Startup Watch: Yapta (Beating the Airlines at Their Own Game)

Startup Watch: Yapta (Beating the Airlines at Their Own Game)
By Erick Schonfeldon Travel
 
One of the most frustrating things for any traveler is the seemingly random price swings in airline tickets.  The same flight could be $1098 one day and $573 the next, as was the case with a flight to LA that I was trying to book about ten days ago on American Airlines.  If you look at the chart at the left, you will see what is typical for any airline flight.  The price does not steadily rise (or fall) the closer you get to the departure date.  It gyrates wildly (and I left out the last two days, when the price skyrocketed to $2,600—for an economy seat!).  How are you supposed to know when to book your flight?
A stealth startup calledYapta (Your Amazing Personal Travel Assistant) will soon let you not only track price changes on specific flights, but it will also help you get a refund for flights where the price drops after you‘ve already bought the ticket.  The service, which is in a closed beta right now, is set to launch publicly on May 15th.   Yapta‘s CEO Tom Romary attended my Disruptors Roundtable in LA last Thursday and he told me what he hopes to do.  One thing Yapta is not trying to be is another destination site or travel search engine.  Although there will be a central Yapta site,  the main way to use the service will be by downloading a plug-in for your browser that will let you tag any flight on most travel or airline Websites.  Romary explains:
Our core idea is that people go to multiple Websites before making a purchase. We are allowing people to tag the trips they like, and then we track pricing for you.
Every time the price changes, you can get an alert. That in itself is extremely useful.  But it is not much different than what you can already do on existing sites likeFarecast (which tries to predict when prices will drop) or Kayak (which gives youfare histories so you can try to guess what will happen in the future).  Where Yapta is different, says Romary, is that "we are the only guys who continue tracking prices on a flight after you purchase it."  Why would you do that?  "You can qualify for a refund even on a restricted ticket if it drops," he explains.
There is a little-known rule in the airline industry called the "guaranteed airfare rule."  If you buy a ticket directly from an airline and the price of that ticket later drops, you are eligible for a refund or voucher (usually they give you the price difference minus a change fee).  It‘s a voluntary policy most airlines have adopted to placate angry customers and to generate brand loyalty.  Romary is very familiar with it because he used to be the VP of marketing at Alaska Airlines, where he oversaw the customer loyalty programs.
Romary is taking the airline industry‘s yield management practices and turning them to the consumer‘s advantage.  In three months, his 275 beta testers have already racked up nearly $30,000 in savings, which comes to roughly $500 per traveler (assuming these are frequent fliers who log more than 25,000 miles a year).   Romary is philosophical about how his former colleagues and competitors in the airline industry will react:
We recognize we are throwing a hand grenade into a big industry.  There are airlines who get it and airlines who don’t in terms of building longterm relationships. Airlines looking to maximize short term profits are not going to like us.  Yield management systems are built to maximize revenue on a single flight, but the real win is building value over the long term.  Look, as an airline I still keep your cash.  I‘m taking a short-term hit, and over the next 12 months I have the opportunity to turn that $100 coupon into a $500 ticket. I’ve locked in your loyalty.
The ones who should really be worried about Yapta is not the airlines, but the online travel sites like Orbitz and Expedia.  Yapta‘s trip-tagging software will work on those sites, but to qualify for the refunds you need to buy directly from the airlines‘ own Websites.  Romary says that more than half the people who visit travel Websites like Orbitz use them just for research, and then go get the better deals on the airline sites.  "They use it as search engine and then ditch it," says Romary. "We are just facilitating that behavior."
As Yapta learns about its users particular travel habits, it will be able to serve up targeted travel-related ads to them.  Romary also plans to cut affiliate deals with airlines, and offer personalized alerts on travel deals where Yapta would get a small fee for every ticket sold. Down the line he also hopes to create an alert system for frequent-flyer award seats, which are also yield-managed, which is why they appear and disappear depending on the demand for other seats on a particular flight.
The basic idea of a service that automatically checks prices for you and alerts you when they drop could be applied eventually to other areas of travel as well, such as hotels, rental cars, and restaurants.  Information is power, and Yapta‘s ambition is to give that power back to the consumer.