BTC, Launching Site, Renews Group Purchasing Efforts

<B>BTC, Launching Site, Renews Group Purchasing Efforts</B>

By Cheryl Rosen

The travel buyers in the Business Travel Coalition are about to take a second stab at group purchasing, this time using an e-commerce model.

In an exclusive interview with Business Travel News last week, BTC chairman Kevin Mitchell said he is laying the groundwork for a BTC.com site he hopes to launch by the end of the year. The portal will feature automated travel booking, expense reporting, travel management reporting and data mining. BTC also will offer fulfillment, settlement and consulting services to its customers.

The Web site will "make the transition to a low-cost distribution model for travel in one fell swoop," according to Mitchell, by reducing the cost of commissions, overrides, credit and global distribution.

Mitchell already has signed on 15 customers from the existing BTC customer base--including Black & Decker, Daimler Chrysler, General Motors and Proctor & Gamble--with a total travel buying potential of $2.5 billion. He now is seeking additional members, and will approach travel suppliers when the group's aggregate volume hits $5 billion.

Interested travel buyers will not have to pay any up-front fees, as the group is "close to signing three or four deals" with technology partners who will put up the capital to cover the start-up costs.

BTC.com will offer a master Web site for all to share and a secure sub-site for each member. The first 100 corporate buyers to sign on will receive warrants for shares in the site, "like Delta got warrants from Priceline.com," Mitchell said--and as a result they will be highly motivated to manage their purchasing through the site and to mandate its use.

"In trying to change behavior and encourage the use of online booking systems, companies get bogged down in corporate cultures and policies. But if everybody has some skin in it, that should help," he said.

Mitchell understands perhaps better than anyone else how well prepared one needs to be before whispering the words "purchasing consortium" to the airline industry. But he is confident that this time around, his six-year-old vision of streamlining and aggregating corporate travel purchasing is going to work.

The Business Travel Coalition is all that remains of the industry's most famous unsuccessful buying group, the Business Travel Contractors Corp., which Kevin Mitchell launched from the stage of the National Business Travel Association conference in 1994. Twenty corporations, many of which are still members of BTC, signed up at the time, bringing a billion-dollar travel volume to the table (<I>BTN</I>, June 13, 1994).

But the reception by the airlines back then was decidedly cool: Trans World Airlines, for example, said it "has that business without BTCC," while Continental vice president Bonnie Reitz expressed "concern over the effect of BTCC on Continental's ability to manage its own pricing and distribution" (<I>BTN</I>, Sept. 4, 1995).

Mitchell spent three years trying to reach $3 billion in aggregated purchasing volume--a figure he estimated would force the carriers to deal with him--but got only half-way there before giving up at the close of 1997 (<I>BTN</I>, Jan. 12, 1998).

"In 1993, when the airline industry was bleeding, American Airlines chairman Bob Crandall told us to get BTCC together with Godspeed. But by 1996, when it recovered, we were a solution in search of a problem," Mitchell acknowledged.

But the Business Travel Coalition--like a broad swatch of Internet interlopers, including Pricewaterhouse- Coopers and EDS (see story, page 1)--is betting that online buying communities are going to be too big a force for the carriers to ignore. And the airlines already have bitten the e-commerce bullet.

Travel buyers interested in joining BTC should "call right away," so they can share their insights as far as system requirements in the early stages of the site's development. "Down the road," said Mitchell, "the ability to handle somebody's creative idea will become expensive."

Mitchell also is helping another group enter the aggregated travel volume space. He has been retained by the Chamber of Commerce of an undisclosed "Midwestern city between Chicago and St. Louis" to aggregate travel purchasing for 14 corporations with a combined air volume of $180 million. He plans to begin negotiating with carriers on their behalf in early February.