Business Model Secrets: How Freebird Makes Biz Travel Hassle- And Fee-Free

“There has to be a better way.”

They’re the founding words of many entrepreneurs – in this case, Ethan Bernstein, who was just trying to get home after a ski trip while on break from business school. Bernstein was far from a travel novice: Before deciding to leave the work force for business school, he worked for Expedia. One might assume that managing travel and travel snafus would be second nature.

“But as my friends and I are trying to get back [from the ski trip], of course disruptions happened, mayhem ensued,” Bernstein said, adding that he and his friends spent the better part of their day of departure on hold with call centers doing whatever it took to get home, including “paying a ton of money to get the situation resolved.”

Which it was, eventually. Everyone made it back to Boston; no one gave up and started a new life on the slopes. But the fact that everyone got flights back home – eventually – strongly indicated that a solution had always existed. But getting to one was exhausting, frustrating, friction-filled and ultimately expensive, ending an otherwise fun-filled weekend on a stressful note when it didn’t have to be that way.

Freebird, the business Bernstein went on to co-found, is his better way – at least for business travelers who book their arrangements through their corporate travel departments. In this week’s edition of Matchmakers, Bernstein told Karen Webster that Freebird’s mobile flight rebooking tool makes it easy for business travelers and travel managers to rebook flights in the event of unexpected travel difficulties in about three taps – for free, for any airline.

Bernstein told Webster that Freebird has been implemented across a wide range of companies – from the Fortune 500 to relatively small start-ups – and across a wide variety of verticals, including education, manufacturing, pharmaceuticals and technology.

“If you can name it, we probably work with a firm that does it.”

So, how does it work?

The High Cost of Lost Time  

When one is traveling for leisure, an interruption is unpleasant. When one is traveling for business, on the other hand, an interruption can get very expensive, very quickly.

“Think about your head of sales not getting to a critical pitch meeting because of a travel delay – these are major costs a company can incur,” Bernstein emphasized.

From a business’ perspective, everyone, including corporate travel managers, agree that it’s better to have an employee on the go and ready to move without wasting time wrestling with travel logistics.

Bernstein said that it’s incredibly unproductive for these high-value employees to waste their time sorting through travel options and worrying about whether their boss will be mad because the rebooked ticket is more expensive, or whether they are going to clog up their own personal budgets waiting to be reimbursed for a new ticket. Freebird was designed to allow the traveler to rebook in about five minutes by selecting any airline.

But, here’s the kicker: Cost is no longer a factor, because Freebird pays for the rebooked ticket.

They can do that because Freebird is integrated directly into the corporate travel management system the business happens to use, and charges a fee for every one-way ticket that is booked through its service.

The booking fees create a pool of funds that the company draws from when they have to purchase those rebooked tickets. It’s a model, Bernstein noted, that allows Freebird to make a margin, and the businesses they work with to save 40 percent overall on their employee travel expenses.

“We have been able to generate a model that works well for everyone in the ecosystem,” he noted.
 
The Power Of Real-Time Data in Fighting Risk

The secret, Bernstein noted, is data. Specifically, a very robust risk modeling platform that is able to predict the incidences of delay on a flight-by-flight basis. The first thing that Freebird does when a company approaches them about wanting to implement their system is to run a year of their historical travel data through their model, enriching it with additional information like weather, flight availability and pricing, and flight disruption information on travel patterns. That gives Freebird a snapshot of what often happens to corporate travelers on a flight-by-flight basis, so they can then compare fees per traveler for each one-way leg against the risk of travel delays.

Running that data across airlines and travelers nationwide, Bernstein said, shows that flight cancellations, delays and missed connections happen between 3 and 5 percent of the time.

That may not sound like a very big number, but in an industry where airplanes are packed 80 to 85 percent of the time, a single cancellation can have very big ripple effects for passengers.

“That single flight means there are suddenly going to be 120 passengers who need to get from point A to point B at the exact moment,” Bernstein pointed out. “And the problem is that every flight in the future is running that same 80 to 85 percent load rate.”

Mathematically speaking, airlines will need four to six flights to get everyone back on their way, and the passengers waiting on that sixth flight are going to be none too happy when they get there.

“In fact, a funny thing we see when we look at our data: A statistically significant number are booking back onto the same airline they were originally on,” Bernstein noted. “They will rebook on the same airline, just on a better flight with us. That means they are clearly not getting the best accommodation when left to their own devices.”

But in the many cases that another airline is offering the better flight, Freebird opens up that universe of options, making it easy for a customer to do it on mobile – just like they do everything else when it comes to airline bookings.

It’s a difficult service to offer, Bernstein noted, as pricing risk in the travel industry is no small feat given the number of variables in play.

That is why Freebird only protects against delays, missed connections and other unavoidable misses. They had considered pricing for people who voluntarily rescheduled their flights at the last moment, but found that the risk model couldn’t accommodate it without raising prices across their user base. Part of that, Bernstein noted, is the unpredictability of moral hazard – the risk that someone will sleep in and take a later flight if it is free for them to do so.

“And fundamentally, our goal is help travelers get to their destination more quickly,” he said.

Today, that means business travelers.

The Mass Market

Business travel is divided into two categories: managed and unmanaged. Managed is booked through a corporate travel department, and unmanaged is when a person his or her own ticket from any variety of sources, including online booking sites like Bernstein’s former employer, Expedia. Freebird’s focus, at present, is on the managed travel segment, which allows them to plug into those systems and gain access to travelers and traveler profiles, as well as negotiation rates and inventory.

Bernstein said it was a great way to start.

“We’ve experience a huge amount of demand and had a lot of success in this channel. So, we’ve concentrated our resources here.”

Although he acknowledged that Freebird also has a strong value proposition for the mass market, the consumer individual traveler market is harder to crack, for any number of reasons. For one, there’s the need to get a massive number of users in order for their business model to work in this new segment. Plus, Bernstein noted, there is an incumbent competitor in the field that doesn’t have an analog on the B2B side: travel insurance. Bernstein doesn’t think travel insurance is a good value for customers, but enough people buy it that it’s a competitor, and Freebird would have to educate travelers on why it isn’t the great deal they may think it is.

But watch this space. Managed corporate travel may be where they have started and have established a great deal of success today, but it may not be their final chapter.