When two veteran travel and Internet business executives saw how online travel bookings blossomed with such sites as Travelocity and Expedia in the early 2000s, they envisioned providing the same kind of do-it-yourself packaging for tourist attractions.
The booking part translated well online, but it was a prepaid smart card that became the vehicle for the product in the field.
Indeed, some niche markets have started using prepaid cards to drum up business in tourist areas, specific neighborhoods and even at destination events such as the Olympics. Tying into a certain area or event creates a captive audience for spending and could lead to increased use for travel and destination-related card products among consumers, proponents say.
Since 2004, Boston-based Smart Destinations Inc., led by Internet entrepreneur Kevin McLaughlin and travel-industry veteran Cecilia Dahl, has produced prepaid card products for use at hundreds of major tourist destinations in 14 North American cities, including Boston, Chicago, Las Vegas, New York, Toronto, and Oahu, Hawaii. Word of mouth among not only consumers but between tourist attractions in different cities has helped boost the card’s acceptance, says Rob Schmults, the company’s former chief marketing officer.
For Smart Destinations, it helped to have inside connections in the travel and tourism business. Dahl’s contacts in travel and tourism helped get early players on board, says Schmults. “Everybody knows everybody [in tourism,]” he says. “If we started in Boston and get the science museum on board, then they talk to their counterpart in another city. So when you did a good job with the folks we started with, then it created momentum. That word-of-mouth support was important.”
Though building a base of 500 card-accepting tourist attractions through discount pricing and subsequent increases in site visits, the program so far has flown under the radar of the payments industry. But adding a payment purse to the card’s chip could be a boon for the product and the players that support it, says Ben Jackson, senior analyst at Boston-based Mercator Advisory Group Inc.
Participants now use the prepaid chip card as an admission ticket to various tourist attractions, such the SkyDeck at Willis Tower in Chicago and the Statue of Liberty on Ellis Island in New York.
“Smart Destinations has found a niche, which is going to help them grow the business, as long as everyone is happy–both vendors and customers–with the program,” Jackson says, citing the program’s ability to enable consumers to budget their spending for travel.
Indeed, the product’s value as a prepaid entrance card is substantial, according to the tourist locations that accept it. One location in Chicago saw a 40% increase in admission sales with the product in the first year of accepting the cards. And others hope payment options may be added in the future.
Smart Destinations offers three types of prepaid products. Similar to an online travel site, consumers may go to the company’s website to pick which tourist attractions they want to visit and prepay an amount discounted by 30% to 55%, depending on the attraction, a company spokesperson says.
Different cities have different card offerings. In Chicago, for example, consumers may choose from three cards.
The Chicago Go Card provides cardholders access to more than 30 top attractions and tours for one price. Costs are per day range from $44.99 to $129.99 for an adult. The Chicago Explorer Pass enables cardholders to pay one discounted price, $45 for adults and $35 for children, to visit three Chicago sites. The Custom Explorer Pass enables consumers to pick a discount admission price for each site they wish to add on to the card. The Custom Explorer product comes in price packs that allow cardholders to visit three or five attractions.
Tourists need only hand their card to a ticket agent. The agent dips the card into the smart card reader, which authorizes that the entrance fee is paid and logs the visit for back-office accounting so the tourist site can get a monthly report of card-enabled visits.
Smart Destinations found the smart card to be the best vehicle for its product because it holds more information than a magnetic stripe card and is simplifies the tracking of payments and admissions.
“In travel, the card is pretty unique,” says Schmults. “One thing that happens a lot in travel is often what you get is a piece of paper (such as a coupon or ticket) that has to be sent to the reseller, then there is a whole behind-the-scenes processing that can get delayed when you’re working with paper.”
The smart card system, built by VeriFone Systems Inc., enables the tourist attractions to record how many individuals use the card and how much money is owed. It also enables attractions to receive funds faster because the payments are electronic, Schmults says. VeriFone declined to comment. The smart card vendor is Downers Grove, Ill.-based Versatile Card Technology Inc. The three-day Go cards expire three days after activation and the Explorer cards expire in 30 days, Smart Destinations spokesperson says. Because of the steep discounts, the cards are “use it or lose it” proposition, the spokesperson says.
Chip Collopy, co-owner of Shoreline Sighting, a boat tour company in Chicago, says accepting the prepaid cards has been simple and worthwhile for his business. “They contacted us in 2004 when they were bringing the card out, and they needed certain attractions to make their card work. So having boat tours of the city was one of those,” he says. “We were reluctant at first because it was a new vendor and kind of a risk, but it’s been great, and the increase in sales has been dramatic.”
Smart Destinations is able to negotiate discounts because its service helps increase admissions, program participants say.
