondents are planning to go on at least one vacation this summer. Almost half plan to take more than one trip.

  • Nearly half (43 percent) plan to spend more money than they did in previous years.

  • Of those vacationers, 36 percent said they plan to spend more because they saved extra spending money during the shutdown. Another 25 percent said it was because they are feeling the impact of inflation on the costs of travel as the economy recovers.

Of note: 29 percent of women are taking a vacation this summer "to improve mental health and as an act of self-care," compared to only 17 percent of men.

I get it. Cabin fever is driving many of us to go somewhere or anywhere.

Could the Fourth of July set an all-time record for travel?

It might. AAA just sent me its predictions for the upcoming holiday. It expects travel volumes to nearly fully recover to pre-pandemic levels. More than 47.7 million Americans will take to the nation’s roadways and skies this Independence Day (July 1 to 5), it projects. 

"In fact, this will be the second-highest Independence Day travel volume on record, trailing only 2019," a spokeswoman predicted. 

Overall, just 2.5 percent fewer Americans will travel this year compared to Independence Day in 2019. That's an increase of nearly 40 percent compared to last year.

The projections are within the margin of error, so we might — might — set a new Fourth of July record.

That's no big surprise. People have been cooped up in their homes for more than a year. But what remains to be seen is if this travel boom is sustainable. Will high demand continue this summer and into fall? Or will it just be a temporary thing, followed by more lackluster travel? 

We'll see. 

Hey airlines, it's not about you!

Don't believe those breathless headlines about air travel "surging." Two million passengers screened every day is nothing compared to the tens of millions of Americans who hit the road.

And this summer will be a driving summer. 

The latest data from Arity, a mobile data insights company, reveals that vehicle miles driven are up 10 percent from last summer. As I've noted repeatedly over the years, Americans drive about nine miles for every one mile flown. So if you put this into perspective, a 10 percent jump in vehicle miles driven is huge compared to anything the airline industry might do.

The takeaway? Keep your eye on the road this summer.

Speaking of airlines — how vaccinated is yours?

Confidential graphic of the week: Employee COVID-19 vaccination rates by airport hub at Delta Air Lines. Atlanta, the airline's headquarters, is the lowest. Honolulu is the top airport.

The comments are open, as always.

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