During the first year, the cards helped drive up admission sales for Shoreline by 40% to 50%, Collopy says. Even with slower tourism caused by economic downturn, sales in 2009 were up 19% from the previous year, he says, citing consumers’ preferences for discounted deals.
Two potential roadblocks to accepting any new card involve terminal costs and support. However, Shoreline has had few problems with the VeriFone equipment, and Collopy says Smart Destinations, which pays for, installs and services the terminals, has provided technical assistance when needed.
Shoreline has six terminals at its ticket locations. Overall, Smart Destinations deploys about 900 smart card terminals at its tourist locations.
The Willis Tour (formerly Sears Tower) in Chicago has accepted the Smart Destinations prepaid cards since 2004, and it also reports having a positive experience with the product and terminals.
“The thing we really like is that it brings in a different type of traveler, the one that doesn’t want to carry cash, wants to have great value and usually is energetic and wants an ‘all-you-can-experience’ type of package,” says Randy Stancik, Willis SkyDeck vice president. “And with accepting the card, we’re not handling cash, so it’s a nice way to take the pressure off.”
The terminal system uses simple accounting, which enables attractions to get paid quickly and to see their admissions data in monthly reports. And having the prepaid card keeps the lines moving, Stancik says.
“It’s really a smooth program, and it’s a simple program to administer,” he says. The tower uses only one terminal because it has just one SkyDeck access point.
Stancik would embrace an additional payment purse on the card so visitors also could use it to make purchases at a gift shop or a nearby restaurant.
“I’d like to see that,” he says, suggesting the involvement of a major card brand to lend marketing support to the tourist attraction. “It could help us get our brand out there.”
Tourists likely would use such a purse because they already set aside funds to prepay for the attractions they visit, so they probably would do the same for gift or food purchases, Stancik says. “We are truly a point-of-sale-type attraction because the consumer is ready to purchase in the time that they are there visiting an attraction,” he says.
Mercator’s Jackson suggests that adding a payment purse that offers discounts at tourist-area retailers and restaurants would be a viable option for a prepaid travel-destination/tourist card. “With something like this, you could conceivably build a network of partners and steer the cardholders to those preferred providers,” he says. “The question is, would Smart Destinations be willing to open that up?”
Despite ripples of interest in payments, Smart Destinations has not yet considered adding a payment function to its cards, says founder and CEO McLaughlin.
But consumers have shown a willingness to use destination-type prepaid cards, a various pockets of destination-type cards are scattered in the country, usually in small venues.
One such card is the Lakeview East Chamber of Commerce’s prepaid gift card, which consumers may use at 120 merchant locations and at parking meters in Chicago’s Lakeview neighborhood. The program, operated by Overland Park, Kan.-based StoreFinancial, enables cardholders to buy the gift card for use in the area and receive a $50 rebate when spending $300 on the card. In three years, the card has generated more than $100,000 in sales, Maureen T. Martino, executive director of the community’s chamber of commerce, tells PaymentsSource.
Store Financial did not respond to PaymentsSource requests for comment.
The Lakeview gift card does not expire, but after one year of dormancy, the program charges a $2.50 service fee per month until it is used again, says Martino. Card Solutions Inc. is the vendor for the card, which features a picture of Lake Michigan.
The key to making the program successful was having it run on existing payment terminals so merchants would not have to change their processing or terminal installations, Martino says. “The program was a pretty easy sell to the merchants, and once they realized that it was not an additional cost factor and they could use their existing credit card processor and machine, they were eager to sign up,” says Martino.
Each fall, the chamber sends a letter to participating merchants explaining how the card has helped drive revenue. Some participating merchants have seen sales increase as much as $11,000 with the card program since it began, says Martino.
In a larger example, Visa Inc. also has delved into the destination prepaid card space. This summer, the card brand introduced a prepaid mag-stripe card that visitors to the Singapore 2010 Youth Olympic Games used for transit, ticketing and payment at and around the venue. The event drew more than 300,000 visitors.
Visa collaborated with the Olympic organizing committee, local banking partner DBS Bank and public transportation system EZ-Link to apply the three applications to the one prepaid card. Attendees who were awarded tickets to the opening and closing ceremonies of the games, which took place Aug. 14 through Aug. 26, received the multipurpose card. Cardholders could load value into the prepaid purse held on the card at all DBS ATMs, through the bank’s online banking site and at AXS stations across Singapore. An AXS station is a one-stop terminal that provides e-commerce and payment services.
Most efforts thus far for prepaid travel/destination cards reflect a grassroots foundation in that they involve small-scale neighborhood or city-based cards. But the niche market could grow as consumers build an appetite for discount cards that let them prepay to budget their travel and related expenses.